The Supreme Court recently upheld the constitutionality of the president's signature legislation effort, The Affordable Care Act, including the key provisions for the individual mandate and Medicaid expansion.
The story behind the news was Chief Justice Roberts' decision to join the court's four liberals to uphold the law. Roberts, usually a leader of the conservative bloc, made the decision to uphold, not on what the administration has all along claimed as the reform bill's legitimacy. Roberts explained that the controversial "individual mandate" is actually just a tax. And the congress does have the right to impose taxes. Thus, the law's legitimacy -- even if for different reasons than those the administration has thus far claimed.
Republicans are fuming. Democrats are gloating. Yet, Justice Roberts' rationale could be a boon for the right. Because, if the core legislation is a tax, it can be repealed by a simple majority of the Senate through the budget reconciliation process, in which filibusters are not permitted. Suddenly, November's election becomes even more important. Even for those who previously had no dog in the fight.
Let's not get overly political. Healthcare needed a reformation. For now, however, let's stick with two conceptual frameworks: 1) What is best for the nation? 2) Did we arrive at this point in an honest, democratic fashion from which we can benefit and be proud?
Some context, if you will. Does healthcare need reform? Yes. Do Americans thoroughly understand the issue? No. Yet four issues remain troubling regardless of where one's political sympathies stand.
First, Americans don't want the legislation. Not right now. An Associated Press/GFK poll released shows that 47 percent of us oppose the law, while only 33 percent support it. The Rasmussen presidential-election poll shows that 54 percent of likely voters want the law repealed. And a recent NYT/CBS poll shows that two-thirds of Americans want the individual mandate or the entire law to be determined unconstitutional.
Second, given its national unpopularity, why not leave such a sweeping determination up to the states? Make it a local decision? While everyone wants to compare ObamaCare to RomneyCare in Massachusetts, let's not forget that Romney's policy was confined to one state. Given over to local discretion. Per the intent of the founders. Not forced down everyone's throats (and wallets) at the federal level.
The founding fathers were a very religious bunch. They were not tyrants bent on flaying the poor. Yet, when writing the Constitution, they rejected the centralization of power, choosing to place strict parameters on the power and scope of the Federal government. These parameters were created to protect individual freedoms. To preserve the autonomy of individual citizens. Virtue was to be promoted by a civil society. Not a Federal overlord with no skin in the game.
Third, if SCOTUS, specifically Justice Roberts, deems the mandate to be an act of taxation, and so under the purview of the legislative branch (strict reliance on the interstate commerce clause would not have permitted such an interpretation), then what's next? Will Congress issue further taxes to compel or prevent other behaviors? Fast-food taxes? Politically incorrect commentary taxes? Taxes to force the obese to exercise?
The administration stated repeatedly that the law was not a tax. So, for its legitimacy to be upheld by the Supremes because it was, in fact, deemed a tax means that the administration was 1) disingenuous, or 2) unclear as to the constitutional merits of the legislation. Which would be odd, given that its creator was a constitutional law professor.
But, the report card will be provided by those the law affects most.
Many business owners say it may, in fact, be more cost-effective for them to pay the $1,800 per year penalty tax than to provide healthcare for every employee. Yet another backdoor way to soak the American business owner via another penalty tax. This comes at a time when many businesses are grappling with the challenge of saving the jobs of current employees.
Can assessing yet another mandated expense (or penalty) be positive with the economy still smoldering? This leads to my last point. One must consider the context in which this reform was enacted.
When the current administration took over, our nation's economy was in conflagration. The American Skyscraper was burning. Productivity was nil. Unemployment was rampant. And the small business owner could see no further than the week's economic releases to discern when he might begin to hire and spend.
Given the economic wild fire, did the administration ensure that everyone was safely clear of the building? Did the administration then endeavor to extinguish the fire through forward looking, stimulus-based economic policy? Efforts focused on helping small- and mid-sized business owners to escape from the tar pits of fiscal paralysis in which they were entrenched?
No. Amidst the flames, the administration took the opportunity to overhaul the human resources department. Dodd-Frank. Healthcare reform. Suddenly, the primary employers of the nation's economy, small business owners, went from blurry eyed to bat-cave blind. No spending. No lending. No hiring. No growth.
Still curious as to why this economic recovery has been anemic?
In the end, the ripples go well beyond the healthcare pond. The Butterfly Effect of the SCOTUS decision, potentially upheld or overturned by November's election, will have consequences throughout the U.S. economy. Jobs. Strategy. Capex decisions.
As you read this, a business owner somewhere is trying to decide how to keep his team intact. He's struggled to keep his doors open these past four years. Now, he wonders whether it is better to buy the healthcare or pay the penalty. Could he offer each of his thirty employees a $2,000 salary reduction, and then divert those funds to the $60,000 penalty tax he'll be assessed for not providing everyone with healthcare? That way, at least he can keep his staff employed.
Realize that most of the nation's business owners do not have a choice. These risk takers, these employers, these stewards of the American economy, cannot simply drop a country club membership, sell a yacht and a vacation home in order to provide for the cost of the Affordable Care Act. Most of these entrepreneurs are struggling just to get by. To keep staff. To make payroll.
Would you rather have a job without healthcare or no job and no healthcare? That's the conundrum facing many at this moment. Healthcare needs a reformation. But, first things first. The fire should have been extinguished. The nation's economy lifted from its knees.
Reform is not bad. Yet reform must come at the right time. Consider that one mis-timed, ill-placed trumpet blast can wreck an entire symphony. Well, the American economy is a symphony orchestra. Great, when playing its best. But, uncoordinated, haphazard efforts can mute even the best overall performances.
The bottom line? More people with access to health care. That will be positive for the shares of the large hospital companies, like HCA Holdings Inc. (NYSE:HCA), as well as the drug companies like Merck (NYSE:MRK), Abbot (NYSE:ABT) and Pfizer (NYSE:PFE).
Investors may wish to avoid the insurance companies like Wellpoint (WLP) and United Healthcare (NYSE:UNH), as their shares will continue to be plagued by the lingering uncertainty of the new law. This drama's final act will be staged against the backdrop of the nation's economy. Does it recover, or continue to stagnate?
Like driving through a foggy New England countryside, economies crawl when the forward vision of those with their hands on the wheel is impaired. So, for small businesses and the U.S. economy, the recent decision likely ensures that the landscape remains as opaque as pea-soup fog until November's election.