In response to our Obamacare episode, listeners J. Squires and Sid Jones asked about the issue of whether the government actually has the right to force people to buy healthcare – one more skeptical and one surprised it was even an issue. This aspect is not trivial. But rather than focus on the philosophical issues regarding the law we decided to focus more on the economic logic and effects. That being said, here are a few important points:

  • The individual mandate was held up in a Supreme Court decision as a “tax.”
  • Under this idea, any raised healthcare cost (after subsidies) could be seen as the equivalent of taxing certain groups and redistributing this money to others.
  • We commonly tax individuals and give the revenue to others. This by no means justifies the law, but it also means this process isn’t totally different than anything we already do.
  • We’re generally raising the tax from healthy individuals to give the revenue to unhealthier ones. This could produce a “moral hazard” effect where people are incentivized not to take care of themselves. This also isn’t totally different than other redistribution policies from productive citizens to less productive citizens – unemployment insurance, for example.
  • Since it has been upheld as a tax, President Obama has violated his promise not to raise taxes on the middle class.