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Saturday, March 27, 2010

Is the Health Care Legislation Constitutional?

Rich's post on the possible unconstitutionality of the health care legislation has stirred me from my bad-guest-blogger torpor.  (Well, that, and the completion of those darned footnotes.)   I want to address (in my next post or two)  Rich's interesting claim that conditional taxation might exceed Congress's constitutional power to tax.  First, though, we need to ask whether we even need to ask that question.

The main issue is the law's requirement that individuals buy insurance, also known as the "individual responsibility" requirement ("IRR").  The power to tax is only needed as a basis for the IRR if the commerce power is insufficient.  I am convinced by Jack Balkin that the congressional power to regulate commerce does (as both descriptive and normative matter) reach requirements that individuals acquire insurance coverage. 

Randy Barnett et al. and Ilya Somin argue otherwise, but they overlook the necessary and proper clause.  If one concedes that Congress has the power to prohibit insurers from discriminating against those with pre-existing conditions, then the mandate that individuals purchase follows as a matter of economic necessity.  Without IRR, the non-discrimination rule will be prohibitively expensive for insurers, and also for the government that must subsidize issuance of insurance to risky populations.  (Because otherwise healthy individuals will simply wait until they're sick to buy insurance.)   After the jump, some counter- and counter-counter-argument.

Of course, it's possible to push back against my premises.  Ilya and Randy would argue that Congress lacks the power to regulate intra-state insurance contracts, or that the necessary & proper clause cannot be invoked in support of Congress' purposes rather than powers (for more on that one, see David Engdahl's 1994 article "The Spending Power," 44 Duke L.J. 1).   I don't think either of these claims represent either current law or a likely direction for future law (as both Randy and Ilya forthrightly acknowledge), since they would both represent quite radical breaks from current doctrine, and would imperil big chunks of federal regulation.

One also might suggest, though, that these kinds of considerations could nudge the law towards more demanding review of the policy basis for what makes a use of federal law "necessary."  In the case of the mandate, the argument might be: "Hey, this is the same as a tax on healthy people to pay for coverage for poor people.  Why doesn't Congress just do that, instead of forcing people to enter into contracts they don't want?"  Put aside for now whether even that tax would be constitutional.  Are there policy reasons for preferring a mandate to a simple redistributive tax?

Yep.  Here's a few:

1.  We think insurance companies would waste money on recruiting the healthy/discouraging the sick, and the mandate reduces their incentive to do that.
2.  Similarly, there are economies of scale in having more people insured (as opposed to having only a tax on the uninsured).
3.  The healthy as a group are more sophisticated consumers and, if forced to buy coverage, will do a better job holding down costs.
4.  There's imperfect enforcement of the non-discrimination rule, and we think many of the healthy will under-insure.
5.  Enforcement of the non-discrimination rule is costly, and that cost is mitigated under a mandate.
6.  The economic incidence of the mandate/penalty is different than some other kind of funding system, and this difference in incidence either a. has desirable distributive consequences or b. reduces total deadweight losses.
7.  There are pooling benefits to the mandate that reduce total cost in a way that a simple tax would not.    
Thoughts, anyone?

Posted by BDG on March 27, 2010 at 10:25 AM | Permalink


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Although, as a self-proclaimed federalism fan, it grieves me to say it, I think that you are exactly right, Brian. Randy and Ilya have been led astray by their love of libertarianism, reading into the doctrine of enumerated powers some implied ban on really coercive mandates on private individuals. But the doctrine, in both its letter and spirit, lacks any such ban.

Here's another way to put your point: If Congress can "encourage" Roscoe Filburn to consume interstate wheat by banning the consumption of home-grown wheat, then why cannot Congress go the next step and just directly force Roscoe to buy interstate wheat? Both the regulatory "encouragement" and the direct coercion bear precisely the same nexus to interstate commerce: Their purpose and effect is to get Roscoe into the interstate market for wheat. If there is a problem with the more coercive meausure, it is a problem lying in the doctrine of substantive due process, not the doctrine of enumerated powers.

The purpose and effect of the insurance mandate on individuals is to protect a federal regulation of the interstate insurance market by preventing adverse selection resulting from the ban on insurers' discriminating against persons with pre-existing conditions. This nexus between the regulation of interstate commerce and intrastate (in)action is as tight as a rusty bolt. QED, there is no difficulty with the regulation of local, non-commercial individual inaction, insofar as the commerce clause is concerned.

As I say, this conclusion grieves me: I applaud Randy's efforts in Raich and elsewhere to beef up the constitutional limits on the federal leviathan. But we law prawfs must resist the temptation to conflate wishful thinking with legal analysis. Libertarian principles protect individuals; principles of enumerated powers protect subnational jurisdictions; and there is no reason to believe that Congress' power to regulate interstate commerce in insurance suddenly declines under the latter because they come closer to the boundaries of the former.

Posted by: Rick Hills | Mar 28, 2010 10:22:21 AM

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