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Marc Rodwin On The Individual Mandate: Congress Can Constitutionally Build On Private Insurance



March 28th, 2012
by Marc Rodwin

What options does Congress have to insure the public if the Supreme Court rules unconstitutional the Affordable Care Act mandate that individuals purchase insurance?  Could Congress create a national public insurance program funded through a payroll tax? Well, yes.  It already does.  Medicare covers all Americans over 65, (also individuals with permanent disabilities or end-stage renal disease after a two-year waiting period).  All employees pay a tax to fund Medicare hospital insurance.

Congress could expand Medicare to cover individuals below age 65 and replace private insurance.  Likewise, it could create separate public insurance for individuals not coved by Medicare or Medicaid.

In fact for more than a century, many reformers have championed the creation of a national public insurance program.  And in the last 30 years, several organizations supported legislation for single payer insurance to replace private health insurance.  Supporters of public insurance claim that it costs less than private insurance because it eliminates the 15 to 20 percent of premiums spent for marketing, administration and profit. They note that Medicare spends only about 3 percent for administration.

Why then did Congress not expand public insurance when it sought to reduce the number of uninsured?  Mainly because conservatives and Republicans prefer to use the private sector, rather than government programs, to supply services.  Furthermore, private insurers opposed expanding public insurance because it would deprive them of a lucrative market. Ironically, Congress chose to mandate the purchase of private insurance to placate individuals and firms that object to expanding federal governmental authority.

Congress Should Have The Latitude To Build On The Existing Insurance System

If Congress can create a public insurance program and require individuals to pay for it through their payroll taxes, why can’t it provide insurance to the public in a way that builds on existing private insurance?  Why can’t Congress require individuals to purchase insurance and subsidize the premiums of individuals who lack means?  Those who argue that this exceeds Congressional authority say the Constitution allows Congress to regulate commerce but not to require that citizens engage in commerce by mandating that they purchase insurance.

However, in oral arguments Justice Ruth Ginsburg suggested that since Congress requires that everyone pay taxes to take part in Social Security, it can also require that everyone purchase private insurance:  “It just seems very strange to me that there’s no question we can have a social security system… but if the government wants to…preserve private insurers, it can’t do that.”  And Justice Anthony Kennedy suggested that if Congress “can use the tax power… to… have a national health service” perhaps the Court should allow Congress “a certain amount of latitude.” That is the analysis that that I favor.

Several justices seemed more concerned about the implications for other legislation than the ACA.  They asked lawyers if they could articulate any limits as to what Congress can require individuals to do or what services it can require individuals to buy.  I think that the Court can define the limit of Congressional power under the Commerce Clause and taxing power here by reference to traditional governmental functions.  Does the ACA mandate, or other legislation, depart from traditional governmental roles, powers or authority?

American federal and state governments have traditionally helped supply medical care and health insurance through governmental programs (such as public hospitals and public insurance) and by using tax subsidies and legislation to facilitate the supply through the private sector.  Comprehensive reform of health insurance markets that includes a mandate for individuals to purchase insurance, subsidies for those who lack means, and an expansion of Medicaid, fall squarely within this tradition.

The Written Constitution And The Invisible Constitution

Critics will argue that we cannot allow Congress to legislate beyond what the explicit text of the Constitution allows.  However, the explicit text does not yield a clear answer.  Moreover, as Professor Lawrence Tribe explains, the written text is only part of the Constitution.  The “Invisible Constitution”—based on understandings of what the text means, and intellectual and political traditions—plays a large part in any constitutional analysis.

The United States differs from most other developed nations in relying largely on private rather than public insurance for health care.  It also differs from many nations in making use of the private sector to supply many public services.  The private insurance market, however, has been plagued by market failures due to adverse selection, moral hazard, and individual risk-rating.  Congress should be allowed to enact legislation that fixes that market failure in order to fulfill a traditional governmental function.  It is within the American tradition of both the written and the invisible Constitution.

Editor’s note: Marc Rodwin signed an amicus brief in support of the constitutionality of the ACA’s minimum essential coverage requirement, and another  brief  in support of the constitutionality of the statute’s Medicaid expansion. For more on the debate over the constitutionality of the Affordable Care Act’s minimum coverage requirement — or individual mandate — and day two of the Supreme Court’s oral arguments concerning the ACA, see additional Health Affairs Blog posts by William Sage, Alice Noble and Mary Ann Chirba, Sara Rosenbaum, Timothy Jost, and Wendy Mariner.

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