Tuesday, July 20, 2010
Health care "reform": What if the individual mandate is unconstitutional?
Glenn Reynolds points to an interesting argument that the "individual mandate" embedded in the health care reform law is unconstitutional. I hope the argument is wrong, because we need the individual mandate to survive. Otherwise, those parts of the new law that persist will operate to destroy what remains of the private health care insurance business and we will move inexorably to a fully socialized single payer system. This is because "community rating" -- the very popular (and probably non-repealable) requirement that health insurers accept all comers and set premiums without regard to preexisting conditions -- creates a perverse incentive: If insurance companies are not allowed to turn down new applicants, why would anybody buy insurance until they got really sick? You wouldn't, and I wouldn't, at least once we figured out that the system allowed free-riding. So under community rating the insurance companies would collect premiums only from customers that will cost a lot more money than they would bring in. Any industry that loses money on every customer will not long survive. If we are to have community rating, the only way to guarantee that the insurance companies have some profitable customers is to require that healthy people buy insurance against only the possibility, rather than the certainty, that they will consume more health care than they pay for. Therefore, if the courts deem the individual mandate unconstitutional and the Congress and President Obama do not then repeal community rating the next and inevitable step is for the government to take over all payment for all health care. Since "progressives", including Barack Obama, openly prefer a single payer system, it is safe to assume that they will not repeal community rating if the individual mandate turns out to be unconstitutional.
In other words, be careful what you wish for.
MORE: I further suggest that we ought not rely on the lack of a severability clause.
20 Comments:
By 
K. Pablo, at
Tue Jul 20, 11:05:00 AM:
Well, uh ... wasn't this the plan all along?
By MTF, at
Tue Jul 20, 12:43:00 PM:
I don't share your concern about the results of the unconstitutionality of the mandate, mostly because the legislation necessary to move further down the path to single payer will be Armageddon for the Democrats in Congress, and when confronted by the need to vote overtly for single payer they will back down from this whole exercise and agree to repeal.
Repeal is not possible without their votes, and bringing this back to Congress asap ensures their help.
By Rick, at
Tue Jul 20, 01:42:00 PM:
"Hoping" it is not unconstitutional is disingenuous. Of course it's unconstitutional, but so is the rest of the law. The Tenth Amendment prohibits the Federal Government from being involved in health care at all. Anyone who says otherwise is a traitor to the American people.
By TigerHawk, at
Tue Jul 20, 01:47:00 PM:
"The Tenth Amendment prohibits the Federal Government from being involved in health care at all. Anyone who says otherwise is a traitor to the American people."
Problem is, Rick, you'd have a hard time finding more than a couple of Justices in the entire history of the United States Supreme Court who would agree with you. The Tenth Amendment, for whatever reason, just does not operate as a potent restraint on federal power.
By 
, at
Tue Jul 20, 05:12:00 PM:
So we're to decide between
(a) hoping for the destruction of the private medical-insurance industry (if the Court deems the mandate unconstitutional)
and
(b) hoping for the destruction of what little remains of Constitutional restraint on FedGov power (if the Court deems the mandate constitutional).
Wonderful.
By Robert Arvanitis, at
Tue Jul 20, 06:29:00 PM:
This is a perversion, period.
My professional actuarial opinion is that:
1. The sole justification for insurance is to reveal the prices of risk.
2. The sole use of insurance is to level risk, to swap a $1,000 premium for the one-in-a-hundred chance of a $100,000 illness.
It is unconscionable to separate risk from cost. It is irresponsible to have employers, workers and doctors in a cut-throat poker game. And it is stupid to insure first dollar medical, just as stupid as "grocery benefit" under homeowners or "oil change cover" in auo insurance.
The sooner we cause the socialist enterprise to collapse, the better for the country, and the less long term destruction.
******
In a similar way, we shall soon see the failure of FDR's folly with social security.
Ten citizens, one poor. The right solution is to take 10¢ from each of nine, and give 90¢ to the poor one.
Instead, FDR perpetrated a fraud, took $1 from each of the nine, and then gave EVERYONE 90¢.
That sort of scheme has multiple bad effects. First, it hides the net cost of 10¢ behind the shell game of take a dollar and give some back. Second, it creates a deleterious dependency on all 10 people, making all of them believe (wrongly) that government can actually give them something. Finally, it creates too much latitude for further bureaucratic tampering and interference.
Politicos are in the re-election business, bureaucrats are in the bloat business, and only those two groups benefit from this sort of manipulation – back then with Social Security, and today with efforts to promote socialized medicine.
By lycidas, at
Tue Jul 20, 08:37:00 PM:
I'm wondering why they didn't structure it this way (which they may or may not have thought of):
State A may get Medicaid funds but only if State A passes an individual mandate. (The way they withhold highway funds if State A does not have a 21 year old drinking age.)
I suppose you have to then look at 50 state constitutions. But you avoid a constitutional question that may be hard.
Can anyone think of a roughly analogous mandate (of any kind)?? I have not thought of one.
I should probably talk to Glenn or Mike Paulsen about this....or some of my OLC friends. Perhaps Stuart.
By Lycidas, at
Tue Jul 20, 08:41:00 PM:
By the way, I love the 10th Amendment back and forth.
If TH would give me space some day, I'd recount a story about (Professor) Robert Bork teaching the Commerce Clause at Yale Law School.
By , at
Tue Jul 20, 09:02:00 PM:
"The Tenth Amendment, for whatever reason, just does not operate as a potent restraint on federal power."
If so, then the "potent restraint on federal power" will likely arrive in the form of a revolution--peaceful or maybe not so peaceful.
And if you think this isn't conceivable, just think: if, in April 1860, you'd walked into any American saloon and informed its patrons that five years hence 600,000 soldiers would be dead from a civil war, slavery would be abolished, the sitting president--some homely dude from Illinois named "Lincoln"--would be assassinated, and black males would be on the fast track to voting rights....they'd have laughed, spit, and then collectively hurled you out into the manure-filled street.
By Lycidas, at
Tue Jul 20, 10:18:00 PM:
The Individual Strawberry Mandate
Every American must buy one quart of strawberries per year. Americans may buy them at any place, but pricing shall be determined for the lowest quality strawberries by SMSA. Americans may buy more than a quart of strawberries; of any quality; at any place. But every American must buy a quart of strawberries to support the strawberry growers.
This is a tax. Of some kind.
By JPMcT, at
Tue Jul 20, 11:54:00 PM:
TH, I see your concern, but the argument is irrelevant.
First, and most obviously, even if the measure survives muster, most people with marginal financial means ( as well as many small businesses)will merely pay the fine rather than the more expensive insurance. When you become ill, THEN buy the insurance.
Second, there is precedent for passage of this abortion. Social Security was challenged in court and passed muster because it was argued that it was a TAX and not a mandatory service. Thus, it fell under the power of the Federal government to regulate taxes.
All this occurred whilst FDR was stumping around the country telling everybody it was a retirement plan and NOT a tax.
Sound familiar???
By , at
Wed Jul 21, 12:49:00 AM:
Tigerhawk, why do we have to support the medical insurance industry? Why not let it fall completely apart?
This is the same false argument used to support other government mandated and supported industries and all it does is allow fat cats to feast on the flesh of working Americans.
The current health care system needs to fall apart.
Dave
By MTF, at
Wed Jul 21, 06:02:00 AM:
Destroying this vile law, whether in whole or by pieces, must be done.It will reduce the supply of medical care, of course, and ultimately drive prices through the roof. That's already starting, as yesterday my company received notice from our medical insurer that it will no longer hold prices steady for the contract year but now reserves the right to raise prices whenever and however often it wants to. This, in a year of price deflation!
By , at
Wed Jul 21, 10:19:00 AM:
In an article over at Christian Science Monitor titled "Justice Dept Declares War on Doctors', the Justice dept just won a case against a group of physicians in Idaho. If I understand the article correctly, the physicians were found guilty of price fixing because they were refusing to take workmen's comp patients as the payment schedule was too low.
It is a strategy I had never considered. Accept government patients and payments or be found guilty of price fixing. Wow.
By , at
Wed Jul 21, 11:10:00 AM:
The Individual Mandate has to be a tax to be constitutional. That's why it's literally an amendment to the Internal Revenue Code. As noted above, Social Security paved the way for this.
The Individual Mandate is unprecedented. Until now, if you just sat on the beach for a year you'd owe no taxes ... a free American.
Because it's unprecedented, courts have leeway to find the Individual Mandate to be a constitutional tax ... or not.
Getting the right test case to the Supreme Court out of the right circuit could be outcome determinative. I had hoped that Kagan would be pinned down on recusal -- but it didn't happen. Scalia is a whore for federal power. Go figure.
That's why a resounding rebuke to the Democrats in November 2010 is important here. The Supreme Court may follow this lead, or not.
In any case, expect "Repeal Healthcare" to gain traction over time. By 2012, a clear majority of voters will be at odds with Everything Obama Wrought.
*****
Obama wants to institute a VAT. That'll be his response to our inevitable budget crisis. He may even push for a "progressive VAT".
If so, similar questions will come up about the constitutionality of a VAT. We needed the 16th Amendment to authorize a federal income tax.
"Progressive VAT" sounds like an oxymoron and it is. You'd add another income tax, but allow deductions for documented "savings." Ironically, it'd have better constitutional footing than a true VAT.
By , at
Wed Jul 21, 11:18:00 AM:
Our healthcare system is already rife with mispricing and cross-subsidies. That's why it's grown so big and is so expensive. Just to name a few:
-- Medicare/Medicaid don't pay their full share. Essentially they pay marginal costs and have everyone else pay the fixed costs. This is a burden on the private market. (The comment above on Worker's Comp goes to this.)
-- Big companies can opt-out and self insure their employees -- they get a better risk pool. This is a burden on the rest of the private market.
-- Many states require "one size fits all" maxi-plans. This is a burden on anyone that wants to go low budget.
-- Few people personally pay for expensive procedures.
-- Most of the dollars we spend go to chronic care -- e.g. diabetes -- people don't get better. We could do a better job at addressing this systematically.
Losing the Individual Mandate will only hasten what I expect will be the inevitable financial breakdown of our healthcare system. This is already baked into Healthcare Reform, as many employers are going to dump their employees into the public system. It's cheaper and easier to just pay the fine. Once one company in an industry does, the rest will need to follow.
Healthcare Reform was never going to reduce the deficit -- that was a farcical claim. Just wait to see what happens when millions more of us pile into the Public Side of this.
We're heading to a two-tiered system: those with private plans, and those in state-run GenPop. Ironically, a large number of those with private plans would be government workers.
But we'll have a Peasant's Revolt before we get there.
By MTF, at
Wed Jul 21, 01:41:00 PM:
I don't know about other states, but Maryland works as follows: the state legislature determines what services must be covered, at a minimum, and further, how insurers must determine whether or not to cover something else the legislature hasn't thought of specifically. The state also regulates prices insurers may charge. Our company is small (about $10 million) so we are not separately rated. Unlike some states (like Ohio, where I also some experience) business associations may not be formed for the purpose of buying insurance.
So that's the highly state-run health coverage market in which my business lives and, differently from true insurance (like auto or life), there is no "free market" in coverages or prices. Only three insurers will even quote businesses our size and prices differ according to network size. The larger the in-network group of doctors, the higher the price. The smaller group yields the lower price. Without competition and the ability to tailor coverages to reduce cost, there are no mechanisms to control price inflation and therefor we have rapidly increasing prices.
The Healthcare Reform law includes some provisions similar to the idiocy we have here in Maryland. The lack of a free market will immediately enslave doctors and eventually will result in rapid price inflation, as it has already in Maryland. This should be obvious, and finding ways to "get used" to the new law or "living with" it's inefficiencies is not a good way to solve the problem.
What would truly help is a freer market for coverages and prices. If it were possible to buy only the coverage we need, instead of legislatively mandated coverage, we could reduce our costs and probably improve our health outcomes by focusing our spending where we think it's best used.
I'm all in favor of ripping hte new law down piece by piece, and the mandate can be first to go, if we can't get rid of it all at once.
By , at
Wed Jul 21, 02:01:00 PM:
If it's unconstitutional, which I think it certainly is, it has to go, regardless of the consequences. The Constitution is the only thing we the little people have.
By , at
Wed Jul 21, 03:06:00 PM:
Regarding the conundrum TH describes, the only sane way out, in my opinion, is to embrace Repeal and Replace. Fervently. It would time well as a 2012 issue.
M.E.
By ruralcounsel, at
Wed Jul 21, 04:23:00 PM:
Mr. Arvanitis is absolutely correct. Well spoken!
Congress and the courts may try to deny the reality of risk, probability, and mathematics, but do so only by placing the entire nation in peril.
Our state run Ponzi schemes are approaching maturity. Why Obama thought he could tack on a new one when they're all about to implode is beyond me. I think he's getting some incredibly self-destructive counsel. But he's such an arrogant prig that he doesn't see it.
