Courtesy of Keith Ellison (CC-BY-SA)
President Barack Obama signs the Patient Protection and Affordable Care Act at the White House on March 23, 2010.
Earlier this week, a federal judge in Virginia ruled that the new federal health care reform law’s requirement that most Americans obtain health insurance is unconstitutional In the judge’s opinion, mandating health insurance exceeds the regulatory authority granted to Congress under the Commerce Clause.
This ruling by Judge Henry E. Hudson of Federal District Court in Richmond, Virginia, fails to take into account the many unique characteristics of the health care market that provide a sound economic argument for why mandating health insurance is both constitutional and beneficial to the American population as a whole.
In November, I signed my name to an amicus brief submitted to the U.S. district court in Pensacola, Florida, arguing for the constitutionality of mandated health insurance under the Patient Protection and Affordable Care Act of 2010. This brief was signed by 37 professors and scholars in economics, including three Nobel Laureates, who have taught, studied and researched the economic forces operating in and affecting health care and health insurance markets. The Pensacola court will be reviewing the challenge by 20 attorneys general and governors regarding the health insurance mandate.
The amicus brief argues that the current failure of many individuals to purchase health insurance has financial consequences for other individuals and on the interstate health care and health insurance markets as a whole. Thus, a federal requirement to purchase health insurance is consistent with the Commerce Clause in the U.S. Constitution. While the decision not to purchase insurance has the appearance of inaction, one cannot deny that all individuals will have an unavoidable need for medical care in their lifetime.
Medical care has become so expensive in the U.S. that it is very difficult for anyone to commit to paying for medical care on his own, and only the exceptionally wealthy can even consider doing so. Other federal legislation (The Emergency Medical Treatment and Labor Act) mandates access to a minimum level of health care for all who seek it, even those who cannot pay. Therefore, others bear the costs of health care provided to the uninsured in this country, including taxpayers, health care providers providing charitable care, and privately insured patients subject to cost shifting.
I encourage you to read the entire amicus brief, which provides a more in-depth discussion of why the health care market is far from a perfectly competitive market with complete information, and therefore requires government intervention to protect consumer and patient welfare. Issues such as adverse selection, the nature of health care expenditure growth and the uncertain timing — but inevitable need for health care — make it essential that the U.S. achieves broad participation in insurance pools by all people. The minimum coverage requirement is one way to achieve this goal. Mandating health insurance will reduce the ability to free ride at the expense of others in the current health care system, and lead to more affordable health insurance premiums for all Americans.
Vivian Ho is the James A. Baker III Institute Chair in Health Economics, and she is a professor in the department of medicine at Baylor College of Medicine. She is also a professor in the department of economics at Rice University. Ho’s research examines the effects of economic incentives and regulations on the quality and costs of healthcare.