Obamacare: Loopholes and enforcement

Reading time: 18 – 30 minutes

Well, it has been a week since the much publicized Obamacare bill has been signed into law and, as Speaker Pelosi promised, the American people have now had a chance to read it.

Not quite: The law is so long and convoluted that relatively few people really have read it yet. Much of the news, based on partial reading or mis-reading, is still uninformed. People will be reading this law until the election of 2010 and long after.

President Obama may now be wishing that he had also read the bill before he signed it — but then, how could he have had the time, with all those carefully orchestrated ‘town meetings’?

President Obama before a screened crowd of devoted followers (Iowa City)

I have never seen such unpopular legislation in my life, even when living under dictatorships:

1. First, the socialists are incensed because, in their view, the law did not go far enough towards a government take over of health care delivery.
2. Second, the conservatives are mad because the law was pushed through without their consent, in the dead of the night, with bribery and chicanery, and at huge — probably disastrous — economic cost.
3. Finally, the moderate Democrats are really disappointed because they have thrown away their careers for a law that almost certainly will not be considered by historians as the ‘landmark achievement’ that Speaker Pelosi promised.

In terms of drafting clarity, the law is a shambles.

In terms of economics, this is prohibitively costly legislation that does little to reduce healthcare costs, but instead focuses on the distribution of wealth by coercive measures and on increasing public dependence on central government.

The question I would ask is whether the drafting flaws (intentional or not) are so egregious as to turn the document inoperative.

Forcing law upon a resisting public

Poorly written law can sometimes be successful when the vast majority of people agree with the intent and there is bipartisan support to correct errors. However, this is not the case with the Patient Protection and Affordable Care Act of 2010.

Free people do not like being forced to do things. Here is Charlie Chaplin as the Great Dictator

Numerous polls over the last year have shown that the majority of Americans are satisfied with their health care and their doctors.

People come from around the world for medical treatment in the United States. Even Canadians, that have government health care similar to Obamacare, travel to the US for treatment that is unavailable in their country.

Although millions do not have health insurance, this is often because they chose not to, such as young people with a sense of immortality, or the poor, eligible for government insurance, but who do not sign up.

For many years, health care costs have been rising faster than inflation. Government subsidized insurance, Medicare and Medicaid, is becoming economically unsustainable.

Why health care is expensive

The reasons for rising health care costs are known:

1. There is a shortage of doctors and nurses relative to the population and potential demand for healthcare;
2. Since a large portion of the population gets health insurance through employers, or at subsidized rates from the government, market forces have not worked to bring costs down;
   

   Doctors and medical facilities are the cost element, not insurance

3. Complex government rules and regulations have introduced inefficiencies and economic mis-incentives into the market;
4. Medical advances call for involved, specialized treatments and expensive equipment and this pushes costs upwards;
5. Pharmaceuticals require costly, prolonged testing before government approval, and drug companies enjoy a patent monopoly for years to recover these costs and as an incentive to search for new medicines;
6. Because of medical advances, people are living longer.  In general, older people have higher medical costs than younger people;
7. Some medical conditions which would have caused people to die years ago, now can be treated and lead to longer life, although at high cost. Many feel they should have the right to such treatment, regardless of their ability to pay. Rationing healthcare on the basis of wealth and power strikes many as unfair.

What is Obamacare?

The Patient Protection and Affordable Care Act is neither a government takeover of healthcare, as the socialists want, or an effective free market solution that reduces costs and provides better service.

The new law forces most US residents to buy health care insurance, under the assumption that wider coverage will overcome the fact that having more people with access to health care, without an increase in the number of doctors, can only lead to rationing and higher prices.

Although the Obama administration has tricked the bill so that it would appear to be deficit neutral over the first ten years, this has been accomplished by artificially postponing expenditures in the early years, while incurring ‘benefits’ only in the last years.

The Congressional Budget Office, which was required to accept assumptions given by the Democratic-controlled Congress, nevertheless indicated that the law will cause federal deficits to increase when fully operational.

Millions or ordinary Americans joined the Tea Party Movement to protest Obamacare

The financial burden will be even more onerous — some say disastrous — for the states, because, unlike the Federal government, states cannot print money.

Most Americans already understand that this legislation is not economically feasible.

However, some —now a minority — who are on the receiving end of this vast wealth distribution program, speak highly of the law and support the legislation.

Since President Obama was elected in a time of crisis in the financial markets and not on the basis of mass dissatisfaction with the American healthcare system, which most consider to be among the best in the world, the consequences of using a temporary majority in Congress to force through unpopular legislation are likely to have negative effects on the Democratic party for years to come.

Obscure drafting

Drafting a law is a difficult process, requiring extreme attention to detail and an understanding of the meaning of every word.

It is almost impossible (perhaps it is impossible) to draft a law that does not contain loopholes or that might lead to unintended consequences — even with the utmost attention, an excellent drafting team, lack of political pressure, expert advice, ample research facilities, and plenty of time.

Secrecy, back-room deals, bribery, chicanery are the hallmarks of Obamacare.

The Patient Protection and Affordable Care Act of 2010, President Obama’s signature legislation on which his reputation will rest, had none of these advantages during drafting — due to his own insistence on speed and his one-party, ram-through strategy.

Setting aside questions of back-room deals, secrecy, lack of bipartisan support, or even the intent of the law, the Obamacare Act is a rambling, incoherent, two thousand page case study in legal cut and paste — difficult to understand and larded with uncounted potential loopholes, dead ends, and irrelevancies.

Of course, some praise this obscurantism as a sign of sophistication and intellectual depth. However a law that is antipodal from the US Constitution in clarity, deserves to be viewed with suspicion.

Even a week after the public has had a chance to examine the text, no one seems certain of what it means.

If the Act is repealed in 2013, as Newt Gingrich has proposed, under a Republican president, lawyers still will not have had enough time to uncover all the legal blunders, inconsistencies, uncertainties, and obscurities in this massive document.

Loophole heaven

If Obama were not such an inexperienced lawyer — despite his college role as editor of the Harvard Law Review — he might have chosen a team of legal and healthcare experts to draft the law in a room down the hall from the Oval Office and would have followed each stage of drafting to assure that his goals were accomplished and that the law would withstand judicial scrutiny.

He also would have sought strong bipartisan support, making compromises needed to have the bill accepted by the majority of the public.  The lack of bi-partisan support is likely to turn out to be the fatal flaw that makes the law inoperative.

Instead, he handed the job of drafting to Congress and to the tender partisan mercies of Nancy Pelosi and Harry Reid.

Speaker Pelosi, partisan extremist, used her power to shut down debate and ram Obamacare through the House of Representatives.

• Speaker Pelosi has a BA in political science and had never worked in a law office before becoming a politician. She has never had a contested election in her far left San Francisco district and is incapable of generating bi-partisan support for anything.
• Harry Reid, after graduating from law school worked as city lawyer for two years a half century ago in a small town in Nevada (population 12,000) before devoting his life to Democratic politics. Reid is a Mormon and more to the center than Pelosi, but a loyal soldier for his party who is not above offering political bribes.

From what can be surmised, the Patient Protection and Affordable Care Act of 2010 was drafted by hundreds of staffers of Democratic Congressmen and Senators, aided by innumerable lobbyists representing special interests, along with left-wing academics.

The process went on behind closed doors, with much intervention from this and that side and with numerous, conflicting drafts that were all cut and pasted together in a critical rush to finish before politicians would go home to face their angry constituents in Easter Recess.

All sorts of things were stuffed into this bill for all sorts of reasons, often completely unrelated to the purported object, and sometimes, now even upon cursory reading, seemingly meant to sabotage the intended purpose.

In short, Obamacare is loophole heaven.  The degree to which this was intentional, with ‘errors’ planted by lobbyists or Democratic strategists, is not yet clear.

Only a few loopholes have been discovered so far, but it’s only a week and people are still reading.

The non-criminal individual mandate

The announced intent of the law was to force most Americans to buy health insurance. Those who couldn’t afford such insurance would receive financial assistance from the government.

It was said that by increasing the size of the insurance pool to include many younger people with lower health care needs, the average cost of insurance would fall.

Not to worry! There is no penalty on the 'individual mandate'. Or is there?

Since many Americans today don’t have health insurance because they don’t see the need — primarily young adults who have not yet started a family and have other priorities — Obamacare is said to resolve this problem by forcing everyone to buy health insurance, like it or not.  This is the so-called individual mandate.

However, the most astounding thing about Obamacare is that the individual mandate is basically a misnomer — there are no penalties for not complying with the law:

Here is the relevant text:

The penalty  [for non-compliance with the individual mandate] applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the [Income Tax] Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.

Now, this is obviously not a drafting error and does not jive with the talking points of the Democratic party about the individual mandate. The Democrats wanted to disguise the mandate as a ‘personal responsibility’.

What is going on?  Without penalties, obviously people who don’t want to buy health insurance won’t do so.  The Democratic operatives must have something up their sleeve — some other way to force people to buy health insurance.

That the Democrats have left this loophole intentionally is clear from this exchange between Bill O’Reilly and Democratic Representative Anthony Weiner on ‘The O’Reilly Factor’ on March 25, 2010:

[Bill O'Reilly]
Then tell me, which agency in the Federal Government will deal with somebody who absolutely is defiant?

Anthony Weiner (D-NY)

[Anthony Weiner]
We are NOT, watch this[mouth] Bill, Bill, watch this[mouth] we are not criminalizing people who fail to comply. If you go littering and that’s a $50.00 dollar fine, no one will be following you around to get your litter.

Now if there are no civil or criminal penalties for non-compliance with the individual mandate, what do the Democrats have in mind?

Well, consider the strange provisions to nationalize student loan programs that were inserted into the Obamacare bill. Maybe the government won’t sent a young person to jail for not having health insurance, but now they can deny them student loans.

Here are just some ways that an over-reaching Federal government could punish those who don’t comply with the individual mandate, by executive order of the President:

1. The State Department could refuse to issue a passport to those without a health insurance clearance document from the Internal Revenue Service.
   In this article:

   • Forcing law upon a resisting public
   • Why health care is expensive
   • What is Obamacare?
   • Obscure drafting
   • Loophole heaven
   • The non-criminal individual mandate
   • The non-insurance loophole
   • Repeal, Appeal, or Nullify
   • Related Posts
   • Comments (7)

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2. The Department of Homeland Security could place people who don’t have health insurance clearance on a no-fly list.
3. The Department of the Interior could require visitors to national parks to have a card from the IRS saying that they are in compliance with the individual mandate.

Living in Brazil for 23 years, I saw how an intrusive government could enforce a mandatory voting requirement, which did not have criminal penalties, by requiring citizens to present a voting card to the authorities in many unrelated situations — essentially requiring a ‘certificate of good behavior’.

It seems clear that the Democrats realize that the individual mandate is necessary for Obamacare to work, but that criminal penalties would be too obvious and unpopular.  They needed to be sly and tricky to get the American people to swallow this bitter pill.

If you boil a frog very slowly, he may not jump out in time to save himself.

The Obamacare bill is designed to slip its poison into the American political and economic system slowly, bit by bit, until it is too late for the public to resist. It’s called the Boiling Frog Syndrome.

The central strategy of the bill is that it is to be implemented slowly, over years, with each stage timed to be just after an election — hoping to avoid political consequences for Barack Obama and the Democratic Party.

It is also possible that the non-criminalization of the individual mandate was intended to protect the law against constitutional challenges that are already being raised by the attorneys general of many states.  After all, if it’s a non-mandate mandate, what’s the big deal?

The non-insurance loophole

Whereas Obamacare has an ‘individual mandate’ and requires that all health insurance policies after a certain date have certain provisions, like coverage of pre-existing conditions, insurance companies and their lawyers have already discovered loopholes that seem to make the law inoperative.

A 'loophole' is also an opening in the wall of a fortification through which soldiers can shoot.

This law is based on the premise that insurance companies are ‘the bad guys’ and have to be prohibited from doing this or that. There are no incentives to act in a certain way — only proscriptions.

I’ve spent years running businesses under governments that issue this type of proscriptive legislation. I’ve learned to read a law with an automatic eye for loopholes. ‘Well, this is prohibited, but not that’, or ‘They failed to think of this way of doing things’, or  ’They’ve granted an exception for such and such … maybe I can qualify”.

With thousands of executives and lawyers combing through a two thousand page legal monstrosity, like Obamacare, loopholes will inevitably be found, exploited, and their use propagated throughout the market. When a loophole is in the law, it often cannot be closed in a regulation. If a subsequent administration has no interest in the law anyway, or is actively opposed, the loopholes take over and cannot only defeat the initial purpose, but have surprising, unexpected consequences.

A short, pithy law, carefully crafted and to the point, is less likely to have loopholes.

The general rule is: the longer, more convoluted the law, the greater number of loopholes and unintended consequences.

Laws that are proscriptive — treating the regulated as the enemy — actively foster ill will and encourage and provide incentives for the discovery of loopholes.

Some loopholes in Obamacare may have been planted by insurance company lobbyists during the uncontrolled drafting process. After all, the general handling of the legislative assembly line over the last year seems to indicate that the backers of the bill, while sly and ruthless, were not necessarily wise.

The Obama administration is incensed about the few loopholes found in the first week, and the President has instructed Secretary Sibelius to issue regulations to correct these problems, but it is not clear, without the cover of law, how corrections might be made.

With the majority of Americans turned against the law and after the loss of a filibuster-proof majority in the Senate, it is doubtful that adjustments will be made easily without the support of the Republican party — who the Democrats have purposely alienated and insulted when getting the bill passed.

Of course, some Republican Senators, like Chuck Grassley, Susan Collins, and Olympia Snowe, pining for bi-partisanship at all costs, may go over to the other side, so nothing is certain.

Here are the some areas for loopholes:

1. Although the law mandates that health insurance policies have certain provisions, prior to 2014 there is no mandate that a  company sell insurance to all that apply. Even after 2014, with so-called ‘guaranteed availability of coverage’, there are many loopholes.
   

   Insurers can create a maze through which only those they want to insure may find their way.

2. The law does not completely control health insurance premiums, terms and conditions of payment, or details of marketing or application for coverage. There are some limitations, such as the requirement that a certain percentage of a premium must go for health care, but with no upper limits on the premium itself, and a creative insurer, under pressure to make a profit and not send his company into financial oblivion, will do everything to find ways to survive, although probably not in ways intended by President Obama, who might even be out of office by then.

The law is laced with terms calling for ‘reasonable’ this and ‘unreasonable’ that, but no one knows what this means and every discussion of the matter will have to be settled in court.

Now, it would seem that insurance companies, if they are to remain economically viable, cannot be forced to issue insurance for all comers, because insurers are subject to state regulations, such as capital and reserve requirements and most operate at a profit or go out of business. If a state is hostile to Obamacare, and many are, state insurance regulators can work to sabotage Obamacare in many quiet ways — just a sympathetic bureaucrats in the Federal government have thwarted enforcement of restrictions on illegal immigration for years.

Insurance companies might adopt a ‘policies by invitation only’ tactic, or set up arrangements with doctors and hospitals that would serve to screen undesirable risks.

The biggest mistake of the drafters of Obamacare seems to have been the assumption that people are stupid and that the masses will continue to believe empty campaign rhetoric forever.

When the government decides to demonized the private sector, expect the private sector to strike back.

The biggest and most effective loophole that the Obama administration will be unable to close, is that the law has engendered massive bad feelings and active defiance on the part of millions of citizens, many state governments, doctors, and the opposition party, Tea Baggers, and just about anyone who dislikes being pushed around by Big Government.

Repeal, Appeal, or Nullify

Never is recent American history has a law stirred up such animosity from all sides. Never has such unpopular, extreme partisan legislation survived the election of the opposition party.

Already measures are being taken to challenge the law in the courts, and these will only intensity as the provisions of the law kick in and as the administration tries to close loopholes.

The law is considered by millions, whatever the Supreme Court may decide, as an affront to the US Constitution.

The Republican Party is ginning up massive support for repeal and replacement by more reasonable, effective, less economically destructive legislation.

Barack Obama, arrogant and scornful in victory; how will he be in defeat?

On the Internet and on the social networks, millions are calling for resistance, repeal, nullification — even for a Constitutional Convention.

And Barack Obama is still going before carefully selected audiences of adoring partisans — a minority of the people, nowadays — strutting like Mussolini, his voice dripping with sarcasm as he screams and gestures with defiance and scorn for the majority, the doctors, and the insurance companies. “Bring it on!”, he shouts in defiance.

And indeed, he will bring it on.

Barack Obama lacks magnanimity in his victory and is incapable of bringing the country together again.  He never was a uniter and never will be. Magnanimity and reconciliation are simply not on the curriculum of the Saul Alinsky School of Community Organizers.

Even if Obama wanted to change now, it is too late — the well is poisoned.

Strangely, this is good news for the United States; Obama has not shown that he has the charm, inclination, sincerity, or oratorical skill needed to persuade a hostile people to swallow his bitter pill.

What do you think?