McManus: Obama’s ‘tax’ lapse

Obama is shown speaking during a town hall meeting on healthcare at the headquarters of the Democratic National Committee on Aug. 20, 2009.
Obama is shown speaking during a town hall meeting on healthcare at the headquarters of the Democratic National Committee on Aug. 20, 2009.
(Alex Wong/Bloomberg)

In 2009, President Obama was asked whether the individual mandate in his healthcare plan was really just a tax in disguise. “I absolutely reject that notion,” he responded.

But if the president had been brave enough back then to call a tax a tax, his healthcare law might not be in such a mess today.

At the Supreme Court this week, both sides basically agreed that the Constitution allows the federal government to enact a national health insurance plan — even a government-run single-payer plan. (That, after all, is pretty much what Medicare is.) And both sides agreed that the Constitution allows the government to levy taxes to help pay for that health insurance. (We all pay a Medicare tax.)

But that’s not how Obama and the Democrats wrote their healthcare law. Instead, to avoid the stigma of the word “tax,” they included a requirement that everyone obtain health insurance or pay a penalty.


It turns out that was a big mistake. As we now know, there’s one thing Americans hate even more than taxes, and that’s being ordered around by their government.

Early in the debate on the healthcare law, polls found that most Americans were willing to pay higher taxes in exchange for universal health insurance. But Obama had promised during his presidential campaign that he wouldn’t raise taxes on the middle class, and a healthcare tax would have broken that vow.

The administration’s solution — the individual mandate — is now its biggest problem in the courts, judging by the questioning from the Supreme Court justices over the last few days. As Justice Antonin Scalia asked in Tuesday’s hearing, if the law is upheld, does that mean the government “can make you buy broccoli”?

To answer such questions, government lawyers have emphasized that healthcare is a special case — and it is. Already, the government requires hospitals to care for the sick even if they can’t pay, something it doesn’t do for other goods or services. (You can’t get free broccoli at a grocery store no matter how hungry you are.)

Given that healthcare is different, the government has argued, an individual mandate is a practical necessity. An insurance pool can’t work if only the sick sign up because it would be unaffordable. So there has to be some kind of incentive for healthy people to participate.

Are there alternatives to Obama’s version of a mandate? Sure. In Tuesday’s Supreme Court argument, Justice Sonia Sotomayor suggested a nice, clean way to solve the problem: charge everyone a “healthcare responsibility tax” and offer an exemption or rebate to anyone who buys his own health insurance.

Insurance companies have proposed the idea of a limited “open enrollment” period each year, coupled with harrowing warnings about how much your healthcare will cost if you suffer an accident without coverage. That would make it impossible for sick people to game the system by buying insurance on their way to the emergency room.

Jonathan Gruber of MIT, one of the designers of the Obama law, has suggested another measure that might help: “auto enrollment,” meaning everyone would be put into the insurance pool automatically and would have to take action to opt out. That kind of measure has significantly increased participation rates in employer-sponsored 401(k) retirement plans.


But these ideas aren’t what the court is being asked to rule on. Moreover, at least some of them would need to be enacted by Congress — an unrealistic prospect as long as either the House or Senate are led by Republican majorities bent on repealing the law entirely. Far from helping the law work, Republican leaders plan to throw as much sand in the gears as they can.

That’s why the administration pulled out all the stops this week in arguing that the current law’s mandate, however imperfect, is constitutional.

The president’s lawyer even argued that while the mandate’s penalty isn’t a tax, the court should consider it a tax — or, at least, an exercise of the government’s “taxing power,” if that would help.

If the administration wins, it will be a case of legal double-talk being richly rewarded. If the administration loses, its biggest domestic achievement could be in ruins. It would have been simpler to fess up and call the mandate a tax from the start.