Jake and Tyler dedicated a weekend email chain to the impending Supreme Court decision on the Affordable Care Act, otherwise known as Obamacare. Here is their conversation:
What’s your ACA ruling prediction?
Prognosis: Negative. I bet they take the side of the insurance companies and strike the coverage regulations along with the mandate. I sincerely hope I’m wrong, because otherwise I’m going to go ballistic.
I tend to agree that the court will strike it down but only the mandate. I truly think the constitutional argument for the law is shaky. I understand the economics, but it’s not clear that Congress can regulate people’s decisions to not participate in a private market. Interestingly, I think a public option plan would have been more constitutionally defensible.
The constitutional argument is absolutely rock solid, slam dunk, 100% unimpeachable. The individual mandate is a tax. There’s no criminal penalty for not buying private insurance. You just pay more in taxes, which is how many “private market” activities are regulated. Of the seven appellate courts in which the ACA’s constitutionality has been raised, only one has struck down the individual mandate. It has also been upheld by a number of district court judges, including some Republican appointees. (Which shouldn’t be a surprise considering the mandate was a Heritage Foundation idea that was first introduced in 1994 by Senate Republicans, first passed in 2005 by a certain Republican governor of Massachusetts, and supported by many Republicans throughout the ACA’s negotiations in 2009.)
The reason I say that I think it will all be struck down is that the Roberts Court has not opposed the Chamber of Commerce in a single case this term. The Chamber has not taken an official position except to say that the regulations should not stand absent the individual mandate.
By the way, you’re absolutely right about the public option being constitutional, as is a truly socialized single payer system. Underneath the blatant hypocrisy and rank opportunism of this legal challenge, there is the irony that the bill’s supporters would not have been put in this position if Republicans hadn’t forced them to compromise in the first place!
I really just can’t think of another example where you pay a tax for inaction. I’m not denying that the decision has political underpinnings or that the GOP has previously supported similar structure. I don’t even have an existential problem with the concept of a mandate considering society pays the bills for people that don’t get insurance anyway. It’s just not 100% clear to me that the constitutional argument is there. In Massachusetts you don’t have to consider the constitutionality of it because I think the question is not whether the individual’s rights are being violated to a burdensome extent, but whether there is any enumerated or implied power of Congress to tax inaction.
First off, I reject the premise that the failure to purchase health insurance amounts to inaction. The purchase of health insurance is a proxy for the purchase of health care, which is something everybody consumes whether we choose to or not. An inactive person can get hit by a bus. As long as we agree that they should be taken to the hospital, then they are active participants in the health care market. However, health care itself cannot be considered a normal market good because demand is not always contingent on price: nobody can shop around before they have emergency surgery. Health insurance bridges this market gap. Instead of buying health services at the point of use, we delegate the purchase to third party agents who assure that we will receive the care we need. This removes the responsibility of making consumption decisions under duress and creates a proper pricing mechanism for health care that features an downward-sloping demand curve (note: as price increases, individual demand decreases.)* There are a handful of wealthy people that can perhaps cover their health care costs out-of-pocket, but most of us cannot. Therefore, the purchase of health insurance is inseparable from the purchase of health care, which we all do whether active consumers or not.
Second, even if I were to accept the premise that the federal government is taxing inaction, the individual mandate is hardly unique. I have never had a child, so I pay a higher tax rate than those that have. I have not bought a house recently, so I pay a higher tax rate than those who have. Just because those are termed “tax credits” instead of “tax penalties” doesn’t change the underlying fact that inactivity leads to higher taxes all the time.
*On the aggregate, however, increases in demand lower the price of insurance. The individual mandate’s intent is to lower costs and increase access to health care by expanding the size (and health) of the risk pool. This is different than most goods and services, where shifts in demand increase price. For more on the subject, read Neil White’s explanation.
I totally understand the economic point you are making; furthermore, I think SCOTUS and the GOP’s leadership do as well (they may or may not agree with it but I believe they understand the logic). Still, I don’t know that this answers the constitutional question. I agree that healthcare is a unique market and it requires unique, comprehensive solutions. It is just unclear how Congress can regulate this action or lack thereof (I still think this is clearly taxing inaction).
I think you make a good argument with your second point, and perhaps people are a little quick to accept the legitimacy of a distinction between a tax credit and a tax penalty. Though, this is not an argument that I have heard a lot.
I haven’t made any argument that wasn’t included in the Solicitor General’s brief. If you accept that failure to purchase health insurance does not imply failure to consume health care, then the individual mandate falls securely within the confines of the Commerce Clause. The ACA uses the insurance provisions to regulate the whole health care market, which, at 17% of GDP, is clearly a matter of interstate commerce. The tax argument was secondary, but it still constituted a significant portion of the administration’s case.
To put it succinctly, Congress derives the power to regulate health care from the Commerce Clause. It derives the power to pass the mandate from the Necessary and Proper Clause. It derives the means to enforce the mandate from the Taxing Powers and the 16th Amendment.
I think healthcare does fall under interstate commerce as far as regulation of the industry. I am not sure that regulating individuals’ choices to not participate in a market are a natural extension of the regulation of healthcare. I agree that there is some similar tax treatment of other things (mortgage interest for example) but I do not think they are quite as incentivizing as this penalty would be. I do think that everyone participates in the healthcare market eventually so there may be more reasonable arguments under that fact, but I think there needs to be more constitutional clarification of how Congress can regulate a unique market such as this.
Constitutional clarification is exactly what the Court is going to give. Unfortunately, I ‘m afraid that their clarification is going to disregard precedent, deference, and sound legal reasoning in favor of a highly partisan ruling.
I sincerely hope I’m wrong.