This website provides readers an historical perspective on the evolution of various healthcare laws and regulations affecting healthcare freedom and privacy.
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Health Freedom Watch
October 2010


IMPORTANT NOTICE: CCHC to Publish Health Freedom Watch

It’s official!  The Institute for Health Freedom (IHF) is transferring Health Freedom Watch to Citizens’ Council on Health Care (CCHC) and IHF will disband by the end of this year (2010).  We are delighted that CCHC is taking over Health Freedom Watch.  It will begin publishing the newsletter with the next issue (November 2010). 

IHF is grateful that CCHC will be carrying on the important work of monitoring and reporting on health-freedom and privacy issues.  

Thank you very much for your dedication to health freedom!

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Federal Judge Allows Florida’s Multistate Lawsuit to Go Forward

Politico reported on October 14 that “A federal judge in Florida [on October 14] said he will allow some of the lawsuit challenging the constitutionality of the health care law to proceed—and criticized Democrats for making an ‘Alice in Wonderland’ argument to defend the law.” 

The article further notes: 

  • “U.S. District Judge Roger Vinson allowed two major counts to proceed: the states’ challenge to the controversial requirement that nearly all Americans buy insurance and a required expansion of the Medicaid program.” 
  • “In his ruling, Vinson criticized Democrats for seeking to have it both ways when it comes to defending the mandate to buy insurance. During the legislative debate, Republicans chastised the proposal as a new tax on the middle class. Obama defended the payment as a penalty and not a tax, but the Justice Department has argued that legally, it’s a tax. ‘Congress should not be permitted to secure and cast politically difficult votes on controversial legislation by deliberately calling something one thing, after which the defenders of that legislation take an ‘Alice-in-Wonderland’ tack and argue in court that Congress really meant something else entirely, thereby circumventing the safeguard that exists to keep their broad power in check,’ he wrote.” (Emphasis added.) 
  • “Vinson ruled that it’s a penalty, not a tax, and must be defended under the Commerce Clause and not Congress’s taxing authority.” 

Additionally, Virginia’s Attorney General Ken Cuccinelli released the following statement in response to the ruling:  

  • “I am pleased with the judge’s decision to allow the multistate lawsuit in Florida to go forward.  I am especially pleased that the judge found the federal government’s use of the Commerce Clause to justify the individual health insurance mandate is unprecedented in American history. 
  • “It is also important to note that, despite the government’s argument to the contrary, the judge spent more than 20 pages of his ruling stating that the fee imposed for not buying health insurance is a penalty and not a tax.  This means that the government will have to base its claimed authority to regulate inactivity on the Commerce Clause.” (Emphasis added.) 


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Federal Judge Dismisses Challenge to ObamaCare in Michigan

U.S. District Judge George Steeh, Eastern District of Michigan, dismissed a legal challenge to ObamaCare’s insurance mandate on October 7.  The case was brought by the Michigan-based Thomas More Law Center (TMLC) and four uninsured individuals, who claimed, in part, that the individual mandate in the Patient Protection and Affordable Care Act is unconstitutional because the Commerce Clause provides no authority for it and that the penalty for noncompliance is an unconstitutional tax.  

Judge Steeh wrote: “In its legislative findings, Congress explains that it enacted the Health Care Reform Act to address a national crisis…. The government contends that the Individual Mandate falls within Congress’ authority under the Commerce Clause for two principal reasons. First, the economic decisions that the Act regulates as to how to pay for health care services have direct and substantial impact on the interstate health care market. Second, the minimum coverage provision is essential to the Act’s larger regulation of the interstate business of health insurance.” (Emphasis added.)  

He went on to rule on these issues as follows: 

  • Substantial Effect on Interstate Commerce: “The costs of caring for the uninsured who prove unable to pay are shifted to health care providers, to the insured population in the form of higher premiums, to governments, and to taxpayers…. This phenomenon of cost-shifting is what makes the health care market unique. Far from ‘inactivity,’ by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants…. While plaintiffs describe the Commerce Clause power as reaching economic activity, the government’s characterization of the Commerce Clause reaching economic decisions is more accurate.” 
  • Essential to Broader Regulatory Scheme: “The Act regulates a broader interstate market in health care services. This is not a market created by Congress, it is one created by the fundamental need for health care and the necessity of paying for such services received. The provision at issue addresses cost-shifting in those markets and operates as an essential part of a comprehensive regulatory scheme…. The minimum coverage provision [individual mandate], which addresses economic decisions regarding health care services that everyone eventually, and inevitably, will need, is a reasonable means of effectuating Congress’s goal.” 

Judge Steeh continued, “Having concluded that Congress has the power under the Commerce Clause to enact the Health Care Reform Act, it is unnecessary for the court to address the issue of Congress’s alternate source of authority to tax and spend under the General Welfare Clause…. Congress intended to increase the number of insureds and decrease the cost of health insurance by requiring individuals to maintain minimum essential coverage or face a penalty for failing to do so.  Because the ‘penalty’ is incidental to these purposes, plaintiffs’ challenge to the constitutionality of the penalty as an improperly apportioned direct tax is without merit.”

The dismissal of the case has no direct effect on the other legal challenges pending before other federal district courts.


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ObamaCare and Cost-Shifting

A key argument that government officials cite in defending ObamaCare’s insurance mandate is that it will help save money by reducing cost-shifting due to uncompensated care for the uninsured.  This argument was cited by the federal judge in the case described above.  

However, leading health-policy experts say cost-shifting is a small percentage of total U.S. health-care spending.  A 2008 Kaiser Family Foundation study noted that uncompensated care would make up just 2 percent of total health-care spending in 2008.  The study noted that “Federal and state government dollars will cover at least 75% of uncompensated care, streaming almost $43 billion through health providers and programs for care of the uninsured. Private sources of charity care cover the rest, with little evidence of cost-shifting to the privately insured.” 

Jacob Sullum, senior editor at Reason, reported in September 2009: 

"At a July press conference, President Obama claimed 'the average American family is paying thousands of dollars in hidden costs' because uncompensated health care for the uninsured drives up the price of medical coverage. In an interview with ABC's George Stephanopoulos [in September 2009], by contrast, he said uncompensated care costs the average family $900. According to a 2008 report from the Henry J. Kaiser Family Foundation, both of those estimates are way off. The foundation’s analysis indicates that the true annual cost per family is more like $200, with uncompensated care accounting for 'less than one percent of private health insurance costs.'" (Emphasis added.) 

In December 2009, U.S. Senator Charles Grassley (R-IA) pointed out that Families USA also grossly exaggerated the “hidden tax” from uncompensated care by claiming it came to about $1,100 per family in increased insurance premiums. Grassley went on to note that the health-insurance law would add new hidden taxes:  

"The Reid bill imposes $67 billion worth of so-called 'fees' on health insurance companies and self-insured arrangements beginning in 2010. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) – the nonpartisan experts and official Congressional scorekeepers – have testified that these fees will be passed on to health care consumers. CBO and JCT have further testified that this will result in higher health insurance premiums for all Americans. The actuaries at Oliver-Wyman estimated that the fees imposed on health insurers would add $488 to the cost of an average family health insurance policy." (Emphasis added.) 

So what will really happen with cost-shifting under ObamaCare?  Will the purported reduction in the percentage of uninsured and associated uncompensated care offset increases in fees and taxes that have been established to pay for the forthcoming credits for health-insurance purchased through government-established exchanges?  Will hospitals be forced to give up the hefty tax breaks they currently receive for serving the uninsured?  

We won’t know for sure until at least 2014, when the insurance mandate kicks in.  But if history is any indication, the mandatory program could end up costing much more than initially projected.


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Health Freedom Watch is published by the Institute for Health Freedom. Editor: Sue Blevins; Assistant Editor: Deborah Grady. Copyright 2010 Institute for Health Freedom.