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Jun 29 2012

The Supreme Court’s Decision on the Health Care Law

Though I was pleasantly surprised by the U.S. Supreme Court’s ruling on President Obama’s Affordable Care Act (ACA), I remain utterly dumbfounded by the decision’s refusal to affirm the constitutionality of the individual mandate on the basis of the powers granted to Congress by the Commerce Clause.  Embarrassingly, it is further evidence that the justices really do think that the market for health care is like the market for broccoli or a Chevy Volt (thank you Justices Alito and Scalia).  They don’t really understand market failure due to adverse selection and the cost-shifting externalities created by the free-riding behavior of those individuals who choose not to purchase insurance.  If hundreds of people choose not to buy broccoli or cars, there would be no significant impacts on either broccoli prices or car prices.  On the other hand, if hundreds of healthy people choose not to purchase health insurance, the insurance pool is now populated by sicker people and premiums rise.  If some fraction of these uninsured healthy people happen to have an accident or unexpectedly get sick, they can get health care without paying for it.  Hospitals and other health care providers eat the costs and prices and premiums eventually rise.  The choice not to participate in the health insurance market ultimately shifts costs onto the other participants in both the health insurance and health care markets.  This does not, repeat, does not, happen in the markets for broccoli or cars or shampoo or arugula or chicken or pork rinds! 

Commerce takes place through markets.  When markets fail, commerce fails.  When markets are inefficient, commerce is inefficient.  And when these failures and inefficiencies are pervasive and serious enough, as they are in the health care market, the enactment of laws/policies to deal effectively with them is a legitimate function of the Congress.  Of course, this point is not lost on only Supreme Court Justices.  It is most certainly lost on Congressional Republicans who continue their moronic characterization of the ACA as left-wing socialism, something that unfortunately resonates with a large proportion of the American public, and who continue to peddle their “free-market” solutions to our health care problems.

0 comments - Posted by Ernest Zampelli at 2:11 PM - Categories: