An alarming article in Politico.com looks at what could happen if the Supreme Court determines that the Affordable Care Act’s individual mandate provision is unconstitutional—something that the current conservative leaning of the Court seems to indicate is somewhat more likely than not.
Assuming that such a possible decision by the Court follows that of the Eleventh Circuit Court of Appeals in ruling that the mandate is unconstitutional but the remainder of the ACA may stand, the Politico.com article anticipates some potentially disastrous consequences.
The provisions of the ACA—some of them already in force—include guaranteed issue, elimination of annual and lifetime limits, and a ban on basing premiums on health status, essentially decoupling coverage and premiums from insurance risk. Without the requirement for almost everyone to have coverage, there will be nothing to ensure that the risk pool contains a large percentage of individuals in good health as well as those with medical problems, and nothing to stop anyone from waiting until they’re sick or injured to demand coverage.
On Friday, a federal Court of Appeals held unconstitutional a central feature of the new healthcare law-its requirement that almost all Americans obtain healthcare insurance through private insurance markets. This ruling came only days after the debt-ceiling debacle — a “tempest in a tea party” — during which our country’s credibility for honoring its debts was held hostage to the conviction that tax revenues should regularly ratchet down, but never up. Both the subtext of the majority’s opinion in the healthcare case and the anti-tax fervor evident in the debt-ceiling debate share a common underlying philosophy: the belief that government activity is largely hostile to prosperity and the pursuit of happiness, and therefore the less of it, the better. But this view of government is incorrect.
Government, to paraphrase Congressman Barney Frank, is just the name we give for the things we the people decide to do together. And taxes in turn are just the amounts we chip into the collective pot to buy whatever package of goods and services that we have agreed to purchase collectively.
In ordinary commercial settings, the private sector is more efficient at allocating scarce resources than is the government, which is why the United States relies so heavily on private markets. So why should we bother to do things together through the mechanism of government? One answer is that only government can address an “incomplete” market, which occurs when the private sector cannot or does not provide a market solution to an economic problem. Healthcare insurance is a classic case of an incomplete market that results in real economic burdens.
Ever since the Patient Protection and Affordable Care Act (PPACA) was passed, opponents have looked for ways to overturn it in the court of law and the court of public opinion. They’ve had reasonable success in both arenas, using opposition to the individual mandate to buy health insurance as Exhibit A. Ironically, President Obama wasn’t a big fan of the individual mandate at the outset. In the primary election, Hillary Clinton favored an individual mandate while Obama opposed it. But somehow the mandate –at its core a Republican concept of personal responsibility– has become synonymous with so-called Obamacare.
With the recent court decision, it seems reasonably likely we will end up in a situation where the individual mandate is overturned but the rest of the law is upheld. Observers have some thoughts on what would happen:
- Insurance companies will be unhappy. PPACA puts many restrictions on health plans, e.g., minimum medical loss ratio, no exclusions for pre-existing conditions but the upside is the mandate: lots of new customers, and a reduction in adverse selection, because everyone has to buy insurance and you can’t wait till your sick
- Many fewer people will be enrolled in insurance. Jonathan Gruber’s objectivity may be suspect, but he persuasively argues that repeal of the mandate would lead to many fewer people in coverage and higher premiums due to adverse selection. And the cost of the law wouldn’t drop by much despite the lower impact
- Some opponents think/hope that eliminating the mandate will cause the whole law to collapse. I really doubt it.
Like a tragic literary figure, the 11th Circuit’s opinion declaring the individual mandate unconstitutional is doomed to failure by its own internal contradictions. What follows is a series of quotes directly from the opinion, paired to show how desperately the majority twisted logic in order to find its path to a unsupportable conclusion:
1. On the key necessary and proper argument, the court obfuscated as follows:
The government’s argument derives from a Commerce Clause doctrine of recent  vintage: . . . the “essential part of a larger regulation of economic activity” language in Lopez. . . . Raich [is the] the only instance in which a statute has been sustained by the larger regulatory scheme doctrine.
HOWEVER, the court was well aware that
The Supreme Court’s most definitive statement of the Necessary and Proper Clause’s function remains Chief Justice Marshall’s articulation in McCulloch v.Maryland: 17 U.S. (4 Wheat.) 316, 421 (1819).
Today is a great day for liberty. By striking down the individual mandate, the Eleventh Circuit has reaffirmed that the Constitution places limits on the federal government’s power. Congress can do a great many things under modern constitutional jurisprudence, but, as the court concludes, “what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.” Indeed, just because Congress can regulate the health insurance industry does not mean it can also require people to buy that industry’s products.
One of the striking things about today’s ruling is that, for the first time in one of these cases, a Democrat-appointed judge, Frank Hull, has ruled against the government. Just as the Sixth Circuit Judge Jeffrey Sutton made waves by being the first Republican appointee to rule in the government’s favor, today’s 300-page ruling shows that the constitutional issues raised by the healthcare reform—and especially the individual mandate—are complex, serious, and non-ideological.
Supporters of limited constitutional government need to temper their celebrations—just as they wisely tempered their sorrows after the last ruling—because we must all now realize that this will not end until the Supreme Court rules. Nevertheless, today’s decision gives hope to those who believe that there are some things beyond the government’s reach and that the judiciary cannot abdicate its duty to hold Congress’s feet to the constitutional fire.
Ilya Shapiro is a senior fellow in constitutional studies at the Cato Institute and editor-in-chief of the Cato Supreme Court Review.
This post first appeared at Cato@Liberty – Cato Institute Blog.
Most of the recent attention on the 2010 health care reform legislation has focused on the individual mandate. After two federal court rulings upholding the mandate, a third federal judge—in Virginia—ruled that the Constitution does not allow the government to require the purchase of insurance as part of regulating an interstate commerce market. Simultaneously, Congressional Republicans have reiterated their intention of preventing the individual mandate from being implemented, regardless of the constitutionality of the provision.
One interesting response to the resulting media coverage came in the form of a Kaiser Health News article [http://www.kaiserhealthnews.org/Columns/2010/December/121410laszewski.aspx] suggesting that the issue might be overblown since, even if the mandate were implemented, it would be relatively unsuccessful in leading the uninsured to purchase coverage. Unfortunately, the article misinterprets some of the legislative language, not entirely surprisingly given the complexity of the mandate provision. Following are clarifications of the mandate and associated requirements, and a somewhat more careful look at the mandate’s possible impact.
A Brief Summary of the Mandate
The individual mandate requires almost all legal residents of the United States to have at least a defined level of health care coverage. Those lacking such coverage will be subject to a penalty to be paid as part of tax filing. Exclusions are made for members of certain religious groups, Indian tribes, incarcerated individuals, and those whose income is below the tax filing threshold or inadequate to pay for coverage. To assist those with lower incomes but not eligible for Medicaid or SCHIP, the legislation provides for both premium credits and cost-sharing subsidies.Continue reading…
The following article, forthcoming in U. Penn. L. Rev., pinpoints the strongest arguments for and against federal power under the Commerce Clause to mandate the purchase of health insurance: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747189
Among the key points I make in defense of this federal law are:
1. The “commerce” in question is simply health insurance, and not the non-purchase of insurance as challengers have framed it. Because “regulate” clearly allows both prohibitions and mandates of behavior, mandating purchase is lexically just as valid an application of the clause as is prohibiting purchase or mandating the sale of insurance.
2. Although existing precedent might allow a line to be drawn between economic activity and inactivity, there is no reason in principle or theory why such a line should be drawn in order to preserve state sovereignty. Purchase mandates, after all, are as rare under state law as under federal law.
When it comes to health care, Republicans should be careful what they wish for.
Their upcoming vote to repeal the health-care law will be largely symbolic — they don’t have the votes to override President Obama’s certain veto. The real thing happens later, when they try to strip the Department of Health and Human Services of money needed to implement the law’s requirement that all Americans buy health insurance. This could easily precipitate a showdown with the White House—and a government shutdown later this year.
On its face it’s a smart strategy for the GOP. The individual mandate is the lynchpin of the heath-care law because it spreads the risks. Without the participation of younger or healthier people, private insurers won’t be able to take on older or sicker customers with pre-existing medical conditions, or maintain coverage indefinitely for people who become seriously ill. The result would be to unravel the health-care law, which presumably is what many Republicans seek.
At the same time, the mandate is the least popular aspect of the law. According to a December 9-12 ABC/Washington Post survey, 60% of the public opposes the individual mandate. While they want help with their health-care bills, and over 60% want to prevent insurers from dropping coverage when customers become seriously ill, most Americans simply don’t like the idea of government requiring them to buy something. It not only offends libertarian sensibilities, but it also worries some moderates and liberals who fear private insurers will charge too much because of insufficient competition in the industry.
Next week starts the new Congress, and with it the Tea Party conservatives. What’s their strategy? What will they rally around?
They’ll grouse endlessly about government spending but I don’t think they’ll use any particular spending bill to mobilize and energize their grass roots. The big bucks are in Social Security, Medicare, and defense, which are too popular. And their support for a permanent extension of the Bush tax cuts will make a mockery of any argument about taming the deficit.
Nor will they focus on the debt ceiling. Their opposition to raising it will generate a one-day story but won’t rally the troops or register with the public. Most Americans aren’t particularly interested in the debt ceiling, don’t know what it means, and don’t feel affected by it.
Instead, I expect their rallying cry will be about the mandatory purchase of health care built into the new healthcare law. The mandate is the least popular, and least understood, aspect of that law. Yet it’s the lynchpin. Without it, much of the rest of the law falls apart: It’s impossible to cover all high-risk Americans, including those with pre-existing conditions, unless those at far lower risk are required to buy insurance.
Knowing they don’t stand a chance of getting a direct repeal of the mandate (even if they could get a majority in the House for it, they won’t summon 60 votes in the Senate, and have no possibility of overriding a presidential veto), they’ll try to strip the federal budget appropriation of money needed to put the mandate into effect. This could lead to a standoff with the White House over government funding in general, and a possible government shutdown.
I don’t mean this in a partisan way, but it is really distressing to read this New York Times article about Republican plans to dismantle parts of the recent health care bill by using the appropriation powers of the House of Representatives. I say this because of the unintended consequences that will result if they are successful in this approach. Let me give an example.
I think one of the most important aspects of the law is “guaranteed issue” of health insurance: Insurance companies will no longer be permitted to use pre-existing medical conditions as a bar to coverage. A concomitant of guaranteed issue is the individual mandate, the requirement that all people purchase health insurance. Why?
Left to their own, insurers will impose pre-exisiting conditions types of restrictions because they understand the moral hazard aspect of insurance. Healthy people provide an actuarial balance to sick people. If people only buy insurance when they need care, the risk profile of the insured population rapidly swings, upsetting the actuarial calculations used to establish premiums. So, if these restrictions are outlawed, everybody needs to be in the risk pool. Accordingly, you have to ban optional insurance.
But look at this quote from the article cited above:
Republican lawmakers said, for example, that they would propose limiting the money and personnel available to the Internal Revenue Service, so the agency could not aggressively enforce provisions that require people to obtain health insurance and employers to help pay for it.
I think the Republicans know that guaranteed issue is popular with Americans, and so they do not directly want to repeal that provision of the new law. But what will happen if healthy people start to opt out of getting insurance, only to return when they get sick? The system will quickly get out of balance. Ironically, this will only cause premiums to rise. I don’t understand why the Republicans would want that to happen, and I fail to see a strategic political advantage arising from that result.
This makes me wonder if they have thought this through completely and whether they understand the unintended consequences of their proposed actions.
Paul Levy is the President and CEO of Beth Israel Deconess Medical Center in Boston. Paul recently became the focus of much media attention when he decided to publish infection rates at his hospital, despite the fact that under Massachusetts law he is not yet required to do so. For the past three years he has blogged about his experiences in an online journal, Running a Hospital, one of the few blogs we know of maintained by a senior hospital executive.