OP-ED

Sizing Up the Obama Administration’s Defense of the Health Reform Law

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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JohnDennis ByronMD as HELLBobbyGCwells Recent comment authors
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Cwells
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Cwells

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… Read more »

John
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John

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

Dennis Byron
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@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…… Read more »

Cwells
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Cwells

@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… Read more »

Dennis Byron
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@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… Read more »

Cwells
Guest
Cwells

@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.

Dennis Byron
Guest

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… Read more »

MD as HELL
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MD as HELL

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

Cwells
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Cwells

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

Cwells
Guest
Cwells

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… Read more »

BobbyG
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Good stuff. Very good.

Margalit Gur-Arie
Guest

“…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”… Read more »

Samuel Stenes, MD
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Samuel Stenes, MD

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.