Justice Scalia made an interesting observation in yesterday’s proceedings: “everybody has to exercise, because there’s no doubt that lack of exercise cause—causes illness, and that causes healthcare costs to go up.” The government’s argument in support of the individual mandate hinges on the claim that there is an interstate market in healthcare. Failure to purchase insurance by some raises costs for other participants in that market. Justice Scalia’s point was that if we accept that premise, what is to stop the government from infringing on freedom in many other ways to avert a similar adverse cost impact on innocent market participants? His intuition is quite correct: In fact, if we accept the government’s argument, then the economic case for government-mandated exercise is actually greater than the case for the individual mandate to purchase insurance! Here’s the proof:
On average, uninsured Americans in 2011 generated $1,078 apiece in uncompensated care losses. With 49.9 million uninsured, this amounted to $53.8 billion last year, a rather hefty sum. Leave aside the fact that the mandate will not apply to everyone (e.g., those qualifying for Medicaid, illegal immigrants) and that careful analysis has shown that the actual amount of uncompensated care that would be averted through a mandate is at best 30% of the total amount of uncompensated care attributable to the uninsured. As the following analysis shows, even if we generously assume that the mandate will eliminate all uncompensated care losses for the uninsured—which it assuredly will not—compulsory exercise will spare innocent market participants an even larger amount.
It turns out that three quarters of the uncompensated care generated by those without coverage is financed by taxpayers, or about $728 per uninsured in 2011. But what about the one quarter of uncompensated care costs not paid by taxpayers? This amounts to $250 per uninsured and purportedly is borne by those with private health insurance. How big is this burden? There’s roughly four privately insured people for every uninsured person in the U.S. (inclusive of those with non-group coverage). Thus, cost-shifting by the uninsured places the following burden on the average person with private insurance: $70 apiece, which is less than $6 a month, or about 20 cents a day. [Note: Justice Ginsburg repeatedly made the erroneous claim that this burden increased private health insurance costs for the average family by more than $1,000; by failing to account for the three quarters of costs borne by taxpayers, her estimate exaggerates the burden on private health insurance premiums by a factor of four. When we account for the actual amount of uncompensated care that would be eliminated through the individual mandate—i.e., 30% of the total—the actual impact is only one-twelfth of the amount she kept misstating].
In short, failure to purchase health insurance affects interstate commerce by raising the cost of private health insurance for everyone else. As the foregoing illustrates, it does do that, by at most a mere 20 cents a day (and only 6 cents a day, accurately calculated). But this is far less than the societal burden posed by those who fail to engage in exercise, which was calculated in 1989 to be 24 cents for every mile that sedentary people do not walk, jog, or run (or about double that amount in today’s dollars). Thus, if we can justify forcing people to purchase insurance to avert their imposing a cost of 20 cents a day on the privately insured, what’s to stop us from forcing people to walk, jog, or run a mile a day to avert their imposing a cost of 50 cents a day on society? If the first is constitutional, then how can the second not be?
I’m no constitutional scholar, but I cannot imagine that the Founders pledged their lives, their fortunes, and their sacred honor to create a government that could compel its citizens to exercise. Such a power would appear to lie far beyond the boundaries of the limited government envisioned by the Framers. If the individual mandate is upheld, Americans will have suffered a loss of liberty from which there will be no turning back. Let us cross our fingers that the Supreme Court does the right thing.
Christopher J. Conover is a research scholar at Duke University’s Center for Health Policy and Inequalities Research, an adjunct scholar at AEI, and affiliated senior scholar at the Mercatus Center at George Mason University. His new book, American Health Economy Illustrated, was released in February 2012 by AEI Press.