THE BLOG
02/06/2012 12:14 pm ET Updated Apr 07, 2012

Why the Health Care Law Is Constitutional

By now, the United States Supreme Court is being flooded with briefs from the parties and their supporters in the cases that will decide whether the Patient Protection and Affordability Care Act (ACA) ("Obamacare") will remain the law of the land or not. Oral arguments exceeding five hours over three days will take place at the end of next month with a decision expected no later than at the end of the Court's term in June.

Though the Court has asked the parties to address four issues, the key one is whether or not having Congress tell Americans that they have to purchase a health insurance policy effective in 2014 is within its power to regulate interstate commerce. This is called the individual mandate, or minimum coverage, question. (The other three issues are whether the rest of ACA can remain law if the individual mandate is ruled unconstitutional (this is called the "severability" question); whether it is too soon to decide these cases because ACA provides a tax upon citizens who fail to purchase insurance -- assuming the minimum coverage provision remains the law of the land -- and tax cases cannot be heard before the tax is due, is not paid and the government brings a lawsuit against the taxpayer, or a taxpayer pays the tax and then wishes to dispute it in court (all this would not occur before 2015); and whether ACA expanding Medicaid as it does is unconstitutional.

Among the plethora of legal documents now on file with the Court is an amicus (friend of the court) brief filed by 39 distinguished and renowned, internationally recognized economists that request the Court find constitutional the individual mandate. Among the participants are four Nobel laureates, two recipients of the prestigious John Bates Clark Medal for the outstanding American economist aged 40 and under and economists who served in previous administrations. Also included is noted M.I.T. Professor of Economics, Jonathan Gruber, acknowledged to be the architect of the health care plan presidential candidate Mitt Romney enacted into law in the Commonwealth of Massachusetts, and also who [Gruber] was a key player in the formation of ACA.

The significance of this brief cannot be understated, even to nine lawyers who sit as our Supreme Court.

As these economists make plain in their filing, the health care market is unique among markets, due to "(1) the unavoidable need for medical care [by every American at some point in our lives]; (2) of the unpredictability of that need; the high costs of care (which exceeds the ability of most to pay), the requirement that providers offer care in emergency situations without regard to the ability of those who need the care to pay, and the very significant cost-shifting that underlies the way we pay for health care." This market is economic activity that transcends state borders.

Health care as a necessity of life differs from other necessities, pointed out by these economists as well,

Because the need for such items is typically relatively certain in amount and time, people do not insure against the risk of not having food or shelter. Rather, they plan for those needs, even when their means are limited. Nor our grocery stores or landlords required to provide free food or housing to the impecunious.

Health care providers, in contrast, must provide care and the expenditures for such care take place "unpredictably in both timing and amount." As pointed out in the brief, even other forms of insurance, such as casualty, mortgage guarantee, burial, life, and credit, do not involve the unique characteristics of unavoidable need, unpredictable need, unpredictable costs, the legal mandate to provide a service, and the cost shifting that occurs when someone uninsured requires treatment that must be provided and whose costs are then shifted to all others who have insurance or who can pay for it. It is for such reasons that finding the mandate constitutional does not portend ill for Americans fearing that other markets will become susceptible to government intervention.

The individual mandate also enables spreading of an insurer's risk, and the larger this "health risk pool" (ACA sec. 1501(a)(2)(I)) becomes the less any one person has to pay to access and afford health care services in America. Minimum coverage also interacts with ACA's guaranteed issue and community rating provisions and eliminates "adverse selection"-allowing folks to opt in and out of being insured at their discretion and avoiding what has become known as the 'death spiral' if such selection is allowed. As the brief additionally points out, several states have tried, without minimum coverage, to cover individuals with pre-existing conditions, requiring non-discrimination in insurance pricing and other reforms; all failed, and those that did are now among the most expensive venues to buy non-group insurance. Without the mandate, ACA's reforms may well no longer be viable, leaving millions of citizens at the mercy of free care that can never be paid for by them.

Opponents of the mandate say that a (mental) decision not to purchase a health policy does not constitute economic activity that the constitution allows Congress to regulate -- even if this minimum coverage constitutes, as two federal appeals courts have already said, "an essential part of a larger regulation of economic activity." While no doubt the Supreme Court will pronounce as a matter of law whether a decision to forego the purchase of insurance is an "activity" that can be regulated within the framework of the constitution's Commerce Clause, deciding not to make such a purchase is the result of a reasoned and conscious decision-making process that (as the brief further points out) factors in avoidance of the risk of having to spend significantly on medical costs, but if the need arises to then rely on a safety net of free care under federal or state law. Note what Romney said when he signed into law Massachusetts' equivalent of ACA's mandate, "Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on the government is not libertarian." (Mitt Romney, "Health Care for Everyone? We Found A Way", WSJ (4-11-06).) As one federal appeals judge (Sutton) said when opining on ACA, "[n]o one is inactive when deciding how to pay for health care, as self-insurance and private insurance are two forms of action for addressing the same risk. Each requires affirmative choices; one is no less active than the other, and both affect commerce." As these economists then conclude, not making a purchase thus remains, "an affirmative, rational economic decision."

Another federal appeals court (D.C. Circuit) upholding ACA's mandate last fall wrote, "The right to be free from federal regulation is not absolute and yields to the imperative that Congress be free to forge national solutions to national problems." Indeed, health care is a national problem where the minimum coverage provision was created to immeasurably regulate economic decisions having a great impact on the national market for health care. ACA's individual mandate should thus be found constitutional -- for the very and incredibly precise reasons put forth by these 39 economic scholars.