Tuesday, February 01, 2011

The Strange Justification for the Individual Mandate

Yesterday Federal Judge Roger Vinson ruled in a Florida court that the individual mandate in Obamacare is unconstitutional. His reasoning is the same as most critics of the law - that nearly any economic choice has economic consequences so this opens the door to unlimited Congressional power.

It would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause. If it has the power to compel an otherwise passive individual into a commercial transaction with a third party merely by asserting -- as was done in the Act -- that compelling the actual transaction is itself 'commercial and economic in nature, and substantially affects interstate commerce,' it is not hyperbolizing to suggest that
Congress could do almost anything it wanted.

The response, which was echoed against yesterday, is interesting.

The justification says that the individual mandate is needed in order to assure enough new, healthy people to offset the cost of the other provisions, especially the prohibition against preexisting conditions. Without the influx of new insurance subscribers, the whole structure falls apart.

If you look carefully at this, the Commerce Clause is being invoked to assure that companies providing health insurance will be profitable at the expense of young, healthy people who would be justified in only carrying catastrophic care insurance. In exchange for this new influx of cash, the insurance companies will be required to carry everyone and will be subject to tight limits on their rate structure and the percentage of their income can be taken as profits.

The people defending the law never point out the role of insurance company profits but they are central to the argument.

In a way, this law was designed to be a back-door nationalization of health care. Instead of seizing the insurance companies and replacing premiums with taxes, the law keeps things in private hands. The result is the same except for the overhead that will go to the insurance companies.

But all of this dodges the question of Constitutional authority. Was Congress within its rights when passing this law? Proponents of the law sure as former Majority Leader Pelosi seemed to think that the result was so important that Constitutional issues should be brushed aside. Possibly they think that health care should be evaluated as a unique issue.

Is it unique? Are there any other situations where a goal for the common good might be subsidized by forcing people to subscribe? How about high speed trains? They are a goal of the Obama Administration but passenger train service in the US loses money. What if everyone was required to buy a train pass? Total ridership would climb some but revenue would increase more because trains do not meet most people's needs. How is this different from the individual mandate?

Of course, passenger rail is already tax-subsidized. It would make more sense to raise taxes in order to provide more subsidies. But that is the point. Congress could levy a tax on the population with credits for health policies already in place and use the revenue to subsidize coverage. Why didn't that take this approach? Because they could never sell it. Instead they disguised it.

Judge Vinson was the 4th judge to rule on health care and the second to rule against it but his ruling is the most important to date. His ruling was on the suit filed by 26 states so it affects the most people. Also, he struck down the entire law, although he delayed implementation pending appeal.

It seems that most laws include a small disclaimer that says that if part of the law is found to be unconstitutional, the remainder will remain in effect. That clause was included in early drafts of Obamacare but dropped from the final version. This makes it an all-or-nothing ruling. If any part of the law is found to be unconstitutional then the entire law is nullified.

How did this happen? I suspect that the insurance companies had it taken out. They have no intention of offering coverage on demand unless the individual mandate is in effect. That makes the fight over the mandate a very high-stakes battle.

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