Tax Reform and Repeal of the Individual Mandate
The United States Senate passed major tax reform yesterday. (here) Included in the reform bill is the repeal of the Obamacare individual mandate.
In 2012, the U.S. Supreme Court ruled that the penalty for not owning health insurance is actually a tax. (here) Consequently, the repeal of the mandate requiring Americans to own health insurance is fundamentally (and legally) a tax repeal.
The non-partisan Congressional Budget Office (CBO) weighed in on the specific aspects of the tax reform bill. The CBO found that repeal of the individual mandate would save taxpayers $381 billion and would decrease the federal deficit by $416 billion over the next ten years. (here) This number is from a combination of fewer people paying the penalty tax, fewer people seeking subsidies in the Obamacare exchanges, and fewer people enrolling in the Medicaid entitlement.
The CBO estimates that 15 million fewer people will have health insurance by 2026, including seven million people who would not sign up for the free Medicaid entitlement, six million who would not use the exchange subsidies, and two million who would lose their employer-paid health benefits.
These estimates make absolutely no sense. Why would people not sign up for free health insurance under the Medicaid program? Why would people be less inclined to receive subsidies in the Obamacare exchanges? And why would employers drop health benefits when the employer mandate remains in place?
Also, consider that Obamacare has only insured 20 million Americans – 10 million in the exchanges and 10 million in Medicaid. The CBO estimates suggest that three fourths of those people insured under Obamacare would forgo their health insurance.
Obamacare has been a terribly flawed law from the beginning. It has not come close to providing universal health insurance, nor has it slowed the ever-rising cost of health care. One of the most onerous and least popular parts of Obamacare has been the individual mandate. Never before in the history of the United States has the federal government required citizens to own a private or government product, in this case health insurance.
The U.S. House of Representatives passed its own tax reform bill, which did not include repeal of the individual mandate. (here) The Senate and House bills will now go to a conference committee, where differences will be negotiated. Hopefully, repeal of the individual mandate will be included in the final bill.