The Supreme Court Rules Affordable Care Act Constitutional

The US Supreme Court has upheld the Affordable Care Act (ACA), interpreting the controversial mandate provision as a tax on citizens who choose not to purchase healthcare. SCOTUS Blog has full coverage of the decision.

The decision has been hailed as a victory by some; unfortunately, the success of a law is based on its effects, not its constitutionality. I’ll hold my applause until we see an overall improvement in US health along with an abatement of the untenable path of healthcare expenditures. If the ACA is the bill that brings us that, all the better.

However, most economists believe that the primary healthcare reform that is needed is a repeal of the subsidy given to employer provided healthcare through US tax discounts on firms. For example, here are the results of a poll given to 40 of the top US economists:

The two most prominent healthcare studies that I’m aware of are (1) the new data coming out of Oregon, which shows that some minimal level of healthcare is beneficial along a number of dimensions, and (2) a RAND Corporation study from the 60s and 70s, which shows that, above some higher level of healthcare coverage, improvement in one’s health does not continue to increase with extra expenditure on healthcare. This last study surprises a lot of people, but economists view healthcare as they view any other type of purchase: the cheaper it is the more people will purchase. Instead of staying home and seeing if you can conquer that cold  yourself, you mozy on over to the doctor’s office and have her take a look. Unfortunately, past a certain point, such action ceases to improve your health; instead, you’re just spending extra money and driving up overall healthcare costs with your additional demand for medical services. This problem is exacerbated by people getting insurance through their employer because they don’t feel the full weight of the costs as, again, employer provided coverage is cheaper than it otherwise would be because of US government tax intervention.

ACA takes care of the minimal level of care problem, but does not address the tax subsidy for employer provided care.


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