For over a year, Americans have debated the implication of the following sentence for the Affordable Care Act: “The Congress shall have power to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” It is known in the vernacular as the commerce clause.
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In the coming week, the commentariat will debate what this sequence of letters means among English-speaking people: “p-e-n-a-l-t-y.” Because, as an immigrant, I am still struggling with the English language, I shall absent myself from that debate.
Chief Justice John Roberts was the deciding vote on the decision to view the “penalty” to be imposed on Americans who disobey the mandate to have health insurance as a form of tax and, on that basis, declared the mandate in the health care act to be constitutional.
The penalties under the act amount to $695 per year per person (up to a maximum of $2,085 per family), or 2.5 percent of household income, which will be phased in during 2014-16. There are exemptions for individuals or families for whom these penalties would be a financial hardship.
Given these relatively low penalties, one would predict that many younger and healthier Americans will choose to remain uninsured and pay the penalties rather than insure at the community-rated premiums that force them to subsidize the health care of sicker Americans.
While the federal subsidies toward the purchase of private health insurance through the state exchanges will mitigate this effect — by substantially lowering the net premium payable by lower-income people — healthy, higher-income people without the benefit of subsidies are likely to choose just to pay the penalty, knowing that they can avail themselves of community-rated coverage in case of serious illness.
Viewed from that perspective, one could also construe the penalty under the mandate as something approximating the average per-capita actuarial cost that such individuals might impose as a group on hospitals. Such expenses — for what is known as “uncompensated care” — arise when patients without coverage are treated and released with unpaid bills. This supports the notion that the penalty is in effect a tax. (And perhaps one whose revenues should be directed back to such hospitals, as is the case with the Disproportionate Share program for hospitals that serve the poor in large numbers.)
In essence, the struggle over the mandate is merely part of this country’s struggle over a fundamental moral question: to what extent must I be my poorer brothers’ and sisters’ keepers in health care? Americans are far from united in their response to this question.
There are basically three approaches to forcing healthier and wealthier citizens to be their poorer brothers’ and sisters’ keepers in health care.
1. A tax-financed, government-run social insurance plan (Medicare, Medicaid, Canada, Taiwan, Korea or Japan) or purely socialized medicine (the National Health Service in Britain, or the Veterans Health Administration in the United States).
2. Private health insurance with community-rated premiums and guaranteed issue, with government subsidies toward insurance premiums paid by individuals on a means-tested basis (Germany, Switzerland and the Affordable Care Act of 2010).
3. Private insurance with actuarially fair premiums (based on the health status of individuals), with government subsidies set so that the net out-of-pocket and premium costs borne by the household cannot exceed X percent of household income, where X itself may rise with income.
I am not aware that the latter approach has been tried in practice, perhaps because its administrative cost might be high.
Under any of these approaches, however, many citizens would be forced to subsidize, either with taxes or premiums, the health care of others. Is that fair to libertarians, whose theory of social justice holds the sanctity of justly acquired private property to be the overarching value? They will balk at this coercion as ipso facto “unjust.” Libertarians do believe in private charity (ideally not tax-deductible charity) and are probably often charitable, but not through coerced transfers.
So what could be done to let libertarians enjoy the freedom they seek? Here is my idea of an approach.
Let us set up two distinct systems for health care within our nation. Call one the Social Solidarity system and the other the Libertarian system. Ask young people — at age 25 or so — to choose one or the other.
People joining the Social Solidarity system would know that they will be asked to subsidize their less fortunate fellow citizens in health care through taxes or premiums or both. They would also know, however, that the community will take care of them, and they will not go broke, should serious illness befall them.
People choosing the Libertarian system would not have to pay taxes to subsidize other people’s health care, and they would pay actuarially fair health insurance premiums — low for healthy people and high for sicker people.
Libertarians, however, would not be allowed to come into the Social Solidarity system, unless they were so pauperized as to qualify for Medicaid. Hospitals would have every right to use tough measures to make them pay their medical bills in full, to prevent freeloading at the expense of others.
Furthermore, care would have to be taken to prohibit the kind of estate planning that now often permits well-to-do individuals to take advantage of Medicaid benefits.
Whenever I offer this proposal in health policy debates, I am told that it is unfair to ask people to make such momentous life-cycle decisions at such a young age.
I thought so, too, until I saw young Marines come home from the battlefield. By joining the Marines — or any branch of the armed forces — young people typically face four years of active duty (and often several more years in the Reserves) in which they risk being maimed or killed.
If we routinely ask 18-year-olds to make such momentous decisions and stick by them, why could we not ask 25-year-olds to choose between a life of social solidarity or rugged individualism?
