June 12 2012
by Todd Hixon
- Tagged under
Yes Virginia, Health Insurance Is Different From Broccoli
The Supreme Court will soon rule on challenges to the Affordable Care Act (“ACA”). The central questions before the Court are: 1) is the “Individual Mandate” which requires every U.S. resident to purchase health insurance or pay a fine unconstitutional, and 2) if yes, does the entire ACA need to be struck down and sent back to Congress, or only parts of it?
Virginia and 25 other states challenging the law argue that the requirement that all Americans buy health insurance — known as the ‘individual mandate’ — is unconstitutional. This legal wrangling does nothing to solve the health care problem. Health care is becoming unaffordable for the country as a whole, which means that, as health care costs climb from 17% of GDP in 2010 to 20%+ in 2020, people in lower income brackets get squeezed progressively out of the health care system (except for the very poor, who qualify for Medicaid). The rest get paupered (more).
At the current cost levels, the only way to have an inclusive health care system is for everyone to share the cost (we can argue about who pays how much); every other advanced country takes this approach. In the ACA, the individual mandate together with the rules about how much premium discrimination can occur do this: everyone including the young, healthy “invincibles” (or, as some say, “generation Y-bother”) makes a contribution. On this basis, broad coverage can be achieved and, with subsidies, insurance cost is held to 10% of income.
The legal debate is whether requiring a person to purchase insurance exceeds Congress’ constitutional authority to regulate “interstate commerce”: “it would be like requiring everyone to purchase broccoli”. I’m no lawyer, but the difference is clear to me: broccoli is an inexpensive veggie that you can choose to eat or not. Health care is a complex national system that is so vital and expensive, it has been a national issue for a generation. The federal government clearly has authority to tax and spend. It could finance inclusive health via a single payer approach. The ACA tries to achieve the same end by extending the existing system of private insurance and employer sponsorship, because most people are comfortable with their health care and don’t want to change. The real debate should be: what’s the best way to fund inclusive health care?
And, none of the Capitol Hill players (including the Supremes) here are talking about the submerged part of the iceberg: cost reform. A major force that makes U.S. health care expensive is state-by-state regulation of major parts of the system such as health insurance and professional licensing: this reduces competition by keeping out efficient national providers and/or adds the cost of regulatory compliance in every state. And, it helps makes health care markets oligopolistic: even in a large region like Boston (#10 U.S. metro area), two big hospital organizations and a three big insurers dominate the health care economy. Here’s a legal issue to which Congress and the Court could add value. Regrettably, the debate is focused on fine legal distinctions.
Our health care system and because of it our entire economy are at a watershed. Winston Churchill had wonderful words for such situations, like: “These are the times that try men’s souls.” (Those were more sexist times.) His observation on our health care legal drama in the Supreme Court might be: “Never have so few … done so little … for so many.”
This post first appeared at blogs.forbes.com/toddhixon.