More About the Individual Health Insurance Mandate

After my post yesterday I spent some more time reading opinions about the Individual Health Insurance Mandate. A couple almost had me convinced, but after I shook my head and cleared my eyes of the hypnotized look I came back to reality.

One of the principle uses of the commerce clause to defend the mandate is that even if you don’t have health insurance you affect interstate commerce when you pay out of pocket. You are not part of a pool to keep costs down yet you still contribute to the demand for health insurance. Therefore the Government can require you to join a private health insurance plan where you become part of a risk pool and the cost of health care is spread out by premiums, thus the group as a whole benefits and that is good for everyone.

The penalty is defended as a tax penalty. Which is allowable under the government’s taxation authority. That one almost had me convinced.

As far as the commerce clause goes, there is just one problem. When you purchase health care in a state, you are not engaging in interstate commerce. When you purchase health insurance, you are not engaging in interstate commerce. The states control the health insurance companies in their own state, and health insurance companies are prohibited by the Federal Government from selling across state lines. So how do I affect interstate commerce when I pay out of pocket?

One of the examples about interstate commerce is a case involving a wheat grower, Roscoe Filburn who grew wheat for his own consumption above his allowed quota. Back in the 1930s, the price of wheat had dropped to all time lows. Farmers were growing wheat faster than it could be sold. Storehouses were filled up, railroad companies were rejecting shipment, and thus supply was outstripping demand. This was a problem around the world and the price of wheat globally was in decline. Therefore, to make money, farmers had to grow more wheat, and thus the price dropped more because they couldn’t sell it.

To combat the problem, the Federal Government put quotas in place to limit the amount of wheat grown and raise the price of wheat through the Agricultural Adjustment Act of 1938. Well, Filburn decided to grow wheat for his own consumption and keep it apart from the wheat he wanted to sell in the market under the quota system. He was allowed to grow 20.1 bushels on 11.1 acres, but grew on 23 acres. He was taken to court in Wickard v. Filburn, and it went all the way to the Supreme Court, and the Supreme Court ruled that even though he was growing wheat for his own consumption, it still affected interstate commerce because he was growing wheat for himself instead of buying it from the market. If everyone did that, than the controls the government put in place to raise the price of wheat would be useless and the price of wheat would continue to drop.

This example is used to support the individual mandate, because if you buy health insurance out of pocket you are buying health care that you would otherwise get through insurance, and thus you are affecting the price of health care to the insured. Your additional demand for healthcare contributes to rising costs.

The difference between these two examples is that in Filburn’s case, the government was trying to control supply. In the health care example, they are trying to control demand.

One point I have and others have raised is, can the government compel you to buy a product because failure to do so negatively impacts interstate commerce? General Motors is often used as an example. General Motors, as we know, went bankrupt. The reason was, they could not sell enough vehicles to keep up with the cost to make them. Very simple economics, if I make a product I need to sell enough of it to make up the cost, if it costs more to make a product than to sell it, then I go out of business. That’s what happened to General Motors.

Instead of bailing out General Motors, what if the government had instead told all of us to go buy a new car. Your failure to buy a new car from General Motors negatively impacts interstate commerce. Because you are driving around in a used car or a foreign car, General Motors stands to go out of business, which would affect their employees, their suppliers, the suppliers to the suppliers, and so on down the line. It would devastate the economy. So the Government will compel you to buy a new car from General Motors, and if you can’t afford one, they will subsidize it. They’ll create new taxes to pay for it, they’ll have a real Cadillac tax, and they’ll even tell you the minimum type of vehicle you must own. And they’ll tell General Motors what type of vehicles they have to make. And you’ll be required to buy a new care every three years, and it’ll be great. It will stimulate the economy and drive new technologies, and we’ll all be better for it. And if you don’t buy a new car, you’ll pay a tax penalty to the IRS, and the IRS will be setup to know when you have bought a new car and how long you’ve driven your current one. They can get it from State Departments of Motor Vehicles.

So what the government is doing in that example is they are using you to manage the economy. That throws the ideas of free commerce on its head. It’s not the governments role to tell you what product you must buy and from whom and threaten you with penalties if you don’t. It’s your role to decide for yourself what goods and services you want and can afford to buy. It’s the role of suppliers to attract you to buy their product and manage their costs to make a profit. But what’s happening here with health care is the Federal Government is ordering you to buy healthcare regardless of it’s cost, regardless of if you want it, regardless of the insurance industries ability to control costs and attract you to buy product. Now you will not have a choice. The government will tell you the minimum product you must buy and you will have to buy it. Is there anything more backwards than that?

As for the penalty, I have read other people’s writing saying it’s just a tax. If you don’t have insurance, you’ll just pay more in tax. No where in the bill is the penalty defined as a tax or a tax penalty. It is called a penalty, that’s it. I also saw someone say that the bill doesn’t require you to buy health insurance. Well that person apparently didn’t read the bill. Here is what the bill says;

Subtitle F—Shared Responsibility for
Health Care
PART I—INDIVIDUAL RESPONSIBILITY
SEC. 1501. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.
(b) IN GENERAL.—Subtitle D of the Internal Revenue Code
of 1986 is amended by adding at the end the following new chapter:
‘‘CHAPTER 48—MAINTENANCE OF MINIMUM ESSENTIAL
COVERAGE
‘‘Sec. 5000A. Requirement to maintain minimum essential coverage.
‘‘SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.
‘‘(a) REQUIREMENT TO MAINTAIN MINIMUM ESSENTIAL COVERAGE.—
An applicable individual shall for each month beginning
after 2013 ensure that the individual, and any dependent of the
individual who is an applicable individual, is covered under minimum
essential coverage for such month.
‘‘(b) SHARED RESPONSIBILITY PAYMENT.—
‘‘(1) IN GENERAL.—If an applicable individual fails to meet
the requirement of subsection (a) for 1 or more months during
any calendar year beginning after 2013, then, except as provided
in subsection (d), there is hereby imposed a penalty
with respect to the individual in the amount determined under
subsection (c).
‘‘(2) INCLUSION WITH RETURN.—Any penalty imposed by
this section with respect to any month shall be included with
a taxpayer’s return under chapter 1 for the taxable year which
includes such month.
‘‘(3) PAYMENT OF PENALTY.—If an individual with respect
to whom a penalty is imposed by this section for any month—
‘‘(A) is a dependent (as defined in section 152) of
another taxpayer for the other taxpayer’s taxable year
including such month, such other taxpayer shall be liable
for such penalty, or
‘‘(B) files a joint return for the taxable year including
such month, such individual and the spouse of such individual
shall be jointly liable for such penalty.


With that said, I’ll repeat what I’ve been saying about this requirement. If this is Constitutional, then it represents the greatest threat to liberty and freedom we know. It will give the National Government unprecedented power to compel its citizens to engage in commerce, something it has never done in history. If this remains law it only represents the beginning of what the current Congress and Administration are prepared to do. There is no telling how far they will take this new power.

Extremus.