Thursday, January 14, 2010

The Constitutionality of the Individual Mandate for Health Insurance: The Short Version


My essay on the constitutionality of the individual mandate for health insurance appears at the New England Journal of Medicine's website. (For a previous version of the argument, see here and here)

If you want just the highlights, here is the core of the argument that the individual mandate is a constitutional tax:
The constitutional test is whether Congress could reasonably conclude that its taxing and spending programs promote the general welfare of the country. This test is easily satisfied. The new health care reform bill insures more people and prevents them from being denied insurance coverage because of preexisting conditions. Successful reform requires that uninsured persons — most of whom are younger and healthier than average — join the national risk pool; this will help to lower the costs of health insurance premiums nationally. Taxing uninsured people helps to pay for the costs of the new regulations. The tax gives uninsured people a choice. If they stay out of the risk pool, they effectively raise other people’s insurance costs, and Congress taxes them to recoup some of the costs. If they join the risk pool, they do not have to pay the tax. A good analogy would be a tax on polluters who fail to install pollution-control equipment: they can pay the tax or install the equipment.

The individual mandate is not a direct tax [which must be apportioned by state population]. The House’s version is a tax on income. Under the Sixteenth Amendment, income taxes do not have to be apportioned, regardless of the source of the income. The Senate’s version is an excise or penalty tax. [Under Supreme Court precedents, it is not direct because] [i]t is neither a tax on real estate nor a general tax on individuals. It is a tax on events: individuals who are not exempted are taxed for each month they do not pay premiums to a qualified plan.
And here is the core of the argument that the tax is a constitutional exercise of the commerce power:
The individual mandate taxes people who do not buy health insurance. Critics charge that these people are not engaged in any activity that Congress might regulate; they are simply doing nothing. This is not the case. Such people actually self-insure through various means. When uninsured people get sick, they rely on their families for financial support, go to emergency rooms (often passing costs on to others), or purchase over-the-counter remedies. They substitute these activities for paying premiums to health insurance companies. All these activities are economic, and they have a cumulative effect on interstate commerce. Moreover, like people who substitute homegrown marijuana or wheat for purchased crops, the cumulative effect of uninsured people’s behavior undermines Congress’s regulation — in this case, its regulation of health insurance markets. Because Congress believes that national health care reform won’t succeed unless these people are brought into national risk pools, it can regulate their activities in order to make its general regulation of health insurance effective.
I assume that as soon as the health reform bill is passed, people will challenge the individual mandate in court. I doubt these challenges will succeed. But stranger things have happened in constitutional law, and I've seen some of them in the past twenty-five years I have been teaching in this area. I will, however, say this: The Supreme Court would have to significantly alter its post-New Deal doctrines to strike this tax down. It could not just apply the law as it currently exists; it would have to change the law markedly. At present, I do not think the votes are there for such a constitutional revolution.

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