A Response to Critics on the Founding Fathers and Health Insurance Mandates

Last week, I wrote an article describing several purchase mandates adopted by the framers in early Congresses, including two medical insurance mandates imposed on shipowners and seamen. These examples rebut the claim by challengers to Obamacare that purchase mandates are wholly unprecedented in a way that allows us to infer they are unconstitutional, a claim on which they rely heavily because there is no text, history, or case law that affirmatively supports a ban on purchase mandates.

Not everyone agrees with me. Some comments to my article, here and elsewhere, have suggested that these early medical mandates are distinguishable from Obamacare because they reflect Congress’ power to enact maritime law, not its power to regulate commerce. But the Constitution’s list of congressional powers nowhere includes a maritime law clause. Early Supreme Court cases all held that the Commerce Clause was what gives Congress the power to enact maritime law. For example, in The Daniel Ball, a case decided in 1871, the Court stated that navigable waters form “a continued highway for commerce, both with other States and with foreign countries, and is thus brought under the direct control of Congress in the exercise of its commercial power. That power authorizes all appropriate legislation for the protection or advancement of either interstate or foreign commerce…” In The Lottawanna, the Court held that it was under this commerce clause power that Congress had enacted statutes that determined “the rights and duties of seamen” and “the limitations of the responsibility of shipowners.” These early medical mandates were thus enacted under the very Commerce Clause at issue in the Obamacare case.

To be sure, later cases have held that Congress also has power to modify any judicial maritime common law, reasoning that this Congressional power is necessary and proper to regulate the judicial power to decide maritime cases. But these later cases do not alter the fact that the early federal maritime statutes were based on the Commerce Clause. Nor do these insurance mandates seem to fit within this additional power to alter maritime common law, which was about adjudicating disputes rather than imposing affirmative regulatory duties. Even if the mandates did fit, that would simply show that such mandates were “proper” under the necessary and proper clause.

Others—including the intellectual architect of the challenge to Obamacare, Randy Barnett— acknowledge that our early maritime statutes exercised the commerce power, but distinguish them on the ground that they were imposed on actors who were already in commerce. But this argument concedes that these precedents show that if one is engaged in commerce in one market, such as the shipping market or the seamen labor market, then Congress has the power to impose a mandate to purchase in a totally unrelated market—such as the medical insurance market. This concession conflicts with the argument of Obamacare’s challengers, who claimed that widespread activity in the health care market did not permit a purchase mandate even in the highly related health insurance market. Indeed, this concession seems to make the whole action/inaction distinction collapse: If no relation between the markets is required, then commercial activity in any market would permit the Obamacare mandate. Because the Obamacare mandate applies only to those who have significant income that subjects them to income tax, it is necessarily limited to people who are already active in some commercial market. You cannot earn income without engaging in commerce. Thus, Obamacare satisfies the test that Barnett himself derives from these precedents.

Finally, some argue that the 1798 law requiring seamen to buy hospital insurance was a tax rather than a mandate. But the “duty” automatically deducted from seamen’s wages under this law was not a general tax: The collected funds were segregated and had to be used to provide hospital coverage in the districts in which they were collected. This sort of mandatory payment into a segregated fund is indistinguishable functionally from a requirement to participate in a local hospital insurance pool. True, this statute did not require the seamen to provide proof of payment in order to receive hospital care. But the automatic nature of the deduction meant that proving one was a seaman was proof enough of payment. Nor does this argument distinguish Obamacare: Individuals currently do not have to provide any proof of payment in order to receive emergency hospital care, and part of the purpose of the Obamacare mandate was precisely to fund such emergency care. In any event, the intrusion on free market choices is identical, whether we call the required payment a mandate or an earmarked tax.

Einer Elhauge is a professor at Harvard Law School. He joined an amicus brief supporting the constitutionality of the mandate. This post first appeared at The New Republic.

10 replies »

  1. “If you want to be a citizen of the U.S.A. you buy health insurance – otherwise be a citizen of another country. See, there are always choices.”

    So you’re telling me I have to purchase something that YOU want me to purchase, from a private company, or else you will throw me in prison or throw me out of the country?

    Play nice, open minded liberals.

  2. “If you want to drive you have auto insurance. If you want a loan on a house you buy homeowners, if you want to be a seaman you pay the duty.”

    If you want to be a citizen of the U.S.A. you buy health insurance – otherwise be a citizen of another country. See, there are always choices.

  3. Busted me on a typo. Touche.

    6-3 to Uphold. Maybe only 5-4, with Roberts giving Kennedy Cover, and to send a message to Obama — “this is all we’re giving you and your POS bill. Let the campaign begin in earnest.”

    i.e., 6-3 effectively puts the issue to rest. 5-4 keeps it alive for the general and beyond.

    “Since Health Care has been a political process since 1965 your advocating we try markets and self-regulation right?”

    Yes/No, Mr. Ogden, I don’t see the problem as a false dichotomy. I see the solution as a multi-faceted mix.

  4. San Francisco’s pay-or-play health care mandate — the Employer Spending Requirement (ESR) of the Health Care Security Ordinance (HCSO)1 — was enacted in 2006 as part of an effort to provide health care services to the uninsured. In effect since January 9, 2008, the ESR just cleared an important legal hurdle with the September 30, 2008, decision from the U.S. Court of Appeals for the Ninth Circuit ruling that the law is not preempted by the Employee Retirement Income Security Act (ERISA). (See the text box below for the history of the litigation.)

  5. which actually makes an interesting point, has anyone ever argued that a mandate for employers to provide coverage is illegal. I have never heard a case against it and it has been done. When an employer is mandated to insure their workers they reduce wages, that is exactly what the ship owners did.

    If PPACA mandated employers insure their workers we wouldn’t have this argument. How could someone make such a terribly inaccurate comparison…..oh right Professor.

  6. I don’t think there was any requirement that people be seaman either? If you want to drive you have auto insurance. If you want a loan on a house you buy homeowners, if you want to be a seaman you pay the duty.

    Doesn’t seem anything close to if you want to breath you have to buy an insurance policy. How you can compare the PPACA mandate that applies to everyone to a condition of employment that applied to seaman is beyond me. It didn’t even actually apply to seaman it applied to those who employed them.

  7. 6-13 wow going out on a limb there FDR

    “Where markets and self-regulation fail, it is natural to turn to the political process.”

    Since Health Care has been a political process since 1965 your advocating we try markets and self-regulation right?

  8. 6-13 to Uphold.

    BTW: Who wrote this?

    “As I see it, the strength of the market paradigm are the standard ones: if consumers are knowledgeable, have similar resources, and have incentives to trade off the benefits and costs of each product, then market competition promotes productive efficiency, accommodates varying consumer preferences, and achieves allocative efficiency. The problem of unequal resources is largely external to the market paradigm and potentially remediable through vouchers. But the more fundamental problem of the healthcare market flows from an inherent division between knowledge and incentives. Unlike other markets no decisionmaker exists who has both the knowledge and the incentives to decide when the costs of supplying a particular good or service exceed its social value. Patients lack the knowledge and, even the fact that others (such as insurers or employers) cover much of the social costs, also generally lack the necessary incentives. Physicians and other healthcare providers are knowledgeable about medicine but not about social benefits and costs. Moreover, under current American market systems they either have incentives to provide too much care (if paid on a fee-for-service basis) or incentives to provide too little care (if paid on a capitation basis). Insurance plans generally lack the information to make case-by-case cost than if it decisions and have incentives to provide two little care, or to select for low-risk enrollees unlikely to need much care, because the insurers pay the cost of health care but do not enjoy its benefits…

    … Where markets and self-regulation fail, it is natural to turn to the political process. The main advantages of the political paradigm are (1) that it can make the open-ended trade-offs between healthcare and other social goods that do not lend themselves to objective scientific analysis and (2) that, unlike decision-makers under market and professional paradigms, political decision-makers have incentives to weigh benefits against costs because both are experienced by the polity. The disadvantages are that the political process is inevitably too centralized to effectively trade off the benefits and costs of health care in individual cases, and is susceptible to problems of majoritarian bias, intransitive choices, an interest group politics. These weaknesses counsel for limiting the political process to one global issue: how high to set a national (or state) level of health care spending and associated tax. This avoids the political processes in ability to make operational decisions, and lessens the concern of majoritarian bias because funding levels are more likely to affect everyone equally and decisions about which treatments to fund. This way of framing the political decision is also more likely to produce both “single peaked” preferences resistant to intransitivity problems and, more important, Lower political information costs that render the process less susceptible to interest group dominance.”

    Einer Elhauge, “Allocating Health Care Morally,” 1994, [pp 1542-4]

    In other words, none of these issues are exactly news.

  9. 1) The seamen act did not require seamen to purchase services from private sellers since the government was the one providing the care.
    2) The seamen act had obvious limiting principles.
    3) The seamen act was enacted prior to the 1803 Marbury vs. Madison which is where the judicial review principle comes from.
    4) Very grateful that the author dropped his insistence that the militia act of 1792 is also an example of an individual mandate.

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