The purpose of this blog is to get readers to think about the complex (or perhaps simple) issues I write about.

The primary topics will revolve around politics and society as a whole, but a mixture of sports opinion may be thrown in from time to time.

Tuesday, March 27, 2012

The Free-Rider, Market Regulation Argument for the Individual Mandate is a Red Herring

Today is the second of three days in which the highest court in the land will hear oral arguments as to the viability of the Patient Protection and Affordable Care Act (PPACA, or Obamacare) and its spinal cord, the "individual mandate" which dictates that on January 1, 2014 Americans will be compelled to purchase a health insurance plan or face a fine for their intransigence.

Reports emanating from the court room indicate that the Obama Administration is firmly arguing the mandate's constitutionality on the grounds that Obamacare's individual mandate is a form of market control, addressing the issue of the "free-rider" problem in healthcare. The free-ride problem, as most of the law's supporters argue is a large reason the health care law should not only pass constitutional muster, but be fully implemented.

They argue that the individual mandate is a form of market regulation that has been permissible under previous case law as determined by the Court, which seeks to eliminate or greatly reduce the amount of uninsured people defaulting to emergency rooms to receive the medical care they require. They argue that this type of care brings a heavy financial burden to the economy as a whole, and that part of the reason health insurance premiums are incredibly high is that we all are paying for these "free riders."

This argument doesn't even come close to holding its own weight in medical gauze with me, and I doubt it does for several of the Supreme Court Justices. Here's why.

Emergency rooms are only required under current law (including PPACA) to provide emergency medicine. The law does not dictate that ERs everywhere must provide the type of care most of those with a competitive health insurance are typically seeking at a general practitioner's office. In this instance alone, the individual mandate is an outlandishly over-broad remedy to a minor problem.

The free-rider "problem" is highly inflated by supporters of the law (read: individual mandate) so as to make the mandate seem a necessary remedy. Under welfare systems, free-riding is when an individual is consuming a public good without contributing to the cost of producing that public good. The catch is that everyone has the temptation to free ride, as a result contributions to the cost of producing the good or service would plummet and the market will inevitably slow its production of that good to a halt.

The issue at hand is that in our economy, health care is not a public good. Public goods are made available when two conditions are satisfied. First, consumption of the proposed good must not come with rivalry among those seeking it, i.e. my consumption of the good won't limit your consumption of the good. Second, the good must come with no exclusions, i.e. someone cannot be precluded from having access to the good's consumption.

Again, in our economy, health care is not a public good. Doctors, hospitals or clinics could or can exclude people from having access to their services without paying for them by refusing the desired services altogether. In our economy, health care is not without rivalry. If I have a bad broken leg, and am awaiting an MRI, a doctor could spend hours with me, sacrificing his time and resources to adequately treat your potentially broken pelvis.

"Free-riders" then, are not a result of market failure, but of a process of government regulations born from the desire to turn health care into a public good. Knowing this, why on earth would anyone want the government to impose a mandate that would serve to further the problem of the free-rider, rather than actually address it?

Supporters of the mandate who argue that it is necessary to address this market issue are performing a rhetorical magic trick. The argument conflates two separate markets by saying that a problem in health care must be addressed by regulating health insurance. Your health insurance policy will never make you healthy, just as it can never make you sick (ok, well maybe its cost...).

This all goes without mentioning the everlasting affect this mandate would then have on all markets as there is absolutely NO limiting principle attached to PPACA after it's been heard by the Court. If the mandate is upheld on this argument, the government will thus be able to regulate any market devoid of problems itself while having a tenuous connection with a separate market where a perceived problem exists.

To close, let me try to put in prospective how serious a decision this is. If the mandate is ruled constitutional on these grounds, If Congress, you know, the elected body that only 8% of Americans approve of, had the power to use the Commerce Clause to regulate any failure to buy a product that has a perceived positive economic effect on the grounds that not buying that product has an economic effect, there would literally be no limits to its power.

Using elementary logic, we know that a decision made to do anything is inherently a decision not to do something else, and the decision might have an economic effect. My choice to come to work at 8am is also a choice not to play video games in my basement, or use the time to go buy myself a new video game.

The lower court's opinion on this case sums everything up in one fell swoop: "the government's position amounts to an argument that the mere fact of an individual's existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life." If this is the view the Court holds, expect to get your wallets ready for a lot of other required purchases in the future. 

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