Health insurance mandate ruled unconstitutional

Ilya Shapiro explains the constitutional significance:

Today is a good day for liberty. By striking down the unprecedented requirement that Americans buy health insurance — the "individual mandate" — Judge Henry Hudson vindicated the idea that ours is a government of delegated and enumerated, and thus limited, powers.

But this should not be surprising, for the Constitution does not grant the federal government the power to force private commercial transactions.

Even if the Supreme Court has broadened the scope of Congress' authority under the Commerce Clause — it can now reach local activities that have a substantial effect on interstate commerce — never before has it allowed people to face a civil penalty for declining to buy a particular product. Hudson found therefore that the individual mandate "is neither within the letter nor the spirit of the Constitution."

Stated another way, every exercise of Congress' power to regulate interstate commerce has involved some form of action or transaction engaged in by an individual or legal entity. The government's theory — that the decision not to buy insurance is an economic one that affects interstate commerce in various ways — would, for the first time ever, permit laws commanding people to engage in economic activity.

Under such a reading, which judges in two other cases have unfortunately adopted, nobody would ever be able to plausibly claim that the Constitution limits congressional power. The federal government would then have wide authority to require that Americans engage in activities ranging from eating spinach and joining gyms (in the health care realm) to buying GM cars. Congress could tell people what to study or what job to take...

As for the oft-invoked car insurance analogy, being required to buy insurance if you choose to drive is different from having to buy it because you are alive. And it is states that impose car insurance mandates, under their general police powers — which the federal government lacks. ...

As Hudson said, "Despite the laudable intentions of Congress in enacting a comprehensive and transformative health care regime, the legislative process must still operate within constitutional bounds. Salutatory goals and creative drafting have never been sufficient to offset an absence of enumerated powers."

How to repeal health care reform

It can be politically difficult to run on the slogan "Repeal health care reform," because many Americans see it as a panacea for anything they don't like about the current system.* It would be much easier for political candidates to run against one unpopular component of ObamaCare. Luckily, it's possible to run against one component that bill break the whole thing.

Ezra Klein unwittingly explains how to destroy ObamaCare:

Pick your favorite system. Socialized medicine in Britain. Single-payer in Canada. Multi-payer with a government floor in France. Private plans with heavy public regulation in Sweden, Germany and elsewhere. None of these plans are "voluntary." In some, there's an individual mandate forcing you to pay premiums to insurance companies. In some, there's a system of taxation forcing you to pay premiums to the government. In all of them, at least so far as I know, participation is required except in very limited and uncommon circumstances. And there's a reason for that: No universal system can work without it.

In other words, the Democrats' health care reform law is a house of cards. Remove the right card and the whole house will collapse. In this case, the right card is the individual mandate.

Americans tend to dislike government mandates. I dislike them. You probably dislike them too. This is supposed to be a free country. Government mandates are the opposite of freedom. Government mandates are so abhorrent that the Democrats are waiting until after the 2012 general election for the health insurance mandate to take effect. Republicans should run against the mandate year after year, decade after decade, until it is repealed. Once the individual mandate is repealed, the whole ObamaCare house of cards will come crashing down.

The individual mandate will force people to buy health insurance no matter how expensive that health insurance gets. Expanding health insurance coverage by requiring people to buy something they can't afford, fining them if they don't buy it, and jailing them if they don't pay the fine... is just evil.

The individual mandate forces younger workers to subsidize the health insurance expenses of older workers. That's because the people who don't buy health insurance tend to be young and healthy. Since younger workers are just starting out in their careers and have had little time to save, while older workers have had decades to advance in their careers and build up a sizable nest egg, the individual mandate is a regressive tax. The individual mandate effectively forces entry-level workers to subsidize management. That's just wrong!

In addition, by forcing people to buy insurance, the individual mandate funnels gobs of money away from ordinary Americans and toward health insurance companies. Health insurance executives were happy to let Barack Obama bash them publicly, because he was advocating a law that will stuff their pockets with money. (He can bash me too if he forces people to pay me!)

Now here's the bad part. Of course, the individual mandate (or any part of ObamaCare) can't be repealed while Barack Obama is President. Furthermore, since ObamaCare is a copy of Massachusetts' RomneyCare, it can't be repealed by a future President Mitt Romney either. If Republicans want to collapse the ObamaCare house of cards, they need to both nominate someone other than Romney and win the 2012 general election. Since Mitt Romney is the likely Republican 2012 front-runner, it may be a long time before health care reform is obliterated.

In addition (not as a substitute!) to pursuing a legislative repeal of the mandate, it could be taken to the courts. Argue in court that forcing Americans, against their will, to buy something that may be difficult for them to afford, simply to exist as a human being in this country, is not one of the federal government's enumerated powers. The Washington Post puts it this way:

The individual mandate extends the commerce clause's power beyond economic activity, to economic inactivity. That is unprecedented. While Congress has used its taxing power to fund Social Security and Medicare, never before has it used its commerce power to mandate that an individual person engage in an economic transaction with a private company. Regulating the auto industry or paying "cash for clunkers" is one thing; making everyone buy a Chevy is quite another. Even during World War II, the federal government did not mandate that individual citizens purchase war bonds.

If you choose to drive a car, then maybe you can be made to buy insurance against the possibility of inflicting harm on others. But making you buy insurance merely because you are alive is a claim of power from which many Americans instinctively shrink.

* ObamaCare is only designed to expand health insurance coverage. It is not designed to lower costs or improve quality. Unfortunately, many people incorrectly think it is.

Fareed Zakaria criticizes ObamaCare

CNN's Fareed Zakaria echoes one of my main complaints about ObamaCare:

CNN: What's your view of the health care legislation Democrats may pass in the next week?

Zakaria: My own feeling is it's a missed opportunity — while it would be great to expand coverage, it doesn't fundamentally reform a broken health care system. We have a system that has out-of-control costs, where there's a huge incentive for the overconsumption of costs by the consumer and oversupply by the producers. Patients are willing to consume more health care services than they need, and doctors and hospitals are willing to supply more health care services than are required ...

We consume many more tests, we do many more interventions, all of which are much more costly and at the end of the day, we don't live longer, we don't have better outcomes on virtually any disease.

By the way, his most recent book, The Post-American World, is outstanding. I've recently become a huge Fareed Zakaria fan.

For more on the problem of high health care costs, see my blog posts here, here, here, here, and here. Or, you could just click on the health care tag below to read all of my health care–related blog posts.

Health care reform will hurt those it is intended to help

George Mason University economics professor Tyler Cowen argues that the proposed health care reforms will be harmful. Here's his summary:

We’re on the verge of enacting a policy that is due to explode, penalizing many of the very people that it was ostensibly designed to help.

ObamaCare would increase health care burden

The Office of the Actuary, part of the U.S. Department of Health and Human Services, exposes the hard truth about ObamaCare:

The nation's medical costs will keep spiraling upward even faster than they are now under Democratic legislation pending in the House, a report from government economic experts concluded Wednesday. ...

Unlike previous estimates that have focused mainly on the legislation's impact on the federal deficit, the actuaries' report looked at total costs, public and private, over the next 10 years. It found that the nation's health care tab would increase somewhat more rapidly with the legislation than if nothing is done. The main reason: Newly insured people will seek medical care. ...

Health care would account for 21.3 percent of the U.S. economy in 2019, slightly more than an estimated share of 20.8 percent of the economy if no bill passes. Economists have warned such increases are unsustainable.

"With the exception of the proposed reductions in Medicare ... (the legislation) would not have a significant impact on future health care cost growth rates," the report said. Moreover, it's "doubtful" that proposed Medicare cuts will stay in place, the analysts concluded.

If I remember correctly, the House bill includes the public option. This casts serious doubt on the Democrats' claim that the public option would reduce health care costs.

The problem with health care costs is the insurance

The Democrats' health insurance reform proposals will magnify the problems that make health care so expensive:

The administration's plan will impose mandates that employers provide coverage, mandates that individuals obtain coverage, and mandates about the form this coverage will have to take. These will remove the freedom to choose one's health-insurance plan, because government, in its effort to correct perceived inequities, will dictate which health-care services must be covered and which health-care providers must be used. ...

The mandates will lead to large increases in the cost of health insurance for everyone. Research studies have shown that as people become insured, especially under a health plan that offers broad coverage and low copayments, they consume more health-care services. The best estimates indicate that each newly insured person will approximately double his or her health spending.

With 30 million to 40 million newly insured persons under the administration's plan, aggregate health-care demand will increase significantly. But when demand expands prices increase. ...

The mandates will also have adverse additional longer-run consequences. According to provisions in both House and Senate bills, mandated plans must have low copayments and provide coverage of health-care services that is at least equal in scope to a typical, current employer-sponsored plan. But these are the very flaws that are responsible for high and rising health-care costs...

Comprehensive, low-deductible, low-copayment insurance has brought us to where we are today. The administration's plan to expand and lock-in this flawed paradigm will ultimately defeat the goal of making health services more affordable for everyone.

Again, insurance is what causes health care to be so expensive, because it encourages the population as a whole to purchase more health care services than it otherwise would. Increased demand then pushes up prices. As I quoted economist Martin Feldstein in an earlier blog post:

Since a typical 20% copayment rate means that an extra dollar of health services costs the patient only 20 cents at the time of care, patients and their doctors opt for excessive tests and other inappropriately expensive forms of care.

By the way, here's a list of reform ideas that the Democrats are ignoring. Here's a functioning national health care system that results in far lower costs than the European-style health care systems that the Democrats want to emulate.

Real health care reform: break down the state barriers

The Democrats don't want real health insurance competition. They just want a government takeover of the health insurance industry (i.e. a single payer system). If they did want real competition, they wouldn't need a "public option". All they'd have to do is break down the state insurance barriers that prevent health insurance from being sold across state lines.

Notice the question that the White House repeatedly ducks in this interview:



For more of my blog posts on the subject of health care, click here.

The cause of America's high health care costs

Harvard economist and John Bates Clark Medal-winner Martin Feldstein identifies the cause of America's high health care costs:

Budget considerations aside, health-economics experts agree that private health spending is too high because our tax rules lead to the wrong kind of insurance. Under existing law, employer payments for health insurance are deductible by the employer but are not included in the taxable income of the employee. While an extra $100 paid to someone who earns $45,000 a year will provide only about $60 of after-tax spendable cash, the employer could instead use that $100 to pay $100 of health-insurance premiums for that same individual. It is therefore not surprising that employers and employees have opted for very generous health insurance with very low copayment rates.

Since a typical 20% copayment rate means that an extra dollar of health services costs the patient only 20 cents at the time of care, patients and their doctors opt for excessive tests and other inappropriately expensive forms of care. The evidence on health-care demand implies that the current tax rules raise private health-care spending by as much as 35%.

The best solution to this problem of private overconsumption of health services would be to eliminate the tax rule that is causing the excessive insurance and the resulting rise in health spending. Alternatively, Congress could strengthen the incentives in the existing law for health savings accounts with high insurance copayments. Either way, the result would be more cost-conscious behavior that would lower health-care spending.

I have previously made the case for greater use of health savings accounts here.

Why Singapore's health care system beats ObamaCare

Singapore's health care system is entirely different than anything the Democrats are trying to do. Singapore's health care system is one libertarians should love, because people there pay for their own health care out of their own pocket. Singapore's health care system is basically a system of health savings accounts for everyone, combined with catastrophic (high-deductible) health insurance. There is also free health care for the poor, analogous to Medicaid in the U.S.

Why is Singapore's health care system superior to ObamaCare? Let's compare Singapore to the Democratic Party ideal (Western Europe and Canada).

Singaporeans live longer than people in the Western European countries whose health care systems the Democrats want to copy:


Singapore's health care system costs less than those in the Western European countries that the Democrats want to copy:


Government spending on health care is lower in Singapore than in the U.S. This is something the small-government crowd should love and the ObamaCare crowd should hate:


While some Democrats are trying to abolish health savings accounts in the U.S. (the Republicans introduced them a few years ago, but they are rarely used), Singapore is evidence that universal health savings accounts are superior to any kind of "public option" or "single payer system".

The reason health savings accounts are so successful is because they get supply and demand working the way they should. This doesn't occur when someone else (e.g. an insurance company or the government) pays the bill.

It is a false choice to believe that the only health care options we have are either big-government or the status quo. Universal health savings accounts provide a third alternative.

Data source.

To learn more about Singapore's health care system, click here.

Update: The Washington Post has an article with more details about the Singaporean health care system. Also according to Wikipedia, "Singapore was ranked 6th in the World Health Organization's ranking of the world's health systems in the year 2000."

A better health care system than ObamaCare

I recommend this editorial from the CEO and co-founder of Whole Foods: The Whole Foods Alternative to ObamaCare.

Here's a summary:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs).
• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits.
• Repeal all state laws which prevent insurance companies from competing across state lines.
• Repeal government mandates regarding what insurance companies must cover.
• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year.
• Make costs transparent so that consumers understand what health-care treatments cost.
• Enact Medicare reform.
• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

CBO: ObamaCare won't reduce health care costs

The Congressional Budget Office again hands the Democrats a massive dose of reality:

The health reform bills released so far would increase government spending on health care without sufficiently reining in health care costs.

And at least initially they aren't likely to significantly lower premiums for the majority of Americans with employer-sponsored health insurance.

That's the sobering takeaway from testimony Thursday by Congressional Budget Office Director Douglas Elmendorf.

Although ObamaCare won't reduce health care costs, it will increase taxes (although last year the Obama campaign promised they wouldn't do such a thing) and it will increase the national debt, so that's a benefit, right?

ObamaCare will also fine people who don't buy health insurance, regardless of how expensive health insurance gets.

ObamaCare: The downside of "the public option"

The Democrats' health care hypocrisy

When Bill Clinton ran for president back in 1992, he used Hawaii as an example of a successful health care system that was a role model for the rest of the country. Here is what he had to say during the October 15, 1992 presidential debate:

Now, let me say, some people say we can't do this but Hawaii does it. They cover 98% of their people and their insurance premiums are much cheaper than the rest of America...

Now see Hawaii Congressman Neil Abercrombie's current description—from a recent email—of the poor shape of Hawaii's health care system, and thus the need for a national plan:

It's no secret. There's a healthcare crisis in Hawaii, and in the rest of the country. Medical bills are getting larger and more families are facing bankruptcy. Though most people over 65 are covered by Medicare, one of every four people in Hawaii under 65 has no health insurance, and probably has not seen a doctor in the last two years. Not only are families burdened by the costs, but healthcare providers are in dire straits, too. Our community hospitals will have to come up with $62 million this year to stay in business.

I wonder how long the U.S. will have its new, wonderful universal health care system before it becomes a crisis that needs to be fixed with more government involvement.

You should also know that since 1974 in Hawaii, employer-sponsored health care kicks in when employees work at least 20 hours per week. The result? For many low wage jobs, employers only hire for 19 hours per week. This leaves many low wage workers unable to find a full-time job. As someone who used to be a low wage worker in Hawaii, I can tell you that given the choice between universal health care or the ability to afford a roof over my head, I'd much prefer the latter. (Managing two part-time jobs is difficult, especially when they have flexible hours.)

A Republican alternative to Obama's health care plan

This morning on MSNBC's Morning Joe, Joe Scarborough asked what the Republicans could propose as an alternative to Obama's health care plan. That's the first time I've ever heard a Republican ask that question. The American health care system is disliked by the American public. If the Republicans don't propose a workable alternative, the Democrats will eventually win the health care debate. Someone out there please tell Joe Scarborough (and any other Republican politicians) that the answer is Singapore's health care system.

Through the use of mandatory health savings accounts, Singapore's health care system makes better use of the price system than the American health care system, which Republicans should like. This makes it cost less than the American system, while providing Singaporeans with better overall health than Americans.

From the libertarian EconLog blog:

The Singapore government spent only 1.3 percent of GDP on healthcare in 2002, whereas the combined public and private expenditure on healthcare amounted to a low 4.3 percent of GDP. By contrast, the United States spent 14.6 percent of its GDP on healthcare that year, up from 7 percent in 1970... Yet, indicators such as infant mortality rates or years of average healthy life expectancy are slightly more favorable in Singapore than in the United States... It is true that such indicators are also related to the overall living environment and not only to healthcare spending. Nonetheless, international experts rank Singapore's healthcare system among the most successful in the world in terms of cost-effectiveness and community health results.

For more info on Singapore's health care system, read here, here, here, and here.

Medicare: the growing federal budget crisis

Tyler Cowen proposes a solution to the impending Medicare budget crisis:

No matter who sits in the Oval Office next year, there won’t be many degrees of freedom in the federal budget. That’s because spending on entitlement programs is largely locked into place, and the situation will become much worse as Americans age and health care costs rise. Even if the government is conservative in its spending, just paying out promised benefits implies that tax rates will rise to a crushing level — a range of 60 to 80 percent of income — well before the end of this century.

The main problem is Medicare, which reimburses the elderly for many of their health care expenses. As Mark V. Pauly, professor of health care systems at the University of Pennsylvania, has said, “Medicare as we know it today cannot be sustained over the next 50 years and probably will run into financial difficulties within the next 15.”

There’s one important idea lurking in the shadows that neither campaign is keen to talk about: paying out government benefits more efficiently. To put it bluntly, it means paying out full benefits only to those who really need them, and cutting back on payments to everybody else. Most recently, this notion has been proposed by Peter H. Schuck, a Yale law professor, and Richard J. Zeckhauser, a Harvard political economy professor, in their book, “Targeting in Social Programs: Avoiding Bad Bets, Removing Bad Apples.”

“Means testing” — cutting back on payments to the relatively wealthy — is one way to better allocate benefits. For health care costs, this could be done by expanding Medicaid, which is focused on the needs of the poor, and making it an entirely federal program rather than one partly paid for by the states. At the same time, the government would need to limit the growth of Medicare, which is universally applied to all elderly people; as a segment of American society, the elderly are relatively wealthy. With limited resources, it would be better to reallocate health care subsidies toward the poor, whether they are young or old.

Furthermore, inducing the wealthy to pay for their own health coverage would create pressures to lower costs.

An alternative path is to put in place more means testing throughout Medicare. For instance, higher-income older Americans have already been paying larger Medicare premiums and receiving a lower prescription drug benefit; that’s part of what made it possible to expand the prescription benefit within budgetary constraints.

Here is Greg Mankiw's take on means testing for Medicare.

And here, Paul Krugman provides his input.