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Medicare, Social Security Mandates Dwarf Affordable Care Act

April 1, 2012

As the New York Times suggested last week, the fate of President Obama's Affordable Care Act in general and its mandate that Americans obtain health insurance in particular may hinge on Justice Anthony Kennedy's notion of "liberty." While Solicitor General Donald Verilli posited "a profound connection" between health care and liberty, his opponent Paul Clement argued, "that it's a very funny conception of liberty that forces somebody to purchase an insurance policy whether they want it or not."
Of course, that very conception of liberty has been the law of the land for decades. Today, tens of millions of Americans must purchase health insurance and a pension plan for their golden years. And as it turns out, the Medicare and Social Security mandates for individuals and employers dwarf anything required by the dreaded Obamacare.

As we learned during the recent debate over the extension of the payroll tax cut, 160 million Americans pay taxes to fund the Medicare and Social Security trusts for today and tomorrow's retirees. Since 1935, workers and their employers have each paid into the Social Security trust fund, a figure which next year will return to its 6.2 percent rate on the first $106,000 of income. In addition, employer and employee alike are on the hook for another 1.45% for Medicare, the insurance program for the elderly established in 1965.
In comparison, the Affordable Care Act's individual mandate impacts just a small fraction of Americans. For starters, over 80 percent already have health insurance, compared to roughly 17 percent who do not. The Economic Policy Institute estimates that 59% of those under age 65 receive employer-sponsored insurance, while another 22% are covered by public programs including Medicaid and SCHIP. Of the 50 million people who currently uninsured, about 20 million (including undocumented immigrants and those with religious objections or claiming economic hardship, are not covered or are otherwise exempt from the health insurance mandate. As a recent Urban Institute analysis concluded:

What may be surprising, however, is that if the ACA were in effect today, 94 percent of the total population (93 percent of the nonelderly population) or 250.3 million people out of 268.8 million nonelderly people--would not face a requirement to newly purchase insurance or pay a fine.

As Ryan Grim noted, that's because "98 percent of Americans would either be exempt from the mandate -- because of employer coverage, public health insurance or low income -- or given subsidies to comply." The Urban Institute estimated that 8.1 million Americans would have their insurance paid for by the expansion of Medicaid to 133 percent of the federal poverty level. Another 10.9 million people would receive subsidies to buy private insurance in the new state exchanges, while only 7.3 million (2 percent of the total U.S. population) would be required to purchase a health plan using their own resources alone. As for those Americans choosing to instead to pay the penalty for failing to obtain insurance at all, the CBO estimated that number at 4 million. (That forecast is almost double the rate in Massachusetts, where only 48,000 in a state of 6.6 million people opted to pay the penalty rather than acquire health insurance under Mitt Romney's version of the individual mandate.)
But if far more Americans pay the Social Security and Medicare mandates, the number of direct beneficiaries of "Obamacare" is much lower. In 2011, over 55 million people received Social Security benefits. Of those, 44.7 million got old age and survivors insurance, with another 10 million receiving disability benefits. Forty seven million people are enrolled in Medicare, with 8 million of them non-elderly, disabled recipients. In comparison, the Congressional Budget Office now forecasts that 30 million Americans will gain health insurance under the Affordable Care Act. (That figure understates the program's benefits, as the closing of the Medicare donut hole, ending lifetime benefit caps, mandatory coverage for a range of preventive care services and barring discrimination for pre-existing conditions is already helping millions more.)

Of course, the direct taxes Americans pay now to Social Security and Medicare are not perfectly analogous to the mandate to buy health insurance in the private market that about 20 million will be forced to pay. During oral arguments, Justice Kennedy suggested early on that constitutionally speaking, that difference meant all the difference. Focusing on the Commerce Clause at the heart of the case, Kennedy asked the government:

"Can you create commerce in order to regulate it?" Justice Kennedy asked.
"This is a step beyond what our cases have allowed, the affirmative duty to act to go into commerce" he said. "If that is so, do you not have a heavy burden of justification?"

But as the AP reported Sunday, Justice Ruth Bader Ginsburg explained to Kennedy there is nothing new under the sun with the Affordable Care Act:

Ginsburg brought up Social Security as an example, likening it to a government old-age annuity that everyone is forced to purchase.
"It just seems very strange to me that there's no question we can have a Social Security system (despite) all the people who say: 'I'm being forced to pay for something I don't want,'" she said.
"There's something very odd about that, that the government can take over the whole thing and we all say, 'Oh, yes that's fine,' but if the government wants to ... preserve private insurers, it can't do that."
Kennedy mused that Congress could have created a Medicare-style program for the uninsured, run exclusively by the government without the involvement of private insurers.
"Let's assume that (Congress) could use the tax power to raise revenue and to just have a national health service, single payer," said Kennedy. "How does that factor into our analysis? In one sense, it can be argued that this is what the government is doing; it ought to be honest about the power that it's using and use the correct power.
"On the other hand, it means that since ... Congress can do it anyway, we give a certain amount of latitude," Kennedy continued. "I'm not sure which way the argument goes."

The argument goes this way. If the Supreme Court stands by the much wider-ranging mandates for Medicare and Social Security (which it did in 1937), the Affordable Care Act should as well. If not, the schemes of Republicans to privatize Medicare and Social Security should similarly fail the conservative Court's scrutiny. Ultimately, it all comes down the meaning of "liberty" and what steps the United States government can take to make it meaningful.
Either way, the AP concludes, "The case may well turn on how Kennedy decides."


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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