How Repealing the Health Mandate Could Backfire

Republicans are convinced that voters oppose the individual mandate and want it repealed. But repeal could have some unintended consequences.

As debate about whether or not the incoming Republican House should attempt to “repeal and replace” the Patient Protection and Affordable Care Act continues, the general attitude prevailing amongst conservatives is that Americans found the health care bill unpopular, so Republicans should repeal it. And yet--as pollsters continually tell us--while the bill as a whole is unpopular, many of its individual features are not. They are, in fact, overwhelmingly popular. However, there is one unpopular section of the legislation: the individual mandate, which sixty-eight percent of Americans want to see repealed. Today, the judicial battle over the mandate could be one of the more consequential judicial and policy decisions in recent memory.

When states and individuals began to bring suits against the individual mandate a few months ago, many commentators and politicians simply dismissed the lawsuits as frivolous political obstructionism with little possibility of victory. Yet, those challenging the individual mandate do indeed have a far greater shot of success than many believe, as legal professor Ilya Somin cogently argues.

There are two potential outcomes to the eventual judicial ruling: either the courts rule the mandate constitutional and it’s implemented as instructed, or it is ruled unconstitutional and a vital part of the health care reform bill is toppled, eliminating any potential cost-reductions that the reform strives for. The first result has serious long-term implications for future constitutional interpretation by the courts; the second will have a dramatic impact upon our nation’s health care system which could leave us with a system that is worse than before.

Let’s examine the first result. Currently, those who argue that the individual mandate is constitutional do so with the reasoning that it is simply a tax and merely modifies the tax system much like other tax incentives do. For instance, the numerous tax credits our system already contains are, in essence, penalties on those who choose not to do those things. Theoretically, we already endure a number of mandates, as our ineligibility for certain tax credits (i.e. certain energy credits) can be construed as a de facto penalty. However, if the courts decide that it is not a tax and instead a penalty, then it becomes much more difficult to make a constitutional argument. President Obama seemingly agrees with this latter line of reasoning, as he stated in September 2009 that "for us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase."

However, as Somin argues, advancing the notion that the bill is constitutional under the commerce clause is simply incorrect: “instead of regulating pre-existing commerce, the bill forces people to engage in commercial transactions they would have otherwise avoided.” Refuting the idea advanced by Michigan district Judge George Caram Steeh that the mandate is constitutional because it is “economic activity,” Somin argues:

if I choose to spend an hour sleeping, I necessarily choose not to spend that time working or buying products. Under Judge Steeh's logic, the Commerce Clause authorizes Congress to force workers to get up earlier in the morning so that they would spend more time on the job.

In essence, the precedent that this sets for future congressional legislation and the reach of the federal government is troubling. There would be no activity that the federal government could not force us to engage in, and there would be judicial precedent that future judges would feel obligated to adhere to. Even those who are advocates of the mandate should be concerned about such legislative freedom.

But what if the courts strike down the mandate? Consider it as a victory for limits on the federal government, but the policy implications are unsettling, especially as it pertains to the cost of health care within the framework of the new reforms.

The success of the health care reform bill rests upon three pillars: guaranteed issue, subsidies, and the mandate. You need the mandate in conjunction with guaranteed issue so that people don’t simply wait until they are sick to buy insurance, and you need the subsidies to ensure that everyone is able to comply with the mandate. If one of these pillars is removed though, the whole thing falls apart.

To see a first-hand example of this, look at what happened to New York. In the 1990’s, Gov. Mario Cuomo instituted new regulations within the state’s health care industry that included requirements for guaranteed issue and community rating. As Stephen T. Parante and Tarren Bragdon explain, New York’s health insurance costs are some of the highest in the country:

Today, New York's private individual insurance market is among the nation's most expensive and highly regulated. New York City residents buying private, unsubsidized individual insurance coverage pay at least $9,036 a year for individual coverage and $26,460 for family coverage. New York's average premiums in the individual market are more than twice the national average, according to a 2007 eHealth Insurance survey.

With an increase in the total amount of high-risk patients insured, premium costs skyrocketed by an estimated 35-40%.

Should the courts repeal the mandate, the country as a whole could face similar results. Furthermore, such a consequence wouldn’t occur had the original bill not passed at all. PPACA has placed the country in a precarious position. Should the courts determine the mandate to be unconstitutional, President Obama and the Democrats in Congress who passed the bill might begin to wish they had never done so: first, opponents can accurately accuse them of passing unconstitutional legislative; second they face the possibility of spiraling costs staring them in the face as an indirect consequence of the legislation.

If the mandate were removed, Republicans might face an even stronger temptation to repeal the bill entirely than they feel today. Such a strategy might not even be a bad idea if intolerably high costs are the alternative. Unfortunately, Americans overwhelmingly approve of guaranteed issue and subsidies according to recent polling. It would be politically difficult to repeal either, and especially difficult to repeal both together.

Of course, it’s difficult to anticipate what might occur within the next 3-4 years, before the mandate and guaranteed issue begin in 2014. At this point, an ideal outcome would be the implementation of the recently introduced Wyden-Brown bill, which would grant states leeway in constructing their own healthcare reform while still receiving federal dollars, assuming they meet certain coverage benchmarks. This would potentially allow states to opt-out of a hypothetical mandate-less system and move either to the left or right of the current system, depending on their preference. States such as Vermont could enact a single-payer plan, should they so desire, while other states could experiment with high-risk pools or other market friendly initiatives.

Americans should hope that when it comes to the mandate, there’s a third way. Otherwise, we’ll be left making a tough choice: nearly unlimited federal government, or skyrocketing health costs.