Back in 2009, when the Affordable Care Act was being written, few doubted that Congress can constitutionally impose a tax penalty on people who refuse to carry adequate insurance. Congress’s power to regulate insurance markets under the Constitution’s commerce clause is settled law. While it seemed clear that Congress has the constitutional power to mandate coverage, some doubted the political wisdom of using that power. Simply forcing people to buy insurance seemed too much like a mean parent saying “eat-your-broccoli, or no dessert.” The mandate, it was feared, would arouse needless opposition. The opposition was needless because most people could be encouraged to buy coverage with positive incentives to enroll, such as direct subsidies, and penalties for refusal to enroll, such as extended denial of access to subsidies and exclusion from insurance market protections.

To the surprise of many, opponents of the Affordable Care Act took the broccoli analogy literally. Not buying insurance is simply inactivity, they argued. If government can prohibit this form of inactivity by forcing people to buy insurance, it can force them to buy anything, even broccoli. If Congress can prohibit such ‘inaction,’ they argued, freedom is in jeopardy. More to the point, the constitution doesn’t allow limits on ‘inactivity.’

The appeal to the broad public of the argument that not buying insurance is inactivity may not have been surprising. But the acceptance of the argument by some federal judges is downright astounding, as the distinction rests on a fundamental ignorance of how insurance markets work.

The use of health care is both predictable and random. It is predictable in the sense that some people are more likely to use health care than others—because of age, chronic illness, or genetic disposition. It is random because the onset of many illnesses is unpredictable and because accidents happen.

One would expect that, on the average, those who voluntarily go without health insurance will be comparatively light users of health care. But one would also expect that some fraction of the uninsured will incur large health costs that they cannot afford to pay. Thus, letting some people decide freely not to buy insurance raises costs in two ways for those who do buy insurance. First, it removes from the insurance pool people with lower-than-average costs, thereby boosting premiums for those who do buy insurance. Second, some of those who do not buy insurance will end up using more medical care than they can pay for. Those unpaid bills will also boost costs for the insured.

Thus, the decision not to buy insurance affects the insurance market, which Congress indisputably has the power to regulate. Furthermore, repeated Supreme Court decisions have established that Congress can regulate actions outside the web of commerce that indirectly affect commerce, such as the decision by a farmer to grow wheat for his own consumption is subject to regulation under the commerce clause.

To be sure, this is the position that the government has advanced in its brief in defense of the Affordable Care Act. But it is also the core of two separate, carefully-crafted decisions by conservative appellate court judges, Laurence Silberman and Jeffrey Sutton. Silberman was widely rumored to be on the short list for a Supreme Court appointment during the administrations of Ronald Reagan and George H.W. Bush. Sutton, a former clerk to Justice Antonin Scalia, was nominated to the sixth circuit in 2001 by president George W. Bush. Resistance to his appointment was so stiff that no vote was scheduled for two years; and when the vote took place, 41 senators voted against confirmation. Indeed, the administration’s brief seems crafted to appeal directly to decisions that Justice Scalia signed and that Silberman and Sutton invoked. In particular, the administration brief stresses a point that was key in Justice Sutton’s decision—that, whatever judges may think of the wisdom of a law, they are bound to affirm the law if it is reasonably related to a power that the Constitution gives Congress.

Of course, no sensible person should ever try to forecast what nine very independent justices will decide, particularly when the stakes are as high as those in the decision about the constitutionality of the Affordable Care Act. So, here is my prediction. By a vote 7 to 2 or 8 to 1, in several different opinions, the Court will declare the mandate to carry insurance to be constitutional. Justice Thomas, continuing a long line of decisions calling for a rollback of federal regulatory authority, will dissent. So, might Justice Alito. But Justice Scalia will back the reasoning of his former clerk, Judge Sutton, that demolished the ‘action/inaction’ distinction. The other justices will agree, although for different reasons.

Jointly, the Supreme Court will put the issue of health reform exactly where it belongs…in the hands of the American people. Next November, the electorate will determine the fate of the Affordable Care Act by determining who will occupy the White House from January 20, 2013 through January 19, 2017. In a democracy, that is where the decision should be made.

Henry J. Aaron is a senior fellow of economic studies at the Brookings Institution. Aaron focuses on the reform of health care financing; public systems such as Medicare and Medicaid; Social Security; and tax and budget policy. This piece originally printed as part of a National Journal forum centered on the legal arguments for and against the Affordable Care Act.

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13 Responses for “Sizing Up the Obama Administration’s Defense of the Health Reform Law”

  1. Samuel Stenes, MD says:

    The meaningfully neglected matter in the HR Law is the reliance of meaningfully unusable HIT devices to save money.

    The foundation is cracked already. Expenses will increase and quality will go down as the HIT vendors pocket the money from the taxpayers and patients, and doctors will become categorized as window washers.

  2. “…I don’t have such a mandate because I don’t think the problem is that people don’t want health insurance, it’s that they can’t afford it. So, I focus more on lowering costs. …….. Well, if things were that easy, I could mandate everybody to buy a house, and that would solve the problem of homelessness. It doesn’t.” — Barack Obama, February 2008

    I have faith in the Court and its wisdom to realize that prohibiting the growth of wheat for personal consumption is not the same as mandating the growth of wheat for personal consumption.

    And where is that “focus” on lowering costs now?

  3. Cwells says:

    For all the U.S. sees as personal freedoms, it seems these freedoms only directly affect the lives of the select few. Government may mean well by imposing some regulation, without fully investigating – apparently- its effect in the long run (the farmer growing wheat analogy), although I’m sure ConAgra loves it. However, the fact that the cost of health care is so high, and is essentially out of reach for so many, is evidence that indeed this problem has not gone away and will not go away until meaningful change is made. Mandating purchase of private health insurance, as in auto insurance, homeowners insurance, etc., may seem like the right step, but a counter thought would be if people could afford to buy health insurance, wouldn’t they have done so already?

    While Politicians look to Europe, they and the private insurers and lobbies go so far as to say that these countries don’t have as good a level of healthcare as we do, which is not true. The U.S. seems to have blinders on when it comes to a national health plan. In fact, Newt Gingrich was just saying how Medical Tourism is a promising market for Americans and provided an alternative to expensive healthcare in the U.S. Well, where is it that Medical Tourists go, Mr. Gingrich? If they are going outside of the U.S. for cheaper health services, where are they going? And why should Americans have to go outside the U.S. for health services?

    Europeans have an advantage on us; they are not tied to jobs that have no professional futures because they may lose their health insurance, they are not tied to geographic areas because they may lose their health insurance. Small businesses are not strapped with health care costs and can invest the money they would have to use for health care directly into their businesses. That is economic growth in action. And anyone can find academic and scholarly studies showing that people who have continual health care, do not cost the system more, they in fact cost the system less because their health issues don’t go through acute phases due to the absence of health care.

    Chronic health issues that are maintained throughout the life of a person do NOT end up costing the government more. Don’t any of the politicians who are so adverse to government health care read studies on quality of life? of rankings of the state of health of countries? Don’t they see that the U.S. is embarrassingly pretty far down on the list?

    It is crazy to me that as these people who stand on podiums to decry public health services, Medicare, Medicaid, and a possible public option, do not appear to read and do not appear to understand exactly what it is they are talking about. It seems politics and getting over on Obama – their current target, is more important. Congress decries public health care and social security, but guess what, who is paying for their health care costs and their pensions?

  4. Cwells says:

    @Nateodgen, when you show up with your antagonistic and argumentative comments, don’t waste my time unless you have proof to back them up.

  5. MD as HELL says:

    If PPACA is not thrown out, the country is dead.

  6. Dennis Byron says:

    One of the problems with the author’s logic flow is that he says that some federal judges are fundamentally ignorant of how the healthcare insurance market works (highly doubtful) but then — instead of explaining why he thinks that — he describes the healthcare delivery market. An argument could be made that healthcare is the one commercial service that cannot be delivered without pooling costs (that is, cannot be delivered without insurance) and that therefore there really is no healthcare insurance market (that is, it’s simply a subset of healthcare delivery).

    That would make a good argument for having the government as single payer or even for totally government-run healthcare. But that’s not the question in front of the court. The author’s description of how insurance works is not an argument for forcing someone to buy it. The only reasons he puts forth for forcing someone to buy insurance is
    1.) that if they don’t. it will cost more for the rest of us, and
    2.) they will not be treated if they have an accident or get sick OR — depending where they live — they will be treated at taxpayer expense.
    As Margalit points out above (or below depending on how this comments engine works) President Obama demolishes that argument.

    I live in Massachusetts. Very few of us have any problem with buying healthcare insurance (it was invented here) but we have already seen how dickering around with 1%-2% of a market that couldn’t afford insurance by giving it to them has very expensive unintended costs and consequences. (President Obama understood that as well. Too bad he didn’t hold to his convictions.)

    As a consequence of the three year old mandate in Massachusetts the supply of providers is collapsing (especially providers that will attend to the newly insured) out of proportion to the relatively slight rise in demand. At the same time, personal, municipal, state and federal budgets have been socked to the point that the state legislature is about to re-reform the Massachusetts healthcare insurance and delivery market for the fourth time since the mandate was enacted. That will kick off another cycle of collapsing the provider side of the supply/demand cycle.

    As the author says, this will all really be decided in November 2012. Make sure you understand what really happened here in Massachusetts when you vote in that election.

    (The author does not seem to get the logic of the broccoli analogy either but why bother…)

  7. Cwells says:

    @DByron: I’m curious, you say the supply side is collapsing in MA, is this a consequence of direct pricing for “consumers”? Simple economics has shown in markets where demand is high, supply also increases, but competition will decrease the price. So are insurers pulling out because MA is no longer lucrative for them? If so, this is a boon to the consumer.
    MA has only had this model for 3 years, I’m sure no-one expected perfection immediatly.

  8. Dennis Byron says:

    @cwells

    Sorry I wasn’t clearer. I’m not accepting the blog post author’s argument that healthcare insurance and healthcare delivery are one market… at least not yet :) By supply side I meant providers (doctors and hospitals), not insurers.

    Less than 50% of most PCP-type doctors are accepting the new insurance sold or given away through the RomneyCare exchange (even if the insurance is fully paid for by an individual buying through the exchange, as opposed to someone with one of the free or highly subsidized policies). The finding is based on mid-2011 Massachusetts Medical Society surveys. The largest medical practice in Central Massachusetts has lost its independence and has been gobbled up by some Eastern Massachusetts holding company. There is also some sign that doctors are simply giving up practices, retiring early, going into research, or moving out state but that’s all anecdotal so far.

    Meantime, the fourth or fifth largest (not sure without looking it up) non-profit hospital chain was sold to a private equity firm (the same one that took Chrysler into the tank) and most likely will not last long. At least a half dozen smaller hospitals have been sold to the private equity firm or to larger non-profit conglomerates like the one that owns Masschusets General Hospital.

    The healthcare insurance market in Massachusetts has been and still is dominated by four non-profits and a few smaller non-profits. All were once tied closely to and are still tied loosely to large medical practices and/or the large teaching hospitals. I believe one for-profit has entered the market since RomneyCare (Centene from St, Louis), enticed in by the exchange in some way to provide competition for the already existing non-profits (not sure why they needed the competition?)

    You say “I’m sure no-one (involved in RomneyCare) expected perfection immediately,” but you read this blog, so I’m going to guess you just left off the smiley face?

  9. Cwells says:

    @DByron: In my community, which is a small No. NJ county, we have 6 hospitals. One is in partnership with a major NY teaching Medical Center, 2 that had formed a system recently went their separate ways, 2 more consolidated through an out of state holding company, and 1 is ip for sale and is “courting” a west coast bidder. None have seen record profits for years. One of the hospitals that recently consolidated has been through 2-3 different “investors” since the ’90′s. NJ follows the tradtional modal of privaye and public payers. My point is that possibly the MA delimna of loss of providers and consolidation could just be a market adjustment. The industry on the whole is constantly changing. Even here, some physicians will not accept new Medicaid patients – which, as per your post is, I’m assuming, akin to the subsidized lower tier “Romneycare” coverage. Perhaps the study, concentrated in MA, is absent comparative data from other states.

  10. Dennis Byron says:

    @cwells

    A lot of questions in your comment. Let me try to answer them all.

    First, the only “study” I mentioned was by the Massachusetts Medical Society and related to doctors accepting RomneyCare and there is no comparative with other states… at least not yet… because no one else has RomneyCare… yet. That study is absolutely by definition specific to Massachusetts and RomneyCare.

    Second, as I mentioned in my original comment, the information about consolidation on the doctor side of the equation is anecdotal although the buy outs of medical practices and closing of small doctors office is very visible… kind of like when CVS and Rite Aid and Walgreens slowly replaced independent phamacies.

    Third, on the hospital side, I have not seen any comparative data but I think a big difference from the situation you describe in your state/county is that all the hospitals here were non-profit before the Chrysler guys bought the Catholic hospital chain. (I say “all” but I am not absolutely sure there wasn’t a stray for-profit hospital somewhere in the state before RomneyCare and/or there might have been a charity-hospital board that hired a for-profit company to manage its chartiable trust.).

    However, the kind of hospital consolidation you describe as in progress in your county/state actually already happened here in Massachusetts after one of the multiple healthcare “reforms” that preceded RomneyCare back in the late 1980s and again in the late 1990s. People tend to forget that RomneyCare is Massachusetts’ fourth major reform and that we’ve had two or three since with another being proposed in the legislature. With all that roiling of the market it is hard to say what caused what but clearly what is happening now — with facilities closing and profit becoming a motive — is post RomneyCare.

    Still these things could have happened in anticipation of the Patient Protection and Affordable Care Act becoming fully effective instead of as a result of RomneyCare. Does that matter? I don’t think so because everyone but Romney agrees they are the same.

  11. John says:

    This is a very interesting and insightful discussion. Although I find the author’s focus on determining what judges will vote what way somewhat counter productive, I would like to draw more attention to the voices of the American public since “the Supreme Court will put the issue of health reform exactly where it belongs…in the hands of the American people.”

    In this vein, please be sure to check out the amicus briefs filed by the American Action Forum regarding the PPACA and a substantiated analysis of the economic toll it will inflict on the U.S economy.

    http://bit.ly/ForumAmicus

  12. Cwells says:

    Hello @John, thank you for the link. I find the discussion regarding the ACA to be very fascinating. However, I also find the backlash against health reform disturbing. The brief you supplied the link to, and I haven’t read them yet – just looked through it, seemed to be mostly from private enterprise. I have also read about the Florida case, in other formats, but not read the brief. Also, the brief filed by the National Federation of Independent Businesses, while impressive in its research, as it is stated, been researched by economists and nobel laureates, and this is hardly the make up of the 98% of the American People. I understand where the brief is coming from, but in your brief post you had quoted the initial blog author as pointing out that this issue will be in the hands of the American People. From what I have read in other blogs, which are more political and less formal, most American People are pretty angry at the way politicians are behaving, and do not feel the anti PPACA backlash is beneficial to them. I would tend to agree. For all intents and purposes, the Tea Party anti Obama campaign has done nothing to assist the American People. They have made their platform very apparent, and that is that they will do anything and everything to topple the President’s administration to the detriment of the people. I think I can safely say that this backlash, with its anti-public message, is not going to help the GOP and the Anti PPACA movement.

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