Dean Baker
The Hankyoreh
(South Korea), April 2012

Last month the U.S. Supreme Court heard oral arguments over the constitutionality of the Obama health care plan. Its ruling in June could have enormous consequences for the future of health care in the United States.

There were a number of issues raised in the case, but the most contentious issue is the mandate that requires that everyone not covered by either employer-provided insurance or a government insurance policy will have to buy their insurance policy. Those who refuse will be subject to a modest penalty.

Many opponents of the health care bill argued that requiring that people buy insurance oversteps the limits of government action. While the government can clearly tax people to pay for health care, as it does for the government health care programs that already exist, the question raised in the oral arguments was whether the government has the power to force people to buy insurance.

Judging by the questions raised in oral arguments, it appears that the Republican majority of five judges are likely to rule that it does not have this authority. Most of the court experts who followed the arguments held the view that the even the most moderate of the Republican judges was likely to rule that the mandate was not constitutional.

If the Court does rule against the mandate then there is still a question as to whether it leaves the rest of the law in place or strikes it down in its entirety. The latter would be a radical step for a court that has traditionally tried to defer to the political process as much as possible.

It would be especially ironic if a court that is dominated by conservative Republicans were to go this route. Conservatives have long complained about “judicial activism,” by which they meant courts that over-ruled legislation passed by democratically elected legislatures at either the state or federal level.

Striking down the law in its entirety would mean over-riding a huge legislative achievement that was debated extensively both inside and outside Congress. This would appear to be judicial activism taken to a new extreme.

Nonetheless, no one would rule out the possibility that the Republican judges on the court go this route. In the last decade, the Court has often appeared more partisan than principled, most notably when it ruled for George W. Bush in the case that decided the 2000 election.

However, there is a good chance that the Court may rule more narrowly and simply declare the mandate unconstitutional and leave the rest of the law intact. This would create an important, but solvable problem.

One of the most important provisions of the Obama plan was to prohibit insurers from discriminating against people based on pre-existing conditions. This means that insurers have to even accept people with serious illnesses (e.g. cancer and heart disease) and charge them the same rate as anyone else their age.

This solves the problem of sicker people being unable to buy affordable insurance, but it creates a risk of freeriding. The incentive under this system would be for healthy people to pay their medical expenses out of pocket and only sign up for insurance if they develop a serious illness.

If everyone acted this way, it would soon destroy the insurance market. The only people who would sign up for insurance would be people with serious illnesses. This would make insurance extremely expensive so that no one could afford it.

A mandate is one way to avoid this problem. However there are other mechanisms that could be almost as effective. For example, there can be penalties in the form of higher prices if people delay getting insurance when it is first offered. This could mean that a person who waits five years to buy a policy may pay 80 or 100 percent more than someone who had remained insured the whole time.

The exclusion of pre-existing conditions would not have to apply to people who delay buying insurance. This way, if you try to game the system and end up getting cancer, you find that the insurance you can buy will not cover your cancer treatment. Or, to take a less harsh version of the same approach, people can be forced to have a waiting period of 3-6 months before their insurance takes effect if they delay buying it when it is first offered.

There are many ways in which a system of penalties and incentives can be structured to limit the extent of gaming of the new insurance system. If the Court strikes down the mandate but leaves the rest of the bill intact, presumably the next Congress will focus on constructing the best, or at least most politically viable mix of such policies.

On the other hand, if the Court strikes down the bill in its entirety, health care reform is back at square one. It may end being a long time before the country gets anything resembling universal access to health care.