All Your Economic Decisions Are Belong to Us


If it's an economic decision, the federal government can make it for you. That's the takeaway from a ruling this afternoon by a federal judge in Michigan.

Judge George Caram Steeh, who was considering the constitutionality of the PPACA's individual mandate, which requires all Americans to purchase private health insurance, said the requirement is constitutional. The judge's reasoning boiled down to the argument that even though the decision not to purchase health insurance may not be economic activity, which the federal government is allowed to regulate under the Constitution's Commerce Clause, it is an economic decision, because it has ramifications across the entire health care market. The decision noted that in United States v. Lopez, the Supreme Court ruled that, under the Commerce Clause, the federal government has the authority to regulate "those activities that substantially affect interstate commerce." The choice not to purchase health insurance meets that criteria, according to the judge, and therefore the federal government has full authority to regulate it:

There is a rational basis to conclude that, in the aggregate, decisions to forego insurance coverage in preference to attempting to pay for health care out of pocket drive up the cost of insurance. The costs of caring for the uninsured who prove unable to pay are shifted to health care providers, to the insured population in the form of higher premiums, to governments, and to taxpayers. The decision whether to purchase insurance or to attempt to pay for health care out of pocket, is plainly economic. These decisions, viewed in the aggregate, have clear and direct impacts on health care providers, taxpayers, and the insured population who ultimately pay for the care provided to those who go without insurance. These are the economic effects addressed by Congress in enacting the Act and the minimum coverage provision.

The health care market is unlike other markets. No one can guarantee his or her health, or ensure that he or she will never participate in the health care market. Indeed, the opposite is nearly always true. The question is how participants in the health care market pay for medical expenses—through insurance, or through an attempt to pay out of pocket with a backstop of uncompensated care funded by third parties. This phenomenon of costshifting is what makes the health care market unique. Far from "inactivity," by choosing to forgo insurance plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now through the purchase of insurance, collectively shifting billions of dollars, $43 billion in 2008, onto other market participants. As this cost-shifting is exactly what the Health Care Reform Act was enacted to address, there is no need for metaphysical gymnastics of the sort proscribed by Lopez.

The plaintiffs have not opted out of the health care services market because, as living, breathing beings, who do not oppose medical services on religious grounds, they cannot opt out of this market. As inseparable and integral members of the health care services market, plaintiffs have made a choice regarding the method of payment for the services they expect to receive. The government makes the apropos analogy of paying by credit card rather than by check. How participants in the health care services market pay for such services has a documented impact on interstate commerce. Obviously, this market reality forms the rational basis for Congressional action designed to reduce the number of uninsureds.

In fact, one could opt out of the market entirely if one were so inclined. Granted, most people aren't, but a lack of religious motivation doesn't actually constitute no possible motivation at all. Regardless, even if one doesn't opt out of the health services market entirely, it's relatively easy to vary the degree to which one opts in. One individual might choose to see a doctor regularly for routine or preemptive care; another might choose to see a doctor only when very sick. Today's decision effectively declares that in order to reduce the cost of uncompensated care, the government can force individuals to buy into a particular set of benefits—it's not merely a mandate to buy any kind of insurance, but a mandate to buy insurance deemed acceptable by the government—regardless of whether that individual would've purchased that same level of benefits on his or her own. (It also ignores the minor detail that the law requires taxpayers to pay in excess of $100 billion a year to solve a $43 billion problem. More on uncompensated care here.)

So are there any limits to congressional power under the Commerce Clause? Steeh's decision points to the Supreme Court's decision to strike down the Gun-Free School Zone Act of 1990. In that case, the Court ruled that carrying a gun near a school was not, in fact, economic activity, and the government's arguments saying it was merely constituted "[piling] inference upon inference." That act, says Steeh, "was first and foremost about providing a safe environment for students in the areas surrounding their schools, as opposed to an economic regulation." It's nice to know that Judge Steeh thinks there are limits to Congressional power. It's less comforting to know that he thinks that economic inactivity—such as not purchasing health insurance—is up for grabs anyway just because it creates an economic ripple effect that could potentially touch some federal policy.

The decision is the first to rule on the constitutional merits of the new health care law. Other similar challenges are working their way through the court systems in Virginia and Florida. Expect the ruling to be appealed and one of the challenges to eventually end up in the Supreme Court.

Update: Ilya Somin fleshes out the response to the argument that the decision not to buy insurance somehow constitutes "activity": 

The problem with this reasoning is that those who choose not to buy health insurance aren't necessarily therefore going to buy the same services in other ways later. Some will, but some won't. It depends on whether or not they get sick, how severe (and how treatable their illnesses are), whether if they do get sick, they can get assistance from charity, and many other factors. In addition, some people might be able to maintain their health simply by buying services that aren't usually covered by insurance anyway, such as numerous low-cost medicines available in drug stores and the like. In such cases, they aren't really participating in the same market as insurance purchasers. Of course, many people will buy the same service later, and for some the probability of doing so is quite high. But the individual mandate makes no distinctions on any such basis. It sweeps in nearly everyone.