May 4 (Bloomberg) -- As they await the Supreme Court ruling on the Affordable Care Act, legal critics of the law say their case is about liberty. If the government can instruct people to obtain health insurance, they keep asking, what’s to stop it from requiring them to buy broccoli?
But the real threat to liberty in this case isn’t a hypothetical broccoli law. It’s the problem that the mandate remedies -- the failure of the health-insurance market -- and the long-standing national crisis of rising health-care costs that Congress finally found a way to address.
It’s not a coincidence that in every advanced country in the world, including the U.S., the government is heavily involved in the health-care market and has been for generations. Everybody needs medical attention, at some point, and virtually everybody needs health insurance to pay for it. Nobody can predict when he or she will need care and virtually nobody can pay for it out of pocket. Even the law’s challengers acknowledge these facts.
But in the U.S., not everybody can actually get health insurance -- partly because, as economists have long understood, the health-insurance market is almost uniquely prone to dysfunction.
Insurers need premiums from healthy people, so that, at any one time, they have money to pay the bills of the sick and injured. Private insurers can build these broad risk pools when they sell coverage through large employers, since such companies typically have big and diverse workforces. But when insurers sell health-care policies directly to individuals, they run into trouble: They disproportionately attract people who already have medical conditions.
Stable Risk Pools
During the 20th century, this problem of “adverse selection” pushed many insurers into financial distress.
To preserve themselves, carriers today charge higher premiums, reduce benefits or deny coverage altogether to applicants who have pre-existing medical conditions. Although this keeps insurers solvent, it excludes people who need insurance the most -- in ways that limit their ability to participate fully as members of society and, for that matter, to engage in interstate commerce. Frequently these people can’t switch jobs or start a business. In the worst cases, they can’t pay their medical bills or obtain the care they need.
By establishing the mandate, which is really just a financial incentive for people to get insurance, the Affordable Care Act will build large, stable risk pools for health insurance. It will also enable the government to set rules about standard benefits and pricing that allow people buying insurance on their own to comparison-shop. In the long run, according to the Congressional Budget Office, it will help government control the cost of medical care, which increasingly strains public and private resources alike -- and today accounts for one-sixth of the American economy.
The mandate would seem to fall well within current boundaries of the government’s power to regulate interstate commerce and to do whatever is “necessary and proper” for carrying out its duties, as established by numerous precedents. But if the justices disagree, because they believe the mandate regulates “inactivity,” they can add a new limit.
They could say, for example, that government may regulate activity before that activity takes place -- in this case, requiring people to get insurance before they get sick -- when doing so is necessary to keep an essential interstate market functioning.
This principle would be consistent with the spirit of the Constitution, whose architects wished to construct an economically viable union of states. It would also be consistent with the philosophy of capitalism. Even Adam Smith understood that, sometimes, markets don’t work without government intervention.
Broccoli and Burial
The proverbial broccoli mandate, which Justice Antonin Scalia brought up when the Supreme Court heard oral arguments on the constitutionality of the law in late March, wouldn’t satisfy this standard. Not everybody eats broccoli. And the market for broccoli works fine.
Supply rises and falls to meet demand, as farmers adjust output depending on consumer interest, so that people who want and can pay for broccoli are generally able to get it. The same goes for U.S.-made cars, mobile phones, and most other goods or services.
A burial-insurance mandate, as Justice Samuel Alito suggested, might conceivably meet this standard. Everybody dies. If some day the disposal of remains becomes a crushing financial burden that requires insurance, and the market for burial insurance excludes large numbers of people, then Congress might have reason to act. But today no such crisis exists. For the moment, what is true of the health-insurance business “is not true in other industries,” as Justice Anthony Kennedy observed.
Critics of the health-care law say the Affordable Care Act is unprecedented. But, in 1792, President George Washington signed the Militia Act, requiring all men to purchase a gun and knapsack. The goal was defense of liberty. A decision to uphold the health-insurance mandate would be a powerful defense of liberty in the modern age.
(Jonathan Cohn is a senior editor at The New Republic and the author of “Sick.” David A. Strauss is a professor of law at the University of Chicago and is the author of “The Living Constitution.” The opinions expressed are their own.)
Read more opinion online from Bloomberg View.
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