The non-constitutional problem with a health care mandate

Geoffrey Manne —  14 December 2010

There’s been much teeth-gnashing following yesterday’s ruling by a Virginia judge that the “individual mandate” portion of Obamacare is unconstitutional.  Among many other places, see the ongoing discussion at The Volokh Conspiracy.  I have a quick, non-constitutional response.

It seems to me that there is a basic, deep problem with prohibiting citizens from opting out of economic activity.  It is well-understood that regulation is distorting and, of course, generalized across citizens, even though some of those citizens will be “inframarginal,” and others “marginal” participants in the regulated activity.  For marginal participants, by definition, the addition of certain regulations makes the activity too costly, and it seems a basic matter of efficiency as well as freedom that these participants be allowed to choose between undertaking the activity (but paying the full, regulated price) and opting out.  I get that it is not always feasible or desirable to allow regulatory price discrimination, but all the more so for that reason it seems important to permit opt out.

Examples of this idea abound, but the most current to my mind involves the TSA and flying.  Plenty of marginal flyers feel the latest round of TSA restraints increase the cost of flying too much and have opted out.  I would prefer that the TSA abandon its theatrics altogether, but at least I know I can choose not to subject myself to the high costs of the TSA’s (idiotic) regulatory decisions.

The same should be true for health insurance.  There are plenty of good reasons for many people not to purchase health insurance, all the more so when it is made more expensive by the government’s (idiotic) regulatory decisions.

The argument on the other side is presumably one of efficacy rooted in the adverse selection problem.  But if efficacy must come at the cost of freedom and efficiency, then perhaps the proposed scheme should not, in fact, be effected.  Moreover it is far from clear that the proposed system will even be effective at its stated goal.  And, of course, there are plenty of other regulatory fixes that might actually do more and not carry this defect.

Of course it is sometimes the case that, as a practical matter, one cannot easily opt out of costly regulation.  So be it.  But that doesn’t mean it is the same thing–nor that it is ok–to affirmatively mandate that citizens engage in regulated activity that they would and could otherwise opt out of.

I can’t say that I know this principle is enshrined in the Constitution (and certainly not the “Constitution in Exile“), but I’m glad if at least one judge’s interpretation of it maps onto the concept.

Geoffrey Manne

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2 responses to The non-constitutional problem with a health care mandate

  1. 
    Can't have your cake and eat it too 14 December 2010 at 3:14 pm

    It is fine for people to choose not to have health care if they understand that it is also fine that the government is no longer going to fund medical care-emergency room or otherwise for those who choose not to bother. Also, for those who opt out of the “mandate” at “inception” there will be a waiting period for preexisting conditions, so that you cannot wait until you are sick or sit out your healthier years.

  2. 
    north fork investor 14 December 2010 at 2:54 pm

    As a public policy problem the issue with not-mandating health insurance for individuals (whether via third parties or via self-insurance) is that neither healthcare providers or recipients have socially contracted to NOT provide healthcare to the uninsured who cannot pay. So there is an alternative that wasn’t mentioned by Mackey’s op ed piece. If you opt out of insurance require hospital emergency rooms and the individuals to opt out of health care services they can’t pay for. In other words ration.