• What Justice Kennedy should read

    The reporting from today’s oral arguments was predictably focused on Justice Kennedy. (Best Kennedy post – Brad’s Reading the Kennedy Tea Leaves)  Justice Kennedy asked:

    Is the government’s argument this–and maybe I won’t state it accurately. It is true that the noninsured young adult is, in fact, an actuarial reality insofar as our allocation of health services, insofar as the way health insurance companies figure risks. That person who is sitting at home in his or her living room doing nothing is an actuarial reality that can and must be measured for health service purposes; is that their argument? (p.56 of the Tuesday transcript)

    If a healthy person doesn’t buy insurance, the average cost of the risk pool goes up.* This is unique to insurance markets. If a healthy person doesn’t buy broccoli, the average price goes down.

    The Prescription Policy Choices brief from our BU health law class makes two important supporting arguments:

    1. The individual mandate closes a national marketplace, namely the market for self-insurance in health care.  Congress clearly has the power to block markets (think:  foreign prescription drugs, unpasteurized milk).
    2. This decision is rational, since the individual market for self-insurance is inefficient due to behavioral biases such as optimism bias and hyperbolic discounting.

    This brief is a must-read for Justice Kennedy and his clerks. Professor Abigail Moncrieff of BU is the primary author; I’m the counsel of record.

    @koutterson

    * This is quite distinct from the free rider argument when uninsured people seek uncompensated care (see the Health Care For All brief); the health insurance impact is automatic and actuarial, whether or not the uninsured person ever seeks care.

     

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    • The problem I have with the individual mandate is that it is an ineffective solution to skewed health care spending, As Austin pointed out in http://theincidentaleconomist.com/wordpress/the-health-spending-distribution-is-very-skewed/,

      “HALF of all health care costs in the US is concentrated in only 5% of the population”

      When you force a few of these uninsurable people into the individual insurance market and throw in a little rate leveling, the rates go up dramatically(55% to 85% in Ohio) and the healthy people leave. Eventually the individual insurance market collapses. How is it rational to close the self-insured and individual insurance markets without a benefit? Isn’t that the definition of irrationality?

    • If healthy young people do not buy burial insurance that increases the cost of burial insurance for older, sicker people who do.

      If safe, careful drivers do not buy auto insurance, that increase the cost of insurance for people who do buy auto insurance.

      If people with fire-resistant homes or homes next door to a fire station do not buy fire insurance this raises the cost of fire insurance for those who do buy it.

      Therefore, does the federal government have the constitutional right to require people to buy burial, auto, and fire insurance?

      (Note that the ACA requires people to buy health insurance, not health care.)

      • Burial, auto and fire insurance are underwritten; after the ACA, health insurance isn’t.

        • Well, that’s the point isn’t it? Could the federal government (1) require auto insurance companies to charge everyone the same price regardless of demographics and previous driving record and (2) require everyone to buy auto insurance?

      • What does this word “require” mean? No one will go to jail for not buying insurance. There is only a fine. This isn’t even enforceable in the way a tax would be, in that if you don’t pay it there is no crime, unlike a tax where failure to pay is a crime. Under the ACA, there is just a debt owed, and it is taken out of any tax rebate. I’m not even sure if your credit rating would be dinged. Maybe that’s the worst of it.

        People talk about you shouldnt force people to do things at the barrel of a gun. The ACA mandate does not do that. It is true that the mandate is not a tax. It is less onerous than one.

        Another point that is lost on nearly everyone.

        • Why did the government not make that argument before the Supreme Court?

          • Why didn’t the government make the argument.

            Good point. I guess it was just a bad day for the Solicitor. Maybe he was trying to cram too much about the bill into his memory and did not think of a simple and straightforward argument. He does introduce the basics of the appropriate argument but in a disorganized fashion.

            The Justices will have to consider the law itself and the Constitution.

            It’s an issue that I think is resolved by the principle that We the People can coerce others among us to do certain things, if their not doing it costs us, and if their doing it benefits all at some point. Isn’t that a right of the People (10th Amendment). It increases the general welfare (Preamble) in a necessary and proper way (Art. 1 Sec. 8) And it is a proper regulation of a commerce that everyone will have to participate in at some point, and everyone benefits when all participate and share the costs, during a lifetime.

            Isn’t that the justification for making motorcylists wear helmets (to
            minimize life long disability care by others)? Isn’t it why we expect people to obey speed limits? If what you do effects others either positively or negatively, then you cannot claim exemption from
            the others imposing claims and demands on you. If that is not explicitly in the Constitution, it is implicitly in the 10th amendment as a right
            left to the people to expect others to act in a responsible way and fulfill their social obligations to minimize the costs for everyone including themselves.

    • Isn’t ACA is essentially a response to the inefficiencies and unaffordability of EMTALA?

      Why should Congress pass a law of questionable constitutionality, regulating an activity through compelling participation, because another of its laws is inefficient?

    • Your statement is only true if you force the young and healthy to subsidize the old and sick by making them overpay for their health insurance.

      • We do that in Medicare. Is Medicare unconstitutional?

        • In my feeble understanding of the issue the difference is that the ACA individual mandate is justified under the “Commerce Clause” while social security and medicare are not.

      • A medical insurance program necessarily requires the healthy and young to share in the costs of covering care of the sick and unhealthy. It is not a program that can be opted into at any point in your life or dropped out of, because you may be one eventually to make claims and you will need the healthy and young then to provide most of the additional financing in premiums for your care. It is a life time proposition, just like Social Security. In a way, the premiums you pay before you make claims are like building up obligations in others to share in the costs of your care when you have major medical problems, perhaps later in life.

    • This is an absurd post. I addressed it at my blog today: http://healthblog.ncpa.org/whats-wrong-with-this-statement/