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Health Care Reform Hangs in the Balance

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Protestors in front of the U.S. Supreme Court (image from Politico)

Prior to Tuesday’s arguments before the Supreme Court, I believed that the Court would uphold the health insurance purchase mandate by a comfortable margin. Unlike the Rehnquist Court, the Roberts Court has not made federalism a signature issue, and justices such as Antonin Scalia seemed amenable to the exercise of federal powers consistent with commerce clause precedents. My reasoning, discussed in my earlier blog posting, was that the health care market is the most encompassing national commercial market in America, consuming some 17% of GDP, and with pharmaceuticals, medical equipment, electronic medical records, and insurance claims all moving widely across the nation. The Court’s precedents all pointed toward a broad scope for the commerce authority.

Having heard the arguments on Tuesday, I now believe that health care reform hangs in the balance. Although the tenor of the arguments cannot necessarily predict the result, the Court’s conservative bloc expressed skepticism about the constitutionality of the mandate. Justice Kennedy, often the pivotal vote in close cases, expressed the view that the mandate fundamentally changed the relationship between the individual and the state. Health care reform does do that, but only in the best possible way: by creating a social contract whereby everyone is entitled to access affordable care. And the Affordable Care Act (ACA) establishes this social contract in a way that is in my view clearly constitutional. 

Here are the key arguments before the Supreme Court. The Administration was on the defensive throughout, but they could, and should, have re-framed the arguments to reflect the real reasons to uphold the ACA.

The Freedom Argument

The states’ attorney, Paul Clement, arguing for the Court to strike down the mandate, framed the central question as one of individual freedom. Yet, the freedom argument is flawed. The freedom in question (not being forced to buy health insurance), first of all, is purely an economic freedom. It is not an interest that is any way deeply personal or intimate, such as bodily integrity or privacy. Further, even under classic libertarianism, a person’s freedom extends only so far as her actions do not harm others. By exercising the freedom not to purchase health insurance, the individual raises insurance rates on everyone else. That is, the exercise of my economic freedom affects the economic freedoms of many others. And by raising the rates of insurance, it is not merely imposing an economic cost, but for many, it can be the deeply personal cost of not being able to afford health care.

President Franklin Roosevelt talked about four freedoms, two of which are the freedom from want and the freedom from fear. The liberty of the young healthy individual not to purchase insurance is dwarfed by the diminution of freedom by the many who cannot afford health insurance. There is no greater freedom than to have a fair chance of a life with health and wellbeing. Individuals without health insurance have by far a greater diminution of freedom.

The Cost-Shifting Argument: Who is the “Free Rider”?

The conservative bloc kept pushing the idea that there were two kinds of cost-shifting going on, but they repeatedly focused on the smaller and less important of the two. (And the solicitor general did not consistently bring them back to the central cost- shifting concern). The smallest cost-shift is the one whereby a young healthy individual forced to buy health insurance has to cross-subsidize the older, sicker, more disabled population. Certainly that is true, but it is in the nature of all insurance, and it goes to the very heart of the raison d’être for health insurance.

The larger cost-shift, of course, is the one that occurs when the uninsured individual suffers a catastrophic injury or disease and receives uncompensated care. Virtually everyone will become ill one day and need health care. And by law, and by moral imperative, society will take at least some measures not to allow the uninsured to suffer or die when she can be cared for. In 2010, 8% of people with annual incomes of greater than $75, 000 chose not to purchase health care. And if individuals know they can buy insurance at any time at an affordable price under the ACA, many more would delay buying insurance until they became ill or injured. The reason that I stress this is the larger cost-shift is that in the aggregate free riders impose more than $60 billion every year through higher taxes and insurance premiums.

The Health Care Market Argument

The justices had an extended debate about what market the ACA regulated: health care or health insurance. This is a difference without a meaning because health insurance is only about buying needed health services. And without health insurance (which is an affirmative choice to purchase), individuals still participate in the market for health services—either compensated or “free,” somebody always picks up the cost.

Some of the conservative justices seemed prepared to accept that Congress might be able to solve the problem of cost-shifting, which would be exacerbated by the new “guaranteed issue” and “community rating” provisions in the ACA. By that interpretation, Congress could have required the purchase of catastrophic coverage. Why should, say, a young health male have to subsidize a broad range of services that he will never need, such as maternity care, pediatric care, and substance abuse treatment? Fair point, except that everyone who has insurance coverage subsidizes a host of things they will never need. And it is well within the discretion of Congress to decide as a policy choice that insurance coverage should extend to all conditions reasonably needed by a health individual and population. 

The Act/Omission Argument

The Court’s conservative bloc focused intently on the act/omission distinction, suggesting that the government could not constitutionally regulate “doing nothing.” According to this argument, a person who chooses not to purchase health insurance is not engaged in commerce at all, and thus cannot be regulated. But philosophers have long discounted the act-omission distinction, and if the Court relies on that distinction, it will have set up yet another unworkable distinction (i.e., direct versus indirect).

The truth is that a decision not to purchase health insurance is far from doing nothing. This decision immediately increases the insurance costs of others. And almost all uninsured individuals will participate in the market—tomorrow, next week, next year, no one knows when. Thus Congress is simply regulating the manner and timing of commercial activity. It is not regulated non-commercial activity, as conservative justices implied.

The “Limiting Principle” Argument

Conservatives have argued that if Congress can force an individual to buy private health insurance, it can force anyone to buy any product—the so-called “broccoli” argument. The justices repeatedly asked the solicitor general to clearly enunciate a limiting principle, and the SG had a hard time doing so.

The easiest answer is that health insurance is an unusual market. It is probably unique, but the government does not bear that burden. Suffice it to say that there are few markets where it is impossible to know when you will need the service and that the absence of the service is a matter literally of life or death.

Another straightforward limiting principle is right within the Court’s precedents. Congress cannot regulate activities that are purely local and non-economic. But, as discussed above, the health care market is quintessentially economic and national in character and scope.

The Individual versus Collective Framing

The solicitor general lost the argument because he allowed the issues to be framed repeatedly as a matter of individual choice. Certainly from any individual’s perspective the ACA is a liberty limiting mandate—that is, if you isolate that choice from tens of thousands of similar choices and if you fail to take into account the hardship imposed on all the people who responsibly buy health insurance.

The greater truth is that an insurance market is by definition about aggregate data and actuarial predictions. It is a mistake to think of insurance from an individualistic perspective. This observation is doubly true for health and health care. In public health it is impossible to think only in terms of the regulatory effects on a single individual. Public health, rather, is measured by the collective health and wellbeing of the population. By framing the arguments more from a population-based perspective the SG would have shifted the tenure of the debate.

The “Necessary and Proper” Argument: What is “Proper”?

The conservative justices seemed to accept that the insurance purchase mandate was “necessary” for the reasonable implementation of the guaranteed issue and community rating provisions in the ACA. But they queried whether it was “proper”. This is quite surprising because how can an unelected group of judges decide on what is “proper”? The Constitution, granted, uses that term, but gives it no context.

The Court seemed to say that “proper” should be understood in this case as a matter of “limited government.” That is, the fact that Congress must act within its enumerated powers itself informs what is “proper.” But if that were true, it would call into question every “necessary” provision because by definition Congress is purporting to act under its enumerated powers in all cases before the Court. The idea of “proper” must mean more than that. And in any case, how could it be improper to create a market conducive to allowing all people, sick or disabled, from gaining access to affordable health care?

Does Health Care Reform Hang in the Balance?

Suppose that the Supreme Court strikes down the individual purchase mandate, but says that it is severable from the rest of the ACA—a distinct possibility. What would President Obama do? In order to keep the heart of the reform (and its most popular features) – guaranteeing everyone affordable health care even if they are sick or disabled – the President would have to find a way to pay for it. The cost savings in the ACA are probably not enough to cover the full cost, and Congress is deeply resistant to increased general taxation. This would place the reforms in great jeopardy. The only other option is the one most likely to happen, but would be deeply regrettable. That is, the popular reforms stay in place, the young and healthy delay buying health insurance, and everyone’s premiums for health insurance rise inexorably. Is that what a decent society would want or accept?

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The views reflected in this expert column are those of the individual authors and do not necessarily represent those of the O’Neill Institute for National and Global Health Law or Georgetown University. This blog is solely informational in nature, and not intended as a substitute for competent legal advice from a licensed and retained attorney in your state or country.

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