With the Supreme Court now likely to take on challenges to the constitutionality of the individual mandate, it seems an appropriate time to explain my complex feelings about this controversial aspect of health care reform.
Let’s start with what I like about it.
There’s almost no question that the individual mandate is good policy. Anyone with even a cursory knowledge of insurance markets knows that adverse selection is a serious threat to the affordability of individual health coverage, and this threat is made worse by the guaranteed issue and community rating provisions in the Patient Protection and Affordable Care Act (PPACA).
The mandate corrects for an obvious market imperfection and achieves what almost everyone agrees is an important national priority: making sure that people aren’t driven into bankruptcy due to unforeseen illness. While the polling on health care reform is far from straightforward, it’s clear that a large number of Americans see affordable health care as a right of citizenship. The mandate itself doesn’t necessarily curb the long-term growth in health care costs, but it certainly expands access to medical services. It’s hard to argue that this is a bad thing.
The problem is that a mandate isn’t exactly the least intrusive means of achieving this important national priority. And even if it were the least intrusive means, it’s certainly not the only means, as many proponents of the PPACA would have you believe.
Indeed, anyone who can’t conceive of a workable alternative to the individual mandate probably hasn’t thought about it very hard. The Government Accountability Office (GAO) recently offered several promising approaches that are far more likely to pass constitutional muster.
One of the most sensible options proposed by GAO is to impose a penalty on individuals who receive uncompensated health care, or on the employers of these individuals. This would incentivize the purchase or provision of health insurance in much the same way as a mandate, without stretching interpretations of the Commerce Clause (and the Necessary and Proper Clause) beyond the boundaries of logic.
The differences here may seem academic, but the constitutional implications are enormous. By imposing a penalty on individuals who receive uncompensated care, Congress would be regulating an actual economic transaction resulting from individual engagement in the health care market. That’s pretty different from Congress asserting the power to draw people into a market transaction, and then regulate that transaction.
From a constitutional law perspective, the key question is whether the individual mandate is a valid use of Congress’s authority to regulate interstate economic activity. (We’ll return to the question of whether the associated “penalty” could be justified under the Taxing and Spending Clause in a moment.)
Because the Court has adopted an “aggregation principle” – whereby virtually any activity, however local or non-commercial, can be regulated if it would have a substantial effect on interstate commerce when collectively undertaken – the distinction between interstate and intrastate has become so fuzzy as to be almost irrelevant (see Wickard v. Filburn and Gonzales v. Raich).
So, no one denies that Congress has broad power to regulate even some of the most provincial activities under certain circumstances. But proponents of the individual mandate take the aggregation principle one step further, arguing that failure to engage in economic activity has a substantial aggregate effect on interstate commerce, and therefore falls under the regulatory purview of Congress.
This line of reasoning presumes that a lack of engagement in activity constitutes a form of activity. At the very least, it presumes that this distinction is irrelevant.
Whether the Court will ultimately allow the individual mandate on these grounds remains to be seen, but the logical problems here should be readily apparent. Even where the Court has upheld restrictions on fundamentally non-economic activities under the Commerce Clause, it has always pointed to some form of activity that, when taken in the aggregate, substantially impacts commerce. If the Court now finds the distinction between activity and inactivity meaningless, it’s very difficult to think of a limiting principle for congressional authority under the Commerce Clause.
Every minute that a person remains inactive is a minute she could be purchasing millions of products. If her failure to purchase these products constitutes interstate commerce, it’s not entirely clear what wouldn’t.
The Court has previously expounded on the importance of a limiting principle with respect to the Commerce Clause (see United States v. Lopez):
The possession of a gun in a local school zone is in no sense an economic activity that might, through repetition elsewhere, substantially affect any sort of interstate commerce. Respondent was a local student at a local school; there is no indication that he had recently moved in interstate commerce, and there is no requirement that his possession of the firearm have any concrete tie to interstate commerce.
To uphold the Government's contentions here, we would have to pile inference upon inference in a manner that would bid fair to convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States. Admittedly, some of our prior cases have taken long steps down that road, giving great deference to congressional action. The broad language in these opinions has suggested the possibility of additional expansion, but we decline here to proceed any further. To do so would require us to conclude that the Constitution's enumeration of powers does not presuppose something not enumerated and that there never will be a distinction between what is truly national and what is truly local.
If Court believes that the possession of a gun in a school zone has “no concrete tie to interstate commerce," by what line of reasoning could not possessing health insurance possibly constitute economic activity? The logic is at best strained, and at worst incoherent.
There is, of course, another possible constitutional justification for the individual mandate under the Taxing and Spending Clause. Many proponents of the mandate have argued that a non-compliance “penalty” assessed through the Internal Revenue Code is the functional equivalent of a tax, and thus clearly falls within Congressional authority under Article I, Section 8 to “lay and collect Taxes, Duties, Imposts and Excises.” This reasoning has been rejected by every court that has ruled on the constitutionality of the mandate.
To summarize the problems with this argument briefly: the penalty is clearly designed to be a “punishment for an unlawful act or omission” (see U.S. v. Reorganized CF&I Fabricators of Utah, Inc., et al.). It is referred to as a “penalty” in the legislation, and it unambiguously meets the Court’s definition of a penalty. Moreover, the penalty cannot be considered an excise tax because there’s no “event” to be taxed. It is also cannot be considered an income tax under the Sixteenth Amendment because it is not levied on “undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion” (see Commissioner v. Glenshaw Glass Co.), but rather triggered by a failure to purchase health insurance. To call the penalty a tax is to obviate any distinction between taxes and penalties.
In short, justifications for the individual mandate under both the Commerce Clause and the Taxing and Spending Clause seem difficult to construct. It is at least plausible that the mandate will be struck down.
Let me stress that I have no idea which way the Court will actually come down on this issue. Maybe there's something key here that I'm missing. If the mandate is upheld, I’ll have mixed feelings. Health care is a special case, and the federal government should be doing more to control costs and expand coverage. But it’s far from clear to me that there are no alternatives to the individual mandate. In fact, there are many ways to achieve this important policy goal through constitutionally legitimate means.
What concerns me is that this debate isn’t really about the individual mandate or health care reform at all. It’s about an expansive interpretation of federal power. That’s a fair discussion to have, but let’s not pretend that the whole controversy relates to a single policy solution for which there is no reasonable alternative.
