Is The Individual Mandate Constitutional? Its Creator Says…

In a recent interview conducted by Ezra Klein of the Washington Post, with one of the original authors of the individual mandate – the piece of language in the health care reform bill that requires Americans to purchase health insurance, but is attacked by Republicans as “unconstitutional,” – was asked if the constitutionality of the mandate was ever questioned back in 1991 when the term was first used.

Mr. Mark Pauly, who was the lead author of a Health Affairs paper, was given the job to come up with a way to persuade President George H.W. Bush to adopt a health care policy where all Americans will be covered, while keeping the private health care providers in charge of the industry. The individual mandate was seen as the only way to accomplish this feat.

The question was asked by Mr. Klein; “Was the constitutionality of the provision a question, either in your deliberations or after it was released?” Mr. Pauly answered;

“I don’t remember that being raised at all. The way it was viewed by the Congressional Budget Office in 1994 was, effectively, as a tax. You either paid the tax and got insurance that way or went and got it another way. So I’ve been surprised at that argument. But I’m not an expert on the Constitution. My fix would be to simply say raise everyone’s taxes by what a health insurance policy would cost — Congress definitely has the power to do that — and then tell people that if they obtain insurance, they’ll get a tax break of the same amount. So instead of a penalty, it’s a perfectly legal tax break. But this seems to me to angelic pinhead density arguments about whether it’s a payment to do something or not to do something.”

Opponents of the law, which they have affectionately dubbed ‘ObamaCare,’ states that the law violates the Commerce Clause in the constitution, which, according to Article 1 Section 8 Clause 3 states that Congress shall have the power to: “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”. This its opponents claim, does not give congress the power to mandate commerce, or to make anyone buy insurance, thus, its unconstitutionality.

Proponents claim that the power given to Congress through the Commerce Clause of the Constitution is a grant of power, not an express limitation on the power of Congress to regulate the economy, thus, the law is giving Congress the power to improve the economy through the individual mandate and is therefore constitutional.

This ongoing debate prompted the next question from Mr. Klein, “…whether the individual mandate is a penalty for economic inactivity or whether it’s part of a broader system of regulations affecting a market for health care that we’re all participating in.” Mr. Pauly answered;

I see it in the latter way. We thought it was a good idea to do everything possible to encourage people to get insurance. Subsidies will probably pick up the great bulk of the population. But the point of the mandate was that there are a few Evil Knievals who won’t buy it and this would bring them into the system. In our version, the penalty was effectively equal to the premium of a policy. You paid the penalty and you got the insurance. That’s one of my puzzlements here: In the new law, the actual level of the penalty is quite small compared to the price of a policy. It’s only about 20 percent of the cost of a policy

In short, at the time this ‘individual mandate’ was implemented and presented to a Republican president, the common wisdom was that it would keep the government out of the healthcare sector. Requiring people to buy healthcare as the mandate did back in the early nineties, insured a larger portion of Americans and eliminated the need for a single payer government run option.

Because the private sector would benefit from the increased policies sales the individual mandate provided, Republicans signed on to the measure. Democrats on the other hand did not approve of the measure.

So why  now the debate on the constitutionality of the individual mandate coming from the right?  Simply put, there is now a Democratic President in the White House, and although he and other Democrats have now seen the need for the individual mandate as a way to allow the private sector to offer health care to all, Republicans now have a change of heart. So the debate, childish as it is, continues…

See the full interview here.

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  • Amy

    @ Michael Chase: And another question would be does the Commerce Act and its enforcement by Congress also apply to corporations such as insurance agencies?
    In other words, does the Act allow congress a constitutional right to force insurance carriers to actively seek out low margin clients and offer them healthcare without offering to subsidized the cost? I mean there’s a reason why poor people have no healthcare insurance. I think the mandate along with the subsidy is necessary as a package in order to make this group more attractive to the private sector health carriers, if not to make a whirlwind profit then at least not to lose any money.

  • This is a good question, but I maintain the better question is whether the mandate is necessary at all. This notion of needing the mandate to maintain the viability of insurance companies is based on a somewhat silly view of industry; businesses adapt to changing market conditions. The insurance industry has operated as a super premium business, focusing on high margin clients only. By forcing them to cover low margin clients, without the subsidy of the mandate, they will have to dramatically expand their client base to maintain earnings levels.

    Industries are perfectly capable of making such a move, and the process will engender the competition that will be an engine for cost and service improvements.