"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Monday, December 13, 2010

A Big Decision on Obamacare

The federal district court for the District of Virginia today struck down the individual mandate in the health care bill known as "Obamacare."    Here's the decision.    For my money, here's the key reasoning:

The power of Congress to regulate a class of activities that in the aggregate has a substantial and direct effect on interstate commerce is well settled.  This even extends to noneconomic activity closely connected to the intended market. But these regulatory powers are triggered by some type of self-initiated action. Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market. In doing so, enactment of the Minimum Essential Coverage Provision exceeds the Commerce Clause powers vested in Congress under Article I.   
In other words,  Congress can regulate economic actions under the Commerce Clause on the theory that they impact interstate commerce.   But if you choose not to buy something -- health insurance -- Congress can't touch you.  

If the individual mandate falls, Obamacare as a whole must fall, because otherwise it makes no sense.   (It doesn't make much to begin with.)    The reason is simple:  the only way you can guarantee insurance coverage to people with pre-existing conditions (the "moral" centerpiece of the legislation, if it has one), is to force everyone to buy it from the outset.   Otherwise, rational economic actors would just go without insurance until they got sick, and then sign up.   In economics, it's called the "free rider" problem, and it's not something that wishful thinking or clever drafting can avoid.... it's a law of economics that is always and in all circumstances true, just like other scientific facts.  

This decision will undoubtedly be appealed, first to the 4th Circuit, then to the Supreme Court.  Likely other decisions in other circuits will come first, some agreeing with this logic, some disagreeing.   But with the growing displeasure of the electorate with Obamacare, I would expect a repeal long before the Supreme Court hears this case.

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