Thursday, December 16, 2010

Is the Mandate Constitutional?

A few days ago, a U.S. District Court judge ruled that the individual mandate in the health reforms of the Affordable Care Act is unconstitutional. This got a lot of hyperbolic press proclaiming the imminent end of "Obamacare." In truth, it's not nearly as critical a ruling as all that. For one thing, the ruling itself separated the individual mandate from the rest of the Affordable Care Act, meaning that even if the mandate were struck down the rest would still survive. Furthermore, the judge refused to grant an injunction preventing the implementation of the health reforms.

We also have to look at the context of the ruling. This is actually the third ruling on the individual mandate, and the first two both found the mandate to be constitutional. It's maybe a sad commentary on the US judicial system that these rulings have been completely partisan. The two judges who ruled in favor of the mandate were appointed by Clinton and the judge who ruled against was appointed by George W. Bush - so much for apolitical judges calling balls and strikes. Anyway, all of these rulings are just stepping stones on the way to the Supreme Court.

So what will happen at the Supreme Court? Who knows. It's famously stacked with several activist Republicans including Scalia, Alito, and Roberts, but I think even they would be very hesitant to hand down a ruling that would dramatically reinterpret and narrow the ability of the federal government to regulate economic activity.

But what if they do declare the mandate unconstitutional? The rest of the health reforms would still be in place. And here's the key problem: the health reforms do not work without the mandate. If you prohibit insurance companies from discriminating based on pre-existing conditions, and you don't require people to have insurance, then people will simply wait until they get sick and then get insurance. That obviously is not a sustainable system. And, as this article points out, it "is not an insurance system at all. It’s free-riding." So the mandate would be replaced with something very similar to the mandate. Ideas are already circulating should that come to pass.

So the takeaway point is that, even in the worst case scenario, this does not signal the end of the Affordable Care Act.

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