Broccoli vs. Health Insurance
You can’t eat broccoli without paying for it. You can get health insurance without paying for it because hospitals are obligated to treat you if you turn up at the ER door. This means society is providing health insurance for free to some people. They are being subsidized by the people who pay for health insurance. There is no such issue with broccoli. Note I am using the phrase health insurance not health care as some of the justices tried to make a distinction between the two.
We can turn heath insurance into broccoli by denying care at the ER door to the uninsured. This is feasible as healthcare services are excludable. Whether society wants to do that are not is a political judgement. Hence, elections are the right mechanism to determine this issue.
Broccoli vs. Wheat
the Commerce Clause of Article I, Section 8 of the Constitution, [gives] Congress the power
To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.
How has this been interpreted? Again, via the New Yorker:
In the famous 1942 case of Wickard v. Filburn, the Court said that the federal government’s authority extends to any activity that “exerts a substantial economic effect” on commerce crossing state lines.
The case involved Roscoe Filburn, an Ohio farmer who wanted to grow more wheat than he had been allotted under quotas introduced during the Great Depression to drive up prices. In deciding against Filburn and in favor of the Department of Agriculture, the justices pointed out that the actions of individual wheat farmers, taken together, affect the price of wheat across many states. That is what gives the federal government the power to limit their actions.
This argument can be made for any good, private or public. Hence, the externality argument made above is not necessary under this precedent. Also, Justice Scalia, Roberts etc can be forced to buy broccoli by law.
What is then the limiting principle? The commerce clause has no limiting principle, according to me, a non-lawyer. The limiting principle is the imposed by politics: any politician who seeks to regulate the broccoli market must run for election. This politician will reach the limit of his political career.
(Edit: Changed “eat” to “buy” re broccoli and “free insurance” to “care” re healthcare.)
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March 30, 2012 at 12:45 pm
jbchilton
Roscoe Filburn was growing wheat for his own use (as chicken feed). The ruling against didn’t say he had to buy (it didn’t say he had to eat brocolli), it said if he wanted to feed his chickens more wheat than he was allotted to grow, then he’d have to buy. It was if, then.
I’m not rearguing the Filburn decision, but I do suspect that the conservative justices on the court think it was an excessive expansion of federal use of the commerce clause to apply it to a small time chicken farmer who was growing a bit of wheat on the side for his own use.
March 30, 2012 at 2:09 pm
Sandeep Baliga
Hi jbchilton: I should have said “buy” not “eat” in post and I changed it thanks to your comment.
Here is some stuff I edited out because post was too long: For any product there is demand and supply. Ohio precedent is about supply. Individual mandate is about demand. But all cc says is Congress is allowed to “regulate commerce”. It doesn’t say “only influence supply”. Influencing demand also regulates commerce. Taxes and subsidies influence demand and supply often in subtle ways e.g. tax incidence is very hard to explain to undergrads and MBAs!
Thanks for coming to our blog.
March 30, 2012 at 1:01 pm
Law and the Market for Health Insurance « BS Economist
[…] Sandeep Baliga makes the point I was trying to make, albeit with infinitely more precision. […]
March 30, 2012 at 2:16 pm
David
You don’t have health insurance without paying for it (and that’s beside the point). If you receive health care, you are obligated to pay for it. If you have insurance, they help you pay for it. If you don’t have insurance, you have to pay for it yourself, like most things in life. Saying that you have insurance just because you can receive medical treatment while uninsured is like saying you have a car because you were able to travel a mile.
March 30, 2012 at 3:22 pm
Sandeep Baliga
http://en.wikipedia.org/wiki/Emergency_Medical_Treatment_and_Active_Labor_Act
March 30, 2012 at 3:38 pm
David
The only way to discharge the debt you incur through emergency care hospitals are required by law to provide is to declare bankruptcy. In that way, you could claim you have insurance against any debts…except student loans. It’s a stretch to call the Emergency Medical Treatment and Active Labor Act “insurance”. Health insurance and health care are two different products.
March 30, 2012 at 4:36 pm
Sandeep Baliga
Not getting insurance and being “uninsured” gives you a non-degenerate lottery over healthcare outcomes. If you have an emergency you get healthcare at some penalty to you. In other states of the world, you get no healthcare. [If you buy insurance and are “insured”, you get a better lottery]
If you do not buy broccoli, you get a degenerate lottery – no broccoli.
March 30, 2012 at 5:02 pm
David
The key non-degenerate lottery involved in not purchasing (and consuming) broccoli is your health outcome. The reason broccoli is used as an example is that it’s a stereotypical healthy food. This becomes important as far as commerce is concerned because you consume more health care services when unhealthy. This impacts everyone by marginally increasing the price of those services. Effects on prices are the reason that is now being used to justify a health insurance mandate using the interstate commerce clause.
Not buying insurance and not buying broccoli are both non-actions. That is an important distinction between them and growing wheat, which is an action. We already know the Supreme Court has, correctly or incorrectly, judged that growing wheat even for your own personal consumption can be regulated as interstate commerce. However, growing wheat is an action which affects interstate commerce. Not purchasing health insurance is a non-action which affects interstate commerce. If you say that the power to regulate interstate commerce applies to non-actions, then you have opened the floodgates for any other mandate the government wishes to impose upon citizens. That could include a broccoli purchase mandate. Everything I am doing and everything I could possibly be doing but choose not to do has some miniscule effect on interstate commerce. Expanding it to cover non-action removes any sort of check on what the government can demand of citizens.
April 1, 2012 at 4:11 pm
Sean Crockett
ER services to the uninsured are frequently (perhaps typically) negotiated to a fraction of the original bill, because the expected cost relative to benefit to the hospital of pursuing legal action is high. I’ve seen estimates that hospitals collect in the neighborhood of 20 cents to the dollar on services rendered to the uninsured, but those estimates were anecdotes from friends in the industry, not published sources.
March 31, 2012 at 2:49 am
Brittany
“The commerce clause has no limiting principle” -I agree that this is the implication of Wickard vs. Filburn. The interesting question becomes whether the SCOTUS will essentially ignore/overturn Wickard v Filburn by striking down the mandate.
After all, it is pretty silly for the Constitution to 1) carefully enumerate all the rights of the federal government, 2) reserve the complement for the states with the 10th amendment, but then 3) allow for unlimited federal power through the commerce clause. Is that really the right way to interpret the Constitution? The argument in Wickard could easily be extended past mere commercial pursuits– social issues impact commerce in some way, and even atomistic behavior can be interpreted as interstate. Truly unlimited power.
So while all democracies have a limiting principle in elections, federalism imposes additional limits by delegating power to the states. These limits force states to compete with each other and, as Friedman argued in Capitalism and Freedom, limit the extent to which politicians can deviate from the will of the people.
Thanks for the attention to this issue!
March 31, 2012 at 11:28 am
Sandeep Baliga
Commerce isn’t everything. The court already ruled against using the Commerce Clause to restrict carrying of guns near schools and violence against women. These seem to contain reasonable limiting principle.
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