Archives For constitutional law

For those who follow these things (and for those who don’t but should!), Eric Goldman just posted an excellent short essay on Section 230 immunity and account terminations.

Here’s the abstract:

An online provider’s termination of a user’s online account can be a major-and potentially even life-changing-event for the user. Account termination exiles the user from a virtual place the user wanted to be; termination disrupts any social network relationship ties in that venue, and prevents the user from sending or receiving messages there; and the user loses any virtual assets in the account, which could be anything from archived emails to accumulated game assets. The effects of account termination are especially acute in virtual worlds, where dedicated users may be spending a majority of their waking hours or have aggregated substantial in-game wealth. However, the problem arises in all online environments (including email, social networking and web hosting) where account termination disrupts investments made by users.

Because of the potentially significant consequences from online user account termination, user-rights advocates, especially in the virtual world context, have sought legal restrictions on online providers’ discretion to terminate users. However, these efforts are largely misdirected because of 47 U.S.C. §230(c)(2) (“Section 230(c)(2)”), a federal statutory immunity. This essay, written in conjunction with an April 2011 symposium at UC Irvine entitled “Governing the Magic Circle: Regulation of Virtual Worlds,” explains Section 230(c)(2)’s role in immunizing online providers’ decisions to terminate user accounts. It also explains why this immunity is sound policy.

But the meat of the essay (at least the normative part of the essay) is this:

Online user communities inevitably require at least some provider intervention. At times, users need “protection” from other users. The provider can give users self-help tools to reduce their reliance on the online provider’s intervention, but technological tools cannot ameliorate all community-damaging conduct by determined users. Eventually, the online provider needs to curb a rogue user’s behavior to protect the rest of the community. Alternatively, a provider may need to respond to users who are jeopardizing the site’s security or technical infrastructure. . . .  Section 230(c)(2) provides substantial legal certainty to online providers who police their premises and ensure the community’s stability when intervention is necessary.

* * *

Thus, marketplace incentives work unexpectedly well to discipline online providers from capriciously wielding their termination power. This is true even if many users face substantial nonrecoupable or switching costs, both financially and in terms of their social networks. Some users, both existing and prospective, can be swayed by the online provider’s capriciousness—and by the provider’s willingness to oust problem users who are disrupting the community. The online provider’s desire to keep these swayable users often can provide enough financial incentives for the online provider to make good choices.

Thus, broadly conceived, § 230(c)(2) removes legal regulation of an online provider’s account termination, making the marketplace the main governance mechanism over an online provider’s choices. Fortunately, the marketplace is effective enough to discipline those choices.

Eric doesn’t talk explicitly here about property rights and transaction costs, but that’s what he’s talking about.  Well-worth reading as a short, clear, informative introduction to this extremely important topic.

A couple of weeks ago, I argued that the Supreme Court’s decision upholding the constitutionality of the Affordable Care Act will ultimately doom the Act to failure. The problem, I argued, is that the ACA’s guaranteed issue and community rating provisions create a perverse incentive for young, healthy people not to buy insurance until they need it, and the Supreme Court’s reasoning that the penalty for failure to carry insurance is a “tax” because it is small relative to the price of insurance precludes Congress from increasing the no-insurance penalty to the point at which it prevents young, healthy people from dropping coverage. As those folks remove themselves from the pool of insureds, insurance premiums (reflective of the per capita expected health care costs of the covered population) will rise, leading even more relatively healthy people to exit the pool and thereby exacerbating the “healthy flight” problem. In short, guaranteed issue (i.e., insurers have to insure you regardless of your health) + community rating (i.e., insurers can’t charge you more if you’re sick) + constitutionally limited low penalties for failure to carry insurance (a result of the Supreme Court’s reasoning in NFIB v. Sebelius) = adverse selection that will drive insurance premiums through the roof.

Some readers noted flaws in my analysis. One correctly observed that I had ignored the premium support subsidies the ACA provides for lower- and middle-income people (those earning from 1.33 to four times the Federal Poverty Level). Those subsidies may prevent many younger, healthier people from failing to buy or dropping coverage because the no-insurance penalty will exceed the out-of-pocket cost of insurance (i.e., the policy price minus the amount of the federal subsidy). Someone else observed that I had ignored the ACA’s employer mandate, which requires employers with more than 50 employees to provide insurance coverage or else pay a penalty for each employee that buys her own subsidized insurance on a state exchange. Since most people get their insurance coverage through their employers—an unfortunate result of the federal tax code—perverse incentives in the individual insurance market might not be that significant.

Unfortunately, neither the ACA’s premium support subsidies nor its employer mandate will save the Act from failure. Here’s why:

Premium Support Subsidies

The ACA’s premium support subsidies are unlikely to prevent substantial “healthy flight” for two reasons. First, they’re too small. When a young, healthy person is deciding whether to buy insurance now or to hold off, pay the penalty, and sign up for coverage when her family needs it, she will compare the no-insurance penalty with her out-of-pocket expense for a subsidized policy. If the penalty exceeds out-of-pocket expenses (policy price minus available subsidies), then it makes sense to purchase insurance. Otherwise, it makes sense to pay the “tax” until insurance coverage is needed, at which point it will be available (guaranteed issue) at rates not reflecting the family’s particular health care needs (community rating). To assess the risk of adverse selection, then, we must consider the magnitude of penalties, expected insurance premiums, and available subsidies.

The ACA provides that the penalty for failure to purchase insurance shall be the greater of:

  • A flat dollar amount per person (for adults, $95 in 2014, $325 in 2015, $695 in 2016 and beyond, adjusted for inflation; for children, half the adult penalty), with the flat amount per family never exceeding three times the adult amount; or
  • A percentage of income (1% in 2014, 2% in 2015, and 2.5% in 2016 and beyond) above the tax-filing threshold (estimated to be around $10,250 for single filers and $20,500 for joint filers in 2016).

For four-person families eligible for premium support subsidies (those earning from 133% to 400% FPL), the flat rate will always exceed the income percentage, so the maximum penalty will be $2,085 (adjusted for inflation from 2016 dollars). Insurance premiums will be substantially higher than that amount. According to Kaiser Family Foundation estimates, the 2014 price of “silver level” (70% actuarial value) insurance coverage for a family of four living in a moderate cost region will range from $10,108 for a family headed by a 30 year-old to $19,750 for a family headed by a 55 year-old. Since the ACA mandates only “bronze level” (60% actuarial value) coverage, so we can estimate prices of qualifying policies to be about 86% (60/70) of those levels, or from $8,693 for the 30 year-old’s family to $16,985 for the family of the 55 year-old.

The important comparison, however, is between the penalty amount ($2,085) and the subsidized price of qualifying insurance. For qualifying individuals and families, the ACA lavishes generous subsidies that are inversely related to income. Even after accounting for available subsidies, though, most families will find it more advantageous to pay the penalty than to purchase insurance.

The following table, based on Kaiser’s Health Reform Subsidy Calculator, shows for different family income levels the maximum income percentage and out-of-pocket dollars the family would have to pay for subsidized insurance, the percentage difference in outlays for the family’s two options (buy insurance or pay penalty), and the family’s likely decision (buy or don’t buy):

 Family   income

Maximum % of income to be spent on insurance

Maximum dollar amount to be spent on insurance

Comparison of insurance expenses
vs. penalty

Likely decision

$35,000

3.97%

$1,388

 Penalty is 50% more than ins.

Buy

$40,000

4.96%

$1,982

 Penalty is 5.2% more than ins.

Buy

$45,000

5.94%

$2,672

 Ins outlays are 1.28 times penalty amount.

Don’t buy

$50,000

6.77%

$3,385

 Ins outlays are 1.62 times penalty amount.

Don’t buy

$55,000

7.52%

$4,135

 Ins outlays are 1.98 times penalty amount.

Don’t buy

$60,000

8.23%

$4,937

 Ins outlays are 2.36 times penalty amount.

Don’t buy

$65,000

8.85%

$5,751

 Ins outlays are 2.76 times penalty amount.

Don’t buy

$70,000

9.47%

$6,626

 Ins outlays are 3.18 times penalty amount.

Don’t buy

$75,000

9.50%

$7,125

 Ins outlays are 3.42 times penalty amount.

Don’t buy

$80,000

9.50%

$7,600

 Ins outlays are 3.65 times penalty amount.

Don’t buy

$85,000

9.50%

$8,075

 Ins outlays are 3.87 times penalty amount.

Don’t buy

$90,000

9.50%

$8,550

 Ins outlays are 4.1 times penalty amount.

Don’t buy

$95,000

No maximum.

Policy cost

 Ins outlays (dependent on ages) significantly exceed penalty amount.

Don’t buy

$100,000

No maximum.

Policy cost

 Ins outlays (dependent on ages) significantly exceed penalty amount.

Don’t buy

 

As the table reveals, at all but the lowest income levels it makes more sense for healthy families to refrain from purchasing insurance and pay the penalty until insurance coverage is needed. In fact, until 2016, even families with the lowest two income levels on the table would be better off foregoing insurance purchases. Because the no-insurance penalties are phased in between 2014 and 2016 (they’re only $285 in 2014 and $975 in 2015), they are initially less than the out-of-pocket cost of a qualifying insurance policy. It is likely, then, that even low-income healthy families will drop out of the insurance pool in 2014 and 2015, driving up insurance premiums for those remaining in the pool.

In addition to being too small, the ACA’s premium subsidies may not be available in many states. As Jonathan Adler and Michael Cannon have demonstrated, the text of the ACA provides for premium support subsidies only on purchases made through exchanges that the states establish.  While proponents of the ACA presumably assumed that all states would voluntarily establish such exchanges so as to make subsidies available to their citizens, a great many states (36 at this point) either have declared an intention not to set up a state exchange or have made little movement in the direction of doing so. The IRS has taken the position that the subsidies should also be available through federal exchanges set up as a “fallback” in states that do not establish their own. It insists that expanding the subsidies is consistent with the purpose of the statute. But that’s far from clear. As Adler and Cannon show, the ACA’s legislative history suggests that Congress deliberately provided subsidies only through state-established exchanges in order to encourage states to set up and manage such exchanges.  In any event, the statutory language limits subsidies to state exchanges, and courts are generally loathe to exalt a statute’s purported purpose over its clear text, particularly when congressional intent is ambiguous.

Because the premium support subsidies (1) are too small and (2) may not be available in many states, they’re unlikely to correct the adverse selection problem resulting from the toxic combination of guaranteed issue, community rating, and constitutionally constrained low penalties for failure to purchase health insurance.

The Employer Mandate

But what about the fact that the ACA penalizes employers who fail to provide insurance coverage for their workers? Won’t that be enough to prevent large numbers of young, healthy people from failing to purchase or dropping health insurance? No, because the ACA’s subsidy provisions actually encourage employers to drop health plans for lower-income employees, many of whom will not be motivated to purchase insurance on their own.

As we’ve frequently discussed, the federal tax code currently exempts employer-provided health insurance benefits from taxation.  That exemption, which does not apply to individually purchased health insurance, amounts to an implicit subsidy percentage equal to the payroll tax rate plus the recipient employee’s marginal income tax rate. Because high-income workers are subject to higher marginal tax rates than are lower-income workers, the subsidy is greatest for them. Moreover, workers earning more than 400% of FPL will get no subsidy to buy insurance if their employer stops providing it.  Lower-income workers, by contrast, get less of an implicit subsidy for employer-provided health insurance, are eligible for more generous subsidies on state exchanges if their employer does not provide health insurance benefits, and would therefore prefer to work for employers that do not offer such benefits. Employers competing for workers will respond to these preferences.

Consider, for example, a previously uninsured 45 year-old who earns $35,000 and is required by the ACA to purchase a family insurance policy expected to cost around $15,000 in 2016.  If the employer provides the policy, the cash component of the employee’s compensation will fall to $20,000 (benefits generally being a dollar-for-dollar substitute for wages). The employee, however, will not have to pay the approximately $3,400 in federal income, Social Security, and Medicare taxes that would otherwise be due on the $15,000 received as insurance rather than cash.  On the other hand, if the employer does not provide health insurance and the employee purchases it on a state exchange, the employee will be eligible for a federal subsidy worth around $13,600.  Given the choice between a $3,400 implicit tax subsidy and a $13,600 subsidy on the exchange, the employee would prefer the latter. Now, if the employer employed more than 50 workers and failed to provide coverage, it would be charged a penalty of $2,000 for each worker that purchased subsidized insurance (after the first 30 workers).  It would likely choose to pay that penalty, however. It could finance the payment by reducing the employee’s salary by $2,000, and the employee would gladly agree to that arrangement. Even after having his salary diminished by $2,000, the employee would be better off gaining access to the larger government subsidy available only to individuals without employer-provided coverage.

But this analysis shows merely that the ACA encourages employers to drop coverage for lower-income workers. Won’t those workers turn around and purchase subsidized policies on the state exchanges? Perhaps not. For many of those workers, it will make more sense to pay the penalty and wait until health care is needed before purchasing insurance.  A one-income family of four headed by a 40 year-old earning $50,000, for example, would have to pay $3,385 for qualifying insurance or incur a no-insurance penalty of $2,085,  and it could always purchase insurance on a state exchange—with a $9,900 subsidy—the moment coverage became necessary. Such a family’s income level is low enough that the family is better off without employer coverage yet high enough that the family’s out-of-pocket insurance expenses will exceed the no-insurance penalty. Families in this situation can be expected both to lose employer coverage and to refrain from purchasing insurance on a state exchange.

Of course, all this assumes that premium subsidies are indeed available. For the reasons Adler and Cannon set forth, the ACA seems not to authorize such subsidies in states that fail to establish exchanges and instead rely on the federal government to do so.  Employers in such states would have less incentive to drop coverage for low-income employees, but lower income citizens who do not have employer-provided health insurance would not be likely to purchase insurance in such states, where the difference between the non-coverage penalty and the out-of-pocket cost of insurance (without subsidies) would be quite large.

In the end, then, neither the ACA’s premium support subsidies nor its employer mandate is sufficient to prevent the pernicious adverse selection cycle that results from combining guaranteed issue, community rating, and constitutionally limited deficient penalties for failure to carry insurance.

There’s great irony in Chief Justice Roberts’ reasoning in the recent Affordable Care Act ruling.  In reading the ACA to impose a tax for failure to carry health insurance, thereby assuring the Act’s constitutionality, Justice Roberts also doomed the Act to failure.  Let me explain.

As the government repeatedly stressed, the individual mandate (now interpreted as a disjunctive order either to carry health insurance or to pay a “tax”) is necessary because of two “popular” provisions of the ACA: guaranteed issue (i.e., insurance companies are not allowed to deny or drop coverage because of preexisting conditions) and community rating (i.e., insurance companies must set common rates and can’t charge higher premiums to sick people or those susceptible to sickness). Taken together, those two provisions create a terribly perverse incentive for young, healthy people:  Don’t buy health insurance until you get sick!  After all, you can always sign up immediately upon becoming ill or injured (thanks to guaranteed issue), and (thanks to community rating) the insurer can’t charge you a higher price reflective of the greater likelihood — certainty, really — that you’ll make big claims.  To prevent young, healthy people from dropping their insurance, thereby leaving only the older and infirm in the pool of premium-paying insureds, the law must create incentives for them to buy insurance.  The penalty-backed individual mandate was ostensibly designed to do so.

But there’s a problem: penalties don’t deter if they’re set too low.  If a parking meter costs a dollar, but the penalty for not feeding the meter is only a quarter, who’s going to feed the meter?  Unless the expected penalty for an expired meter (the fine times the likelihood of detection) exceeds a buck, feeding the meter’s irrational.

What does this have to do with the ACA?  Well, the statutory penalty for not carrying health insurance is really low — way lower than the cost of insurance.  As Justice Roberts observed:

[I]ndividuals making $35,000 a year are expected to owe the IRS about $60 for any month in which they do not have health insurance. Someone with an annual income of $100,000 a year would likely owe about $200. The price of a qualifying insurance policy is projected to be around $400 per month.

So what is the young man or woman, fresh out of college and beginning a career, going to do — pay the $400/month or pay $60/month until he or she gets sick, at which point he/she can call up the insurance company and be assured of coverage (guaranteed issue) at rates not reflecting his/her impaired health (community rating)?  Surely a great many young people will take the latter tack, especially since — as Justice Roberts repeatedly emphasized — they’re not acting “unlawfully” in doing so.

Then we’ve got real problems.  Health insurance premiums are based on the likely health care expenditures of the pool of insureds.  The greater the percentage of young and healthy (low expenditure) folks in the pool, the lower the premiums.  Conversely, when the young and healthy drop out so that the pool of insureds is older and more infirm, premiums will rise.  And, of course, the higher insurance premiums rise, the more sensible it becomes for the relatively healthy to drop their insurance, pay the small “tax” instead, and wait to get sick before signing up for increasingly costly coverage.  It’s a pernicious cycle.

None of this is rocket science, and proponents of the ACA certainly understood these dangers when the statute was enacted.  They likely assumed, though, that the deficient penalties for failure to carry insurance were a “bug” that Congress would eventually fix once the Act was put in place and became operative.  Proponents needed for the penalties to be low so that they could get the statute through the political process; they figured they could fix the deficiencies later.

Justice Roberts’ opinion, though, will make it very hard for Congress to raise the penalty for not carrying health insurance.  The small size of the penalty was one of three factors that, according to the Chief Justice, transformed the penalty into a tax for constitutional purposes.  He explained:

[T]he shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more.  It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the “prohibitory” financial punishment in Drexel Furniture. Second, the individual mandate contains no scienter requirement. Third, the payment is collected solely by the IRS through the normal means of taxation — except that the Service is not allowed to use those means most suggestive of a punitive sanction, such as criminal prosecution.

This reasoning suggests that the penalty for failure to carry health insurance can count as a tax for constitutional purposes only if it is kept so small as to be ineffective.  Justice Roberts has thus transformed what was effectively a “bug” in the ACA into a “feature” of the statute — one that is required for the Act to constitute a valid exercise of congressional power.  He has damned the ACA in the process of saving it.

But market-oriented folks shouldn’t rejoice.  It’s true that Justice Roberts’ reasoning has assured that the ACA, if not repealed, will implode. That will occur because the combination of guaranteed issue, community rating, and constitutionally required low penalties will drive young and healthy folks from the pool of insureds, causing health insurance premiums to spiral upward and inducing even more people to opt for the “tax” over costly coverage.  Congress will eventually have no choice but to restructure or repeal the Act.  But its replacement won’t be pretty.  Look out for the argument, “We tried a solution involving private insurance.  It failed.  Now our only option is a single-payer system.”

Justice Roberts’ decision may turn out to have been an even bigger gift to the left than anyone initially thought.

Here’s a Letter to the Editor I sent to the Wall Street Journal today:

Dear Editor:

Today’s front page article, “GOP’s New Health-Law Front,” states that the Supreme Court’s Affordable Care Act ruling  “circumvented the issue of whether the law was proper under Congress’s constitutional right to regulate commerce among the states.”  That is incorrect.  Chief Justice Roberts’ opinion emphasized that he construed the penalty for failure to carry insurance as a tax only because doing so was necessary to sustain the Act’s constitutionality.  Had the Commerce Clause authorized the individual mandate, the Chief Justice would not have endorsed what he conceded was not “the most straightforward reading of the mandate.”  The Chief Justice’s conclusion that the individual mandate exceeded Congress’s powers under the Commerce Clause–a conclusion also reached by dissenting Justices Scalia, Kennedy, Thomas, and Alito–was therefore necessary to the majority coalition’s conclusion that the penalty for failure to carry insurance was authorized by Congress’s power of taxation.  That makes it part of the Court’s holding and thus binding constitutional precedent.  While your editorial, “A Vast New Taxing Power,” correctly chides the Chief Justice for improperly expanding Congress’s taxation powers, you must give him credit for preventing a Commerce Clause ruling that would have eviscerated the notion of enumerated powers by granting Congress a general police power.

Sincerely,

Thom Lambert
Professor of Law
University of Missouri Law School
Columbia, Missouri

President Eisenhower appointed Earl Warren to the Supreme Court thinking that Warren was a conservative.  Of course,Warren turned out to be a very liberal Justice.  Eisenhower later said that appointing Warren was the biggest mistake of his presidency.

Is John Roberts the Earl Warren of this century?

In today’s New York Times, Richard Thaler argues that the Constitutional “slippery slope” argument in the Obamacare case (“Today health care, tomorrow broccoli”) is misguided.  This is a strange argument in this particular case.  We must remember that all of today’s commerce clause jurisprudence (which everyone agrees has greatly expanded the power of the Federal government to regulate economic activity) rests on Wickard v. Filburn, a 1942 case involving a small wheat and chicken farmer in Ohio.  If ever there was a slippery slope, this is it, and it seems rational to fear another in the same Constitutional line.

Imagine if you picked up your morning paper to read that one of your astronomy professors had publicly questioned whether the earth, in fact, revolves around the sun.  Or suppose that one of your economics professors was quoted as saying that consumers would purchase more gasoline if the price would simply rise.  Or maybe your high school math teacher was publicly insisting that 2 + 2 = 5.  You’d be a little embarrassed, right?  You’d worry that your colleagues and friends might begin to question your astronomical, economic, or mathematical literacy.

Now you know how I felt this morning when I read in the Wall Street Journal that my own constitutional law professor had stated that it would be “an unprecedented, extraordinary step” for the Supreme Court to “overturn[] a law [i.e., the Affordable Care Act] that was passed by a strong majority of a democratically elected Congress.”  Putting aside the “strong majority” nonsense (the deeply unpopular Affordable Care Act got through the Senate with the minimum number of votes needed to survive a filibuster and passed 219-212 in the House), saying that it would be “unprecedented” and “extraordinary” for the Supreme Court to strike down a law that violates the Constitution is like saying that Kansas City is the capital of Kansas.  Thus, a Wall Street Journal editorial queried this about the President who “famously taught constitutional law at the University of Chicago”:  “[D]id he somehow not teach the historic case of Marbury v. Madison?”

I actually know the answer to that question.  It’s no (well, technically yes…he didn’t).  President Obama taught “Con Law III” at Chicago.  Judicial review, federalism, the separation of powers — the old “structural Constitution” stuff — is covered in “Con Law I” (or at least it was when I was a student).  Con Law III covers the Fourteenth Amendment.  (Oddly enough, Prof. Obama didn’t seem too concerned about “an unelected group of people” overturning a “duly constituted and passed law” when we were discussing all those famous Fourteenth Amendment cases — Roe v. Wade, Griswold v. Connecticut, Romer v. Evans, etc.)  Of course, even a Con Law professor focusing on the Bill of Rights should know that the principle of judicial review has been alive and well since 1803, so I still feel like my educational credentials have been tarnished a bit by the President’s “unprecedented, extraordinary” remarks.

Fortunately, another bit of my educational background somewhat mitigates the reputational damage inflicted by the President’s unfortunate comments.  This morning, the judge for whom I clerked, Judge Jerry E. Smith of the U.S. Court of Appeals for the Fifth Circuit, called the President’s bluff.

Here’s a bit of transcript from this morning’s oral argument in Physicians Hospital of America v. Sebelius, a case involving a challenge to the Affordable Care Act:

Judge Jerry E. Smith: Does the Department of Justice recognize that federal courts have the authority in appropriate circumstances to strike federal statutes because of one or more constitutional infirmities?

Dana Lydia Kaersvang (DOJ Attorney): Yes, your honor. Of course, there would need to be a severability analysis, but yes.

Smith: I’m referring to statements by the President in the past few days to the effect…that it is somehow inappropriate for what he termed “unelected” judges to strike acts of Congress that have enjoyed — he was referring, of course, to Obamacare — what he termed broad consensus in majorities in both houses of Congress.

That has troubled a number of people who have read it as somehow a challenge to the federal courts or to their authority or to the appropriateness of the concept of judicial review. And that’s not a small matter. So I want to be sure that you’re telling us that the attorney general and the Department of Justice do recognize the authority of the federal courts through unelected judges to strike acts of Congress or portions thereof in appropriate cases.

KaersvangMarbury v. Madison is the law, your honor, but it would not make sense in this circumstance to strike down this statute, because there’s no –

Smith: I would like to have from you by noon on Thursday…a letter stating what is the position of the Attorney General and the Department of Justice, in regard to the recent statements by the President, stating specifically and in detail in reference to those statements what the authority is of the federal courts in this regard in terms of judicial review. That letter needs to be at least three pages single spaced, no less, and it needs to be specific. It needs to make specific reference to the President’s statements and again to the position of the Attorney General and the Department of Justice.

I must say, I’m pretty dang proud of Judge Smith right now.  And I’m really looking forward to reading that three-page, single-spaced letter.

Douglas Holtz-Eakin and my former George Mason colleague and Nobel Laureate Vernon Smith are in the WSJ today discussing the economic wisdom and constitutionality of ObamaCare.  From the WSJ:

The Obama administration defends the mandate on the ground that a person’s decision to not buy health insurance affects commerce by materially increasing the costs of others’ health insurance. The government adds that health care is unique and therefore can be regulated constitutionally in ways other markets cannot.

In reality, the mandate has almost nothing to do with cost-shifting. The targeted population—the young, healthy and not poor who choose to forgo coverage—has a minimal role in the $43 billion of uncompensated health-care costs. In 2008, for example (the latest figures available), the Department of Health and Human Service’s Medical Expenditure Panel Survey showed that the uncompensated care of the mandate’s targeted population was no more than $12.8 billion—a tiny one-half of 1% of the nation’s $2.4 trillion in overall health-care costs. The insurance mandate cannot reasonably be justified on the ground that it remedies costs imposed on the system by the voluntarily uninsured.

The government’s other defense is that the health-care market does not exhibit textbook competition. No market does. The economic features relied upon by the government—externalities, imperfect information, geographically distinct markets, etc.—are characteristic of many markets.  The presence of externalities and other market imperfections does not justify a departure from the normal rules of the constitutional road. Health care is typically consumed locally, and health-insurance markets themselves primarily operate within the states. The administration’s attempt to fashion a singular, universal solution is not necessary to deal with the variegated issues arising in these markets. States have taken the lead in past reform efforts. They should be an integral part of improving the functioning of health-care and health-insurance markets.

Holtz-Eakin and Smith conclude:

Without the individual mandate, ObamaCare imposes total net costs of $360 billion on health-insurance companies from 2012 through 2021. With the mandate, the law would provide a net $6 billion benefit—i.e., revenues in excess of costs—over that same time period. In other words, the benefits of the individual mandate to health-insurance companies, along with their additional revenues provided by ObamaCare’s Medicaid expansion, are projected to balance, nearly perfectly, the costs that the law’s various regulatory mandates impose on insurers.

The individual mandate and Medicaid expansions appear to many to be unconstitutional. They are certainly bad economic policy. When they go, the entire law must fall. The administration built an intricate, balanced policy on a flawed economic foundation. It is up to the Supreme Court to pull it down.

Go read the whole thing.

According to Senators Barbara Boxer, Jeanne Shaheen, and Patty Murray, the Catholic Church is the real bully in the fight over whether religious employers must include coverage for contraception in the insurance policies they offer their employees.  In yesterday’s Wall Street Journal, the three responded to, in their words, the “aggressive and misleading campaign” against this new Obamacare mandate.  They wrote:

Those now attacking the new health-coverage requirement claim that it is an assault on religious liberty, but the opposite is true.  Religious freedom means that Catholic women who want to follow their church’s doctrine can do so, avoiding the use of contraception in any form.  But the millions of American women who choose to use contraception should not be forced to follow religious doctrine, whether Catholic or non-Catholic.

The three Senators seem to believe that as long as the government doesn’t force Catholic women to use birth control and the morning after pill, religious liberty is protected.  They also believe that in praying to the Almighty One (not that Almighty One) for permission not to pay for a medical intervention that offends their deeply and sincerely held religious beliefs, Catholic officials are trying to force women to follow their religious doctrine.

That’s ridiculous, and it shows how desperate the defenders of President Obama’s intrusion on individual conscience have become.  In a world in which religious employers were exempt from paying for a measure that violates their sacred beliefs, any woman who didn’t share those beliefs would be perfectly free to obtain birth control.  The Catholic Church, after all, doesn’t have the power to overrule Griswold v. Connecticut.

By contrast, in the world of Mr. Obama’s contraception mandate, Catholic officials who choose to follow their consciences by refusing to subsidize interventions that violate their religious beliefs may ultimately be thrown in jail.  That, Honorable Senators, is a full-frontal assault on religious liberty.

[More on the deeply misguided contraception mandate here.]

Doug Mataconis criticizes efforts in Congress to overrule Citizens United by abolishing corporate personhood (HT Bainbridge).

I’ve already addressed this issue, noting among other things that “the loss of personhood would not have the slightest effect under Citizens United” because that case reasoned that the speaker’s identity is irrelevant.  In any event, I pointed out that “if personhood matters at all under Citizens United and subsequent decisions, the loss of personhood actually could be a constitutional boon to corporations.” That’s because “the post-Bellotti cases on corporate political speech showed that it is easier to deny First Amendment rights if the speech is attributed to an artificial person.”

In general, as I noted in my earlier post, this attempted sneak attack around CU crosses St. Hubbins-Tufnel fine line between clever and stupid.