Dan’s Blog

Gruber Acknowledges Supreme Letdown

Dan Calandro - Sunday, November 16, 2014

Those who haven’t yet appreciated the recently released statements by Jonathon Gruber should know that the chief architect of the Affordable Care Act (a.k.a. ObamaCare, or the ACA) testified that law could only be passed by means of fraud, deception, and "the stupidity of the American voter."

How Gruber’s provocative admission isn’t plastered all over every media outlet is not only a travesty to We the People, but also negligent, corrupt, and criminal. His short form statement can be found here; and a long form statement can be found here

Indeed Gruber is partially right. Some Americans are, in fact, stupid; these are people capable enough to be well read and independently minded but instead choose to be led by media propaganda and political pressure. Then there are those who are illiterate; these are people without the ability to read and understand the most basic dynamics of the market economy.  And sadly, yes, people from those two groups can cast a ballot and vote.

But not all American voters fit that bill.

It should not be forgotten that more than 60% of Americans polled at the time of ACA passage were against the law, and outraged by the shenanigans Congress pulled to force that law through the system. Remember, Scott Brown promised not to deliver the 60th vote Democrats needed to pass the law if he won Ted Kennedy’s Senate seat, which he did. That was when Senate Majority Leader Harry Reid changed longstanding protocol and forced the bill through a process called reconciliation, which requires only 51 senatorial votes. Up until the passage of the ACA reconciliation had been reserved only for budgetary items. That makes ACA passage through reconciliation a clear breach of standard operating procedures for the U.S. Senate.  

This is not to mention the breakneck speed in which the bill was forced through congressional chambers, leaving little to no time for members to actually read the bill that was put to vote. That was when Speaker of the House Nancy Pelosi attempted to calm the controversy by notoriously stating, "we have to pass the bill so that you can find out what is in it."

I’m not so sure that’s what the Founders had in mind when they established congressional protocols. 

So there was a lot of outrage and dissent for ObamaCare, then and now, by a majority of voting Americans. And while there might be some truth behind Jonathon Gruber’s statements – heck, some people are still stupid enough to think the ACA is actually good law, good protocol, and good for the market – the fraud he reveals in the law’s passage is most stunning.  

In a presentation given at the Annual Health Economics Conference in 2013, Gruber and his cohorts actually poke fun at Chief Justice John Roberts for transforming ObamaCare’s penalties into taxes. The law, he said, was written in a "tortured" way to fleece the Congressional Budget Office and sway the Supreme Court, which it did. And just to make that point clear, Gruber’s elitist position places Justice John Roberts in, and at the top of, the "stupid American voter" group. 

Gruber has picked a major fight.

The way I see it: Gruber’s statements, the most recent election results – and the Supreme Court’s recent decision to review another major threat to the ACA’s constitutionality – completely reopens the national debate on ObamaCare. 

In a blog posted just a few days after the Supreme Court held that the individual mandate was constitutional, my blog Supreme Letdown highlighted the main reasons why the High Court’s decision was flawed (that entire blog follows this one).

In short, the Supreme Court held that the individual mandate was constitutional because it considered the law’s stated penalties as taxes – a clear constitutional power authorized to Congress – and because of precedent. After all, Americans are already mandated to purchase a national retirement program (Social Security) and senior citizen health insurance (Medicare).

And while Supreme Letdown provides a salient argument on the tax issue, it didn’t vividly address the obvious problem with the mandate issue. Never before in American history has Congress mandated American citizens to purchase a product or service from a private organization. Social Security is purchased from the U.S. central government. Ditto for Medicare. Their according taxes are collected by the IRS with specific tax rates on specific activity (wages). 

ObamaCare mandates people to purchase services from private healthcare insurers – not yet a government entity – and according taxes are collected by insurance companies. The tax rates are unknown to consumers and are dictated each year when policies renew. In other words, the healthcare tax rate is a moving target and can change without voter repercussion – and it has nothing to do with the level of activity. For instance, taxes paid by workers into Social Security and Medicare increase as their wages increase. Not so with health insurance taxes, which can rise or fall without any change in consumer activity. Instead, and without little doubt, the healthcare tax will be driven by central government deficit and the ruling Party’s political agenda.

Doesn’t that make you feel warm and fuzzy – especially when considering all the persistent incompetence displayed in Washington DC?

The fact of the matter is this: if ObamaCare could pass with only 51 Senate votes it can be repealed with the same number. Republicans have that number. But they will need 67 Senators to overturn Obama’s veto. The only chance they have in getting those votes is to pass a replacement that will efficiently and effectively achieve the objective – to lower healthcare costs and increase individual enrollments.

Here are some rallying points to compromise:

  • 1.  Cut Corporate Tax Rates – if insurance companies pay less federal taxes they will pass less of those taxes onto consumers, which will lower healthcare prices. Or if that can’t pass then how about making the amount a company pays for healthcare insurance premiums double or triple tax-free (this to encourage enrollment). 
  • 2.  Cut Personal Tax Rates – many doctors make a lot of money; their profession costs a lot of time and money, and the cost of malpractice insurance is outrageously high. They deserve a robust return on investment. If doctors pay less personal taxes they will pass less onto their customers – and consumers will have more money to pay for services.  Or if that can’t pass then provide a tax credit to those enrolled in an insurance program (again, to encourage enrollment.)
  • 3.  Allow Health Insurance companies to Compete Across State Lines – prices fall when competition increases. The federal government must breakdown State boundaries to make it easier for healthcare businesses to compete nationally.
  • 4.  Mandate all Insurances companies offer Healthcare Insurance – prices fall when competition increases. By offering multiple lines of coverage insurance companies will be better able to diversify risk across business units (i.e. health care, property & casualty, life, etc. etc.)
  • 5.  Make Pre-Existing Exclusions Illegal – common sense, prices fall when more consumers (a.k.a. demand) contribute to overall expense. Besides, a free market is an open market.
  • 6.  Increase Grants for Nurses and Doctors – prices fall when Supply (a.k.a. healthcare professionals) increases. We need more doctors and nurses; investing in them is a worthwhile government investment.
  • 7.  Increase Grants for Immediate HealthCare Clinics again, we need more Supply to help prices fall – especially where dense populations exist. This will help inner cities and the poor, a worthwhile government investment. 
  • 8.  Mandate that Immediate HealthCare Clinics Stay Open until 10PM – All too often a sickness happens after office hours of doctors expire – when people return home from work. Emergency rooms are the most expensive providers of healthcare services. They should be reserved for emergencies and unfortunate circumstances in odd hours.
  • 9.  Impose a Healthcare Penalty on any employed person over 26 years of age and Not Enrolled in a major medial insurance program.
  • 10.   Limit the Amount of Malpractice claims to $10 million – Indeed, there is no way to appropriately value human life. My life is priceless to me, so any amount would be too low. But we need to address this out of control cost element; limiting damages will help do that. (Mandating malpractice insurers to also cover major medial insurance will also help.)
  • 11.  Maintain that Medical Decisions are made Strictly between Doctor and Patient – whether it’s the government or a panel of doctors paid by some insurance company – no one knows better about appropriate care than doctors and their patients. Government and insurance company bureaucracies need to stay out of the decision making process; they can’t be trusted with our well-being. 
  • 12.  Expand Medicaid until Supply catches up with Demand and reasonable prices exist in the marketplace.

Such a bill can be written in just a few pages, some 2,475 pages less than the ACA; and it will be much more effective in achieving the stated objectives. Yeah, it’ll take some time.  But it’d be worth it. 

I have one more quick point to make before leaving you with Supreme Letdown; at the end of that blog I say, "The "healthcare boom" begins today – and that includes price inflation…"

For those who believe the stock market is a leading indicator of the economy, consider that since Supreme Letdown was written the Dow Jones Industrial Average (a.k.a. "the market") is up 36% and United Healthcare is up almost double that, 68%. 

As a side note, my group insurance policy is up 27% in the same time. 

So contrary to the pompous ass that Jonathon Gruber is, some of us American voters had ObamaCare figured out from the very beginning.  

And I do hope, truly, that Chief Justice John Roberts has the last laugh. 

Until next time…

Stay tuned.


# # #


Supreme LetDown

Jul 07, 2012

Let me begin by saying that I’m not a lawyer and I have a plaque on my desk to prove it. But I can read, and have an independent mind. My goal in this blog area, as always, is to provide you – the independent investor – with all the tools and analysis required to invest successfully on your own. That is part of my chapter 8 guarantee.    

For those of you who do not yet know, LOSE YOUR BROKER NOT YOUR MONEY won the 2012 International Book Awards for Investing. It did so for a reason. In the book I demonstrate how to identify changes in Market condition long before stock markets react to them. This allows you to stay way ahead of the trading curve. (It makes making money so much easier.)

As we know, governments control Markets. The American system of government has three branches: Executive, Legislative, and Judiciary – governors, regulators, and judges. Policy and legislative changes from any branch of government are major Market indications. Supreme Court decisions, while not permanent, are very close to it. 

Red alert!

Recent Supreme Court decisions are poised to dramatically affect the American Market and stock market valuations going forward. Independent investors must take note: These rulings signify major changes in Market condition and direction.   

In two incredibly important issues facing the U.S. economy (immigration and healthcare), the Supreme Court dealt the American cause a severe blow in two specific cases: 

•         Arizona v. the United States (a.k.a. ARIZONA), and 

•         National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services (re: Affordable Care Act, ACA). 

After reading the Opinions in their entirety, I am left with two profound questions:

1.         At what point in American history did individual States cede their right to protect and defend their citizens as defined by federal statute – should the Federal Government choose not to enforce their own laws?  

2.         Exactly what clause in the U.S. Constitution gives the Supreme Court the power and authority to impose a tax on the American People against the clear intent of Congress and popular sentiment?  

In a nutshell, States and People lost big-time with these two Supreme Court miscues.  And that’s not good for Markets, People, and Stocks. Here’s how I see it.  

# # #

What happened in ARIZONA?

Arizona citizens, under a duly authorized elected government, enacted three laws that identically mimic Federal Statutes. They did so to enforce laws that the Federal government was not was enforcing in the same manner as in neighboring states, California, New Mexico, and Texas. Arizona claims that such a policy makes their state a "gateway" for illegal immigration – a real problem in the State, as the data proves.  

The Fed cited "limited resources" for not enforcing border controls in Arizona but asserted that the Arizona laws were unconstitutional because border issues were restricted for Federal enforcement only. States had to stand down regardless of federal policy. 

And the Court agreed.   

# End of Summary #


ARIZONA highlights the burden of failed immigration policy. Crime is up, jailhouses are full, and Arizona’s education and healthcare systems are greatly strained. The Arizona government contends that the fiscal cost of an open border is vastly greater than responsible border enforcement. The data overwhelming corroborates their position. Illegal entrants have imposed a severe cost to their State and they wanted to employ their resources to stop the incursion.   

But the Court ruled against them, and as such, provided all future presidents with the ability to use immigration policy – and border security – to sway elections and coerce States into following their national and political agendas. 

How could any right-minded American believe that the Colonies gave sole control over their security to one man named, President? Something seems truly un-American about this type of individual federal power.

All fifty states lost in ARIZONA. Today all States are less free, less stable, less profitable, and more vulnerable. And since States are just Markets, it’s safe to say that all Markets also lost with this decision. Remember, dollars spent on the costs associated to illegal immigration come at the expense of free market activity, and are thus bad for investments, markets, and taxpayers (a.k.a. Consumers.)  

Not good.  


# # #

What is the issue with the AFFORDABLE CARE ACT (ACA)?

Two central themes of the Act were contested: the Individual Mandate and the Expansion of the Medicaid program. In the ACA, all able persons are required to purchase "minimum essential" healthcare insurance.  It’s commonly known as the Individual Mandate. It assesses penalties to certain people for non-compliance of the Mandate.  

The ACA also requires all States to participate in the program. Congress achieves this by stripping a State from all of its Medicaid funding should it not participate in the ACA. 

In a nutshell, Congress makes it quite clear that the only way the ACA program could work was if all the People in all the States participated.  

The questions before the Court are simply these: 

  • 1.  Can Congress compel people to purchase a product against their free-will?
  • 2.  Can Government force all States to comply with the ACA by withholding all Medicaid funding – Or is this extortion? 

In the end, the Court found the Individual Mandate constitutional under Congress’s taxing authority and struck down the Congressional effort to withhold all Medicaid funding for non-participating States. The Court held that States foregoing ACA participation can only lose new Medicaid funding under the expansion plan.  

# End of Summary #

Somewhere along the line the Supreme Court lost its way – they, too, serve the cause to support liberty and protect the rights of the American People (a.k.a. Consumers) under our founding principles. The Affordable Care Act (ACA) was rammed through Congress against popular demand, with many polls showing more than 60% of Americans against the bill at the time of passage – a sentiment that still rings true today.    

Most of the Justices forgot that the Individual Mandate was sold to the American public specifically as a "penalty" and definitely "not a tax." While admittedly, the ACA is laden with taxes and duties, the Individual Mandate was specifically labeled a penalty numerous times in the areas defining it. The Supreme Court, against the Chief Justice’s pledge in his confirmation hearings, legislated from the bench, re-wrote the law and made liars out of Congress – and by so doing, levied a huge tax on the American People.  

That’s not the way our system was intended to work.  

And because the intent of the law was changed from a penalty to a tax, the Court in effect changed the character of the government’s role in the healthcare market from penalizer to insurer.—And that’s where the big problem is. 

In the ACA, government looked to penalize certain groups of people, i.e. those who do not buy medial insurance. Ok, fair enough. The only way Congress could "finance" the ACA was if every able person purchased health insurance. It’s a Mandate, punishable by a monetary penalty for non-compliance. 

To be clear: a penalty is a punishment for breaking a rule. A tax, on the other hand, is something entirely different. A tax is a required contribution to the government levied on income, profit, or certain goods and services.  In other words, all active People pay taxes; while only Violators pay penalties.  

By transforming the penalty into a tax, the Supreme Court’s decision creates more confusion – What will this new tax be called, and how will Congress impose it? 

While these are legal barriers that a sly Legislature will surely overcome, I can see an easy Congressional remedy on the immediate horizon: They will raise the Medicare tax to pay for the Medicaid Expansion under the ACA, because under its definition, all Violators already pay taxes. This incubates a single payer system. 

And just like with Medicare the government will end up calling all the healthcare shots – who gets what care, when, what it will cost the patient, and what the provider will get paid for it. After all, they will be the single largest payer of it all. This makes government the primary insurer and ultimate price fixer in national healthcare – a power born by Congress’s taxing authority, so this High Court says.

Unlike the Court, elected officials are driven by political motivations and spend money for reasons other than return on investment. It’s strictly political. That’s why they waste so much money – and why the American system was founded on three separate and equal branches of government. Our Framers knew all too well the natural tendency of government to expand power in order to gain domineering control. The Supreme Court, by design, is supposed to be liberty’s last defense against overzealous Executives and Legislatures. On that front, We the People have lost big with these two Court opinions.  

And that’s not good for consumers.

When governments become too intrusive in markets corruption is not far behind and calamity is right around the corner. Recall the subprime mortgage debacle as explained in my book. What started in the 1990’s fell into ruin in the fall of 2008.  It was too easy – and money was too cheap for far too long.  

Sound familiar?  

The Affordable Care Act (ACA) is positioned to do the same thing to the healthcare market that the Community Reinvestment Act (CRA) did to the financial markets – it caused calamity. Not overnight, for sure. But in due course.

And for those of you who think this Supreme Court ruling is a great sign to a great new American Way – think again.  Medicare is government run healthcare – and it’s broke. Medicaid – a State and Federal joint program – is collectively broke. Social Security, a nationalized retirement program, is bankrupt by any reasonable account – regardless of the amount of taxes levied over its many decades of existence. 

Do you see a pattern here?—If not, look to Greece and Spain for the end game (who, by the way, are drastically cutting education and healthcare programs at the present time.)

If you are middle-aged and are investing for retirement you must put your portfolio into high gear! Expect the cost of living to rise dramatically. No longer can you afford the establishment’s offerings (mutual funds and Social Security) to finance for your retirement well being. They will fall way short.

The "healthcare boom" begins today – and that includes price inflation – and will continue until another major fiscal crisis erupts. Sorry to say.  

Prepare your portfolio now.  

And let me if you need help.  

ShieldThe road to financial independence.™


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