Another Legal Round – With a Major Misstep?

The appellate court hearing in Atlanta a week ago on the Affordable Care Act’s constitutionality, one of a series along the inevitable road to the Supreme Court, showed that the opposing legal arguments are beginning to be firmly established—with each seeming to confuse the purchase of health insurance with the purchase of health care.

The Atlanta panel of three judges, with both Republican and Democratic appointees, heard arguments for and against the earlier ruling by Judge Roger Vinson in Pensacola that the individual mandate was unconstitutional and so central to the ACA that the entire act should be invalidated, and specifically that while the Commerce Clause of the Constitution gave the government authority to regulate interstate commerce, it did not allow Congress to penalize people for the “inactivity” of declining to buy a commercial product.

Former Bush administration Solicitor General Paul Clement, arguing in support of the Vinson decision, agreed that while it could be permissible for Congress to require insurance or other payment by those being treated in an emergency room, because they would already be in the “stream of commerce,” it was a very different matter to require them to pay prospectively for future care.


Acting Solicitor General Neal Katyal, presenting the government’s case, urged the judges to see the ACA requirement not as a mandate to buy an insurance policy, but as a regulation of the payment for care that individuals would inevitably consume. He argued that Americans would not be “conscripted” into the market because the uniquely unpredictable demand for health care would have already placed them there, thus “it’s all about financing, it’s about regulating whether people are paying cash or credit.”

Clement’s characterization of health insurance as a type of prospective payment for service fits neatly into ACA opponents’ argument that if the federal government can require Americans to buy such insurance, there are no effective constitutional limits to prevent it from mandating any other purchase or activity. On the other hand, Katyal’s use of the cash or credit analogy—similarly implying that health insurance is a form of payment for care—may have been a serious misstep.

While the government apparently hopes to build on two precedent Supreme Court decisions that (separately) defined wheat growing and marijuana cultivation for home consumption as falling under the purview of the Commerce Clause, the government case that medical care is an inevitability and so puts every American in the stream of commerce is undermined by the facts: some people never receive care, while others willingly pay for care out of their own pockets at the time they need it.

The problem is in characterizing insurance as a form of prospective payment. An alternative—and probably more accurate—view is that insurance is the sharing of risk, and that the purchase of insurance is payment for participation in the risk pool. In fact, without the sharing of risk, the concept of insurance is meaningless. While the underlying reality may be the same, the practical difference between the two perspectives is that risk is current, universal, and certain; payment for care is not necessarily any of these.
The risk model makes the government’s case for constitutionality of the individual mandate considerably stronger, since it is the failure of the non-insured to participate in the sharing of risk that immediately increases the costs for the insured—something that experience shows very clearly. Moreover, it emphasizes the uniqueness of insurance: although it is clearly a commercial activity, it offers neither a tangible product nor a service activity, only a transfer of risk—thereby helping to counter the “if Congress can require insurance purchase, is there no purchase they could not compel?” argument.

Would the Supreme Court find this interpretation persuasive in judging the constitutionality of the individual mandate? Prospectively, it’s impossible to say, but regarding insurance purchase as payment for risk sharing—and therefore something that applies to all Americans, since even those who fail to purchase insurance affect the costs of others—seems more consistent with the intent of insurance than the advance purchase concept offered by both parties to the Atlanta court.

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies.  He is editor of Health Care REFORM UPDATE.

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10 replies »

  1. Apparently the Constitution is a document that describes the processes by which the federal government was destined to control all economic activity. It’s just taken us this long to develop the smarts to read it. In general, the more money you stand to gain from that control, the smarter a reader you are.

  2. Peter, you are mandated to pay taxes as your situation requires. You receive that which is funded by Congress as the result of your taxes. You do not pay a defense mandate.

    But you can leave and opt out.

    You can still comment from your new country.

  3. Isoniazid wa keep writing about and waiting for responses to my proposal for transparency. Publish on the internet the payments per patient per year by provider number of all public money, my tax money. Let the public and the media have the data perhaps Brocken down by zip code and speciality to make it digestible. Better even would be tying provider number to MRIs or home health services. Lets see where the Monet is being spent! Outlier patients could also be identified. At one utilization meeting I attended a patient had made 136 ER visits in 6 mo. on looking closer this person was drug seeking. I guess the expense of dealing with the real problem is seen as more costly than the ER visits

  4. Interesting post here:


    “So what if the PPACA is found unconstitutional?

    It. Won’t. Matter.

    Irrespective of the outcome of the pending legal battles for or against the PPACA, we continue to have a huge cost of care crisis in America. Our problem (hate to say it) was never a need for “insurance reform.” It remains a problem of costs. And the PPACA does little to help us understand where cost savings would be realized. Why is this?

    The legislation was authored by powerful interest groups who were “brought to the table” to feast on the last vestiges of fee-for-service health care. To date, they continued to gorge themselves. I’m not seeing a concern about costs. I’m seeing a consolidation of monster health systems across our land. Much as the insurance industry found profits by eating their own before, so now are hospitals. Bigger, more doctors, more huge facilities gobbling up their competitors until the last Great Health System can claim the “Too-Big-To-Fail” prize. And why not? Our jobs and economy depend on it. We continue to want the best of care without compromise (though there are responsible rumblings out there about end-of-life care.) Bigger systems running more smaller systems. Not only will it be bigger, more efficient, but safer, too! Our wonderful Utopian vision of the future. Costs be damned. We’ve got to build for the future and the influx of newly-eligible health care customers!

    There is no interest in shrinking the middle man.

    Instead, our entire system is cloaked in financial secrecy as we continue to build our Health Care Hindenburg under the auspices of the PPACA, or not.”

  5. I have am mandated to pay for national defense, a commercial enterprise, why can’t I opt out?

  6. It may be worth noting, Roger, that in both the wheat and marijuana cases the government was found to have a constitutional right to regulate an activity that was already occurring and affecting, or could affect, the stream of commerce. The Court never considered if the government has the right to force farmers to grow wheat, or whatever, when they chose not to do so at all, thus also affecting the stream of commerce.

    As to the risk argument, it would me much easier to sustain it if there was one risk pool. But since there are many, and it is not clear how the various pools would be affected by the mandate, I am not sure that this is a persuasive argument either. Also not sure the government should be granted the right to mandate that people previously idle, engage in commerce in order to make products and services more affordable to everybody else.

    Taxing everybody would have been so much simpler… in a judicial sense….

  7. On the contrary, I do pay taxes and I am in the ER doing the work, caring for everyone except myself, getting less and less for it per patient. Twenty-nine years of it.

    At the present itme all patients are seen and treated the same. Nothing in the mandate says anyone will be paying for ER care.

    EMTALA was and is nothing more than extortion against those of us who work in the ERs of the nation. Theft by legislation, just like the mandate.

    You forgot to note that the patients with the uncontrolled problems are unmanageable. No amount of money and no amount of primary care will keep them from being out of control. Today’s dialysis patients have the most sophisticated system of care in the world. Why are they still in the ER in droves?


  8. MD as HELL this really raises the level of discussion! Certainly puts someone in the category of Republicans who are defined as “angry white men who don’t want to pay taxes and don’t care about anyone but themselves”. Nothing to say about the mandate congress passed that all patients in our ERs have to been seen and treated as equals without the mandate to require the public to purchase health insurance that would reimburse the providers for that care? This to me was the great immorality and disconnect with common sense that has led to physicians revolting in droves from providing ER backup call. These are the people who come in with uncontrolled diabetes and renal failure, are stabilized for thousands of dollars and sent out the door to recieve no ongoing care and come back the next week. In our medium suburban hospital it happens every day and how is this multiplied across the country.

  9. The real universal risk here is the loss of control of your money giving to the clowns in Congress to squander. If the mandate is Constitutional then they own you. Slavery anyone?