With or without mandate, Affordable Care Act fails

Published in The Tennessean, Sunday, April 1, 2012
and Forbes with archives.

by Richard J. Grant

It is not necessary for the U.S. Supreme Court to find the individual mandate portion of the Patient Protection and Affordable Care Act (ACA) to be unconstitutional in order to strike down the entire act, but it would be sufficient. It is also the most visible legal weakness in the act, which is why supporters of the ACA have now suggested that the mandate is severable from the remainder of the act.

The ACA’s supporters hope that by sacrificing the mandate they can keep the rest of the act alive. Where there’s life, there’s hope; and the hope in this case is that the remainder of the act’s provisions will become sufficiently integrated into the system that they become politically entrenched. Then, a future Congress could find another, less constitutionally offensive method to serve the same function as the mandate.

That other method would most likely be an overt tax. The economic impact of the remaining portions of the ACA would make such a tax necessary. Although popularly sold as a means of reducing overall health-care costs, the creators of the ACA knew that the inclusion of such provisions as the mandatory coverage of pre-existing conditions and the setting of premiums based on average costs rather than actuarial costs would necessarily increase the total cost of such coverage. Everyone who kept their insurance coverage would pay more.

Such an increase in premiums would cause many previously insured people to drop their coverage. It would no longer be worth it to them. Their refusal to remain insured, and to subsidize those with higher risks (more would now enter the market), would raise the premiums still higher for those who remained. The burden is imposed by the ACA, not by those who drop out.

The individual mandate, by forcing everyone to buy medical insurance or to pay a fine, was intended to force those who preferred not to purchase insurance to do so in order to subsidize the other customers and their insurance companies. This forcing of Americans to purchase a product is the constitutional red flag that now gets the most attention. It is rightly feared that the acceptance of such a provision would turn the Constitution into a mere doormat on the way to greater government intrusion into our lives.

It was difficult enough for the previous Congress to pass the ACA. Although the act imposes other taxes, an overt tax of the size needed to do the same job as the mandate would have been politically unpalatable. As it was, and given the amount of pork-barrel spending deals needed to pass the bill, public acceptance of the ACA collapsed as more people learned what was in it.

This is why the 2010 elections produced a new Congress that would never pass anything resembling the ACA. Just as severability of the mandate has no political future, it has no legal future. The mandate, not something else, is in the current act. Even with the mandate, the ACA will fail to achieve its originally stated goals. But without the mandate it would be even more expensive; the remaining provisions, taxes, and regulatory powers would impose even more burdens and disruptions on the healthcare market.

Perhaps the only compromise possible at that point would be to repeal the remaining portions of the act. The next question is, “Then what?”

Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee. His column appears on Sundays.

E-mail messages received at: rjg@richardjgrant.com

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Copyright © Richard J Grant 2012