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Ideas and Opinions |

The Affordable Care Act Is Constitutional FREE

David M. Cutler, PhD; and Jonathan Gruber, PhD
[+] Article and Author Information

From Harvard University and Massachusetts Institute of Technology, Cambridge, Massachusetts.

Potential Conflicts of Interest: Disclosures can be viewed at www.acponline.org/authors/icmje/ConflictOfInterestForms.do?msNum=M12-0725.

Requests for Single Reprints: David M. Cutler, PhD, Department of Economics, Harvard University, 1805 Cambridge Street, Cambridge, MA 02138; e-mail, mailto:dcutler@harvard.edu.

Current Author Addresses: Dr. Cutler: Department of Economics, Harvard University, 1805 Cambridge Street, Cambridge, MA 02138.

Dr. Gruber: Department of Economics, Massachusetts Institute of Technology, 50 Memorial Drive, E52-355, Cambridge, MA 02142.

Author Contributions: Conception and design: D.M. Cutler, J. Gruber.

Drafting of the article: D.M. Cutler, J. Gruber.

Critical revision of the article for important intellectual content: D.M. Cutler, J. Gruber.

Final approval of the article: D.M. Cutler, J. Gruber.

Administrative, technical, or logistic support: D.M. Cutler, J. Gruber.


Ann Intern Med. 2012;156(9):660-661. doi:10.7326/0003-4819-156-12-201206190-00430
Text Size: A A A

As this commentary first appeared on www.annals.org, the Supreme Court was hearing arguments in one of the most important social policy cases of the past several decades: the constitutionality of the requirement that individuals obtain minimum health insurance coverage under the Patient Protection and Affordable Care Act (ACA). The “individual mandate” is the centerpiece of the ACA, and removing it will dramatically diminish the law's effectiveness. It is also clearly constitutional within the powers of the Constitution's Commerce Clause. We explain why in this essay, drawing on an amicus brief that we and others filed in the Supreme Court (1). This article reflects our joint view and not necessarily that of the other signatories to that brief.

At the heart of the ACA is a “three-legged stool” designed to solve two of the most important failures in insurance markets in the United States today: Not everyone can afford insurance, and insurers can discriminate against the sick by excluding preexisting conditions, denying or dropping coverage, and basing insurance prices on health. The first leg of the stool is insurance market reform—ending the ability of insurance companies to discriminate against the sick. No longer will people be one bad gene or one chronic condition away from being uninsured. The second is the individual mandate, which requires individuals to purchase coverage as long as it is affordable (defined as costing less than 8% of income). The mandate is fundamental; without it, sick people will disproportionately buy insurance, many healthy people will not, and prices to the sick will increase accordingly. The third leg of the stool is extensive subsidies that will make health insurance affordable for those who cannot afford it. Thus, everyone will be able to access the insurance system.

This model is based on a very successful reform that took place in Massachusetts. Five years into its execution, the landmark Massachusetts health reform has covered about two thirds of the formerly uninsured and reduced premiums for individual purchasers by about 50% relative to national trends—with strong public support (2). There is no reason to believe that the ACA will be any different. Indeed, the nonpartisan Congressional Budget Office projects that the ACA will cover about 32 million uninsured Americans and significantly lower premiums for individual buyers (3).

If Massachusetts is a success, insurance reform without subsidies and mandates is a failure. In the 5 states that tried comprehensive insurance market reform without an individual mandate, healthy people chose not to buy insurance, sick people did, and thus prices rose (4). Only by guaranteeing broad participation in insurance markets can we end the cycle of unsecure coverage and high costs. That is why estimates of reform without a mandate suggest that such a policy would be much less effective in achieving coverage—but not much less expensive (56).

Although we are not constitutional scholars, it is clear to us that the mandate is consistent with Article I, Section 8, which states that Congress has the right to regulate interstate commerce. That the health insurance mandate will affect interstate commerce in a meaningful way is beyond dispute.

Individuals cannot avoid medical care with certainty or be sure that they can pay for the costs of care if they become uninsured. In 2007, a total of 57% of uninsured persons used medical services that year (7)—very few individuals go 10 or even 5 years without accessing medical care (8). Because medical care is so expensive, most individuals who receive care require funds beyond their own resources. In 2007, the average person used $6305 in personal health care services, and the top 1% of medical spenders used an average of $85 000 (9). Very few people would be able to afford this care out-of-pocket.

Moreover, the United States has a long-standing and virtually universal practice of ensuring that all Americans have access to at least some minimal level of medical treatment when needed, without regard to ability to pay. This consensus is enshrined in legislation (EMTALA) as well as in the custom and practice of health care providers (10). But this practice, while noble, necessarily imposes costs on others; providers pass along these costs by charging more to those with insurance.

As a result, the individual mandate affects interstate commerce in several ways. First, it reduces uncompensated care costs, which amounted to roughly $43 billion in 2008 and are rising rapidly. Second, it reduces health insurance premiums by reducing the ability of healthy people to purchase insurance only when they get sick. Third, it makes possible reforms that will repair the insurance market, providing an outlet for people who are restricted in their job decisions out of fear of losing their current coverage. In short, few areas affect interstate commerce more than health care.

Some have argued that the mandate does not fall under the Commerce Clause because it regulates economic “inactivity” rather than activity. But this claim is simply wrong—the decision to forgo purchasing health insurance is not a passive act taken without thought, but rather a considered decision driven by economic factors. For example: Individuals are more likely to remain uninsured when there are more sources of “uncompensated care” available, such as public hospitals or hospitals that have high uncompensated care provision. There is no doubt that most people think about their insurance actions and what they are able to afford (11).

Other critics have worried about the “slippery slope”: If Congress can mandate that people purchase health insurance, can it also mandate that people eat broccoli, or drive American cars? But a moment's thought shows that these analogies are specious. The reason to regulate health insurance is because people will use medical care regardless of whether they are insured, and insurance is the only mechanism by which they will be able afford health care. This is not true of food, transportation, or almost any other goods or services in the economy. The individual mandate does not specify the type of medical care that people have to receive, it simply requires them to pay a reasonable amount for the care that they will ultimately use anyway.

In that sense, the individual mandate is about as conservative an idea as there is. Indeed, no less a conservative than former Massachusetts Governor Mitt Romney noted when signing the Massachusetts equivalent of the individual mandate: “Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on the government is not libertarian” (12).

On this point, we agree with the governor. The individual mandate is a part of fixing the insurance markets so everyone can get care when they need it, at a price they can afford. That is the obligation we owe to ourselves, and it is entirely appropriate for Congress to have enacted that obligation into legislation.

Brief of Amici Curiae Economic Scholars in Support of Petitioners Urging Reversal on the Minimum Coverage Issue, No. 11-398. Accessed at www.americanbar.org/content/dam/aba/publications/supreme_court_preview/briefs/11-398_petitioner_amcu_econscholar.authcheckdam.pdf on 21 March 2012.
 
Gruber J.  The Impacts of the Affordable Care Act: How Reasonable Are the Projections? NBER Working Paper 17168. 2011. Accessed at www.nber.org/papers/w17168 on 21 March 2012.
 
 .  Letter to House Speaker Nancy Pelosi. Washington, DC: Congressional Budget Office; 2010.
 
Gruber J, Rosenbaum S.  Buying health care, the individual mandate, and the Constitution. N Engl J Med. 2010; 363:401-3. PubMed
 
Gruber J.  Health Care Reform Without the Individual Mandate. Washington, DC: Center for American Progress; 2011. Accessed at www.americanprogress.org/issues/2011/02/pdf/gruber_mandate.pdf on 21 March 21, 2012.
 
Effects of Eliminating the Individual Mandate to Obtain Health Insurance. Washington, DC: Congressional Budget Office; 2010. Accessed at www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/eliminate_individual_mandate_06_16.pdf.
 
Medical Expenditure Panel Survey: Summary Data Tables, Table 1. Rockville, MD: Agency for Healthcare Research and Quality; 2011. Accessed at www.meps.ahrq.gov/mepsweb/data_stats/tables_compendia_hh_interactive.jsp? on 21 March 2012.
 
Gruber J, Marder WD, Miller K.  Avoiding the medical care system? Not likely. Ann Arbor, MI: Thomson Reuters; 2011. Accessed at http://thomsonreuters.com/content/healthcare/pdf/articles/avoiding_medical_care_system on 21 March 2011.
 
Trends in Health Care Costs and Spending. Washington, DC: Kaiser Family Foundation; 2009. Accessed at www.kff.org/insurance/upload/7692.pdf on 21 March 2012.
 
Walzer M.  Spheres of Justice: A Defense of Pluralism and Equality. Chapter 3. New York: Basic Books; 1983.
 
Rask KN, Rask KJ.  Public insurance substituting for private insurance: new evidence regarding public hospitals, uncompensated care funds, and Medicaid. J Health Econ. 2000; 13:1-31. PubMed
 
Romney M.  Health care for everyone? We found a way. Wall Street Journal. 11 April 2006; A16. Accessed at http://online.wsj.com/article/SB114472206077422547.html.
 

Figures

Tables

References

Brief of Amici Curiae Economic Scholars in Support of Petitioners Urging Reversal on the Minimum Coverage Issue, No. 11-398. Accessed at www.americanbar.org/content/dam/aba/publications/supreme_court_preview/briefs/11-398_petitioner_amcu_econscholar.authcheckdam.pdf on 21 March 2012.
 
Gruber J.  The Impacts of the Affordable Care Act: How Reasonable Are the Projections? NBER Working Paper 17168. 2011. Accessed at www.nber.org/papers/w17168 on 21 March 2012.
 
 .  Letter to House Speaker Nancy Pelosi. Washington, DC: Congressional Budget Office; 2010.
 
Gruber J, Rosenbaum S.  Buying health care, the individual mandate, and the Constitution. N Engl J Med. 2010; 363:401-3. PubMed
 
Gruber J.  Health Care Reform Without the Individual Mandate. Washington, DC: Center for American Progress; 2011. Accessed at www.americanprogress.org/issues/2011/02/pdf/gruber_mandate.pdf on 21 March 21, 2012.
 
Effects of Eliminating the Individual Mandate to Obtain Health Insurance. Washington, DC: Congressional Budget Office; 2010. Accessed at www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/eliminate_individual_mandate_06_16.pdf.
 
Medical Expenditure Panel Survey: Summary Data Tables, Table 1. Rockville, MD: Agency for Healthcare Research and Quality; 2011. Accessed at www.meps.ahrq.gov/mepsweb/data_stats/tables_compendia_hh_interactive.jsp? on 21 March 2012.
 
Gruber J, Marder WD, Miller K.  Avoiding the medical care system? Not likely. Ann Arbor, MI: Thomson Reuters; 2011. Accessed at http://thomsonreuters.com/content/healthcare/pdf/articles/avoiding_medical_care_system on 21 March 2011.
 
Trends in Health Care Costs and Spending. Washington, DC: Kaiser Family Foundation; 2009. Accessed at www.kff.org/insurance/upload/7692.pdf on 21 March 2012.
 
Walzer M.  Spheres of Justice: A Defense of Pluralism and Equality. Chapter 3. New York: Basic Books; 1983.
 
Rask KN, Rask KJ.  Public insurance substituting for private insurance: new evidence regarding public hospitals, uncompensated care funds, and Medicaid. J Health Econ. 2000; 13:1-31. PubMed
 
Romney M.  Health care for everyone? We found a way. Wall Street Journal. 11 April 2006; A16. Accessed at http://online.wsj.com/article/SB114472206077422547.html.
 

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We can't afford the Affordable Care Act
Posted on March 27, 2012
Anthony M., Perry, Physician, M.D.
Regional Diabetes Center Scranton, PA
Conflict of Interest: None Declared

Drs Gruber and Cutler contend that the ACA individual mandate is essential for the integrity of the medical payment system which they favor but this is hardly the constitutional point. These Harvard economists should instead attend to whether the ACA comports with basic economic principles (as outlined in the textbook of economics written by their own Harvard colleague (1)) and leave the legal reasoning to others.

Medical insurance is not insurance at all, but is a high priced pre- payment system. It is by far the worst way to pay for anything. It relieves the patient and physician from the trouble of making appropriate price motivated trade-offs and substitutions. The system requires large administrative cost for coding, billing and documentation, none of which have any particular medical value. Inherent in all this is a large amount of wasted resources which could be directed toward useful alternatives. Price fixing produces waste, decrease in quality and loss of competitive forces that improve services and bring prices down.

It seems incongruous to contend that a citizenry who already pay for this system indirectly cannot pay for it more directly. Small items like lab tests and doctor visits and even small procedures are affordable out of pocket for the average individual and if paid for this waythere would be less waste and lower cost. Bona fide lower cost insurance that belongs to the individual could pay for high priced unexpected medical events.

Granted that persons with low income or serious chronic illness need society's help but total government command and control is surely not the best solution.

The ACA mandates an expansion of our present wasteful pre-payment price-fixed system to every individual. It forces free citizens to waste the fruits of their labor for the sake of a collectivist experiment. It will almost certainly raise the cost and reduce the availability of medical services for everyone.

Reference

1. Principles of Economics 2011 Edition. Chapter 1. N. Gregory Mankiw.

Conflict of Interest:

None declared

Disclosures
Posted on April 2, 2012
Jon, Schwartz, physician
Arizona Oncology
Conflict of Interest: None Declared

I think that it is important that in addition to any conflicts of interest from the drug industry, authors should also state what grants they get from the government as well as their poltical affiliation. Certainly receving grants or other support from the government and one's political affiliation affects how one interprets studies as well as their opinions in op-ed articles at least as much if not more than grants from industry.

Conflict of Interest:

I receive money from the government in the form of medicare payments. The government dictates what i can and can't prescribe which directly affects patient care.

Real Healthcare Reform
Posted on June 14, 2012
Shirish K. Kirtane, MD
None
Conflict of Interest: None Declared

-The presumption that ‘insurance companies have failed’ is to put blame at wrong place. The insurance company collects the premium, spends it on business and medical expenses. If the expenses are more, premium goes up. To state they have failed is naïve. Insurance costs $4200 for a young patient. This is higher than 8% of average salary. If healthy person is ‘subsidized’, who pays the difference? The cost will not come down even if everyone buys. -Fairness. If I exercise, eat properly, stay healthy, why should I be ‘penalized’? Having a medical disease is not always one’s fault. But to have same premium for everyone irrespective of medical history, is unfair to those who work hard to stay healthy. -Health care cost is a square. To reduce cost all sides must be reduced. These sides are providers, recipients, drug companies and lawyers. The cost goes up due lack of controls and fear of malpractice. The waste of resources is seen daily. Too many unnessesary tests are done. Tolvaptan pill, costs $300. The cost of healthcare has increased due to greed, ignorance, malpractice, new technologies -treatment Greed is on the part of the physicians, patients and the hospitals. More cardiac PETs, PSG are done. The hospitals get more money for the same tests done in an office by a physician. Hospital-employed physicians get higher compensation as office is considered an extension of hospital. Why is there a difference for the same tests? New drugs -technologies. - ICD cost $29000 plus hospital cost , PAH treatment $50,000 a year. Mobility scooter, DME is adding to expense. Unless we decide to change , cost will rise. There is no way to reduce premiums, no matter how many more healthy people buy insurance Divide population into groups - Individuals in the lowest socioeconomic group who cannot afford any premiums and have no resources – will receive Medicaid. -Individuals who do not qualify for Medicaid and cannot afford premium. These are ‘indigent,’.The society takes care of them, provided 1)ONE and All medical providers ,will participate. 2) Patients cannot sue. 3) Providers will get ‘tax credit’ for the services. -People who can’t afford regular insurence should buy ‘high’ deductible policy and get tax credit. -The people who can afford regular insurance policy. -The Medicare population. -There should be higher deductible for expensive procedures-ICD, bariatric surgery for older patients. ‘Cookbook’ medicine in certain situations will reduce cost

Dr. SHIRISH KIRTANE

Real Healthcare Reform
Posted on June 4, 2012
Shirish K., Kirtane, M.D.
Conflict of Interest: None Declared

I read with great interest the 'opinion 'given by Donald Cutler and Jonathan Gruber in the May issue of The Annals of Internal Medicine. I cannot disagree with them more. Let me make some observations. 1. To start with, the presumption that 'insurance companies have failed' is to put blame at the wrong place. Let me explain: if you go to buy a shirt, the cost of the shirt is determined by the acquisition cost, the cost for doing business, and the profit. So if the cost of any of these inputs is increased, then the cost of the shirt will go up. The insurance company collects the premium and spends it on the cost to do business and on incurred medical expenses. If the expenses are more, then the premiums will go up. So to hold the insurance company responsible in this manner and then state they have failed is na?ve. 2. The second problem with regard to the 8% in the individual mandate can be elucidated with another analogy. If my office staff makes $30,000, they will have to pay $2,400 per year for health care insurance. At present time, one cannot get insurance for less than $4200 per year, and this is under the assumption that the staff member is a 30 year old female with no prior medical conditions. This means that someone has to pay for the difference. So if a healthy female is 'subsidized', who is going to do it? Who is going to pay the difference? To think and argue that if every person buys insurance, the cost will magically come down is again na?ve. 3. The third issue is a matter of fairness. If I exercise, eat properly, and keep my weight normal, why should I be 'penalized' for someone who does not take care of their health? We are all subsidized when we buy health insurance (e.g., a 'family coverage' premium is not 3 or 4 times that of individual premium). I do understand that having a medical disease is not always one's fault, like having cancer or high blood pressure. But to have the same premium for all covered people irrespective of medical history, health habits, etc. is unfair to those who work hard to keep the healthy body. 4. Historically, CBO has never been accurate in estimating the cost. The rising cost of medicare, Medicaid, and food stamps is illustrative of the inherent inaccuracy of these estimates. Furthermore, they have already raised the estimate on ACA. 5. A real difference can be made by adopting 'real' reforms. Health care cost is a 4-sided square. To reduce the cost of health care, we must reduce the size of all sides. These sides are providers, recipients, drug companies and lawyers. The cost goes up because there are no controls on the demands of the recipients, the expenditures of the providers, the cost of medicines and the things that we do to prevent malpractice accusations. The vast waste of medical resources is plainly seen on an almost daily basis. For example, I have seen 14 CT scan/MRIs of the brain done in the span of a year in a patient who had metastatic melanoma treated and who was admitted with 'altered mental status.' The PET scan (cost $3000), done in a patient with a 3 mm nodule where the chance of picking up cancer is zero is also demonstrative of the misuse of medical resources. This is not to mention the rising cost of medicines. One pill of Tolvaptan, for example, costs nearly $300. So given all these problems, what is the real solution?

Here are some thoughts: The cost of healthcare has increased due to several factors. Greed, ignorance, fear of malpractice, new technologies and modalities of treatment. Let me give some examples to explain. The greed is on the part of the physicians, patients and the hospitals. Otherwise why would family practice doctors do nuclear cardiac stress tests, and read sleep studies? Or to take another example, why are cardiologists performing cardiac PET scans in record numbers now that reimbursements for nuclear stress tests have decreased? On part of patients, sometimes they demand CT scans , PET scans or other tests, and physicians cave. The hospitals get more money for the tests when they are done in the hospital compared to what private practice physicians get when they do the same tests in their office. Yet, hospital-employed physicians somehow manage to get higher compensations for doing tests in their office as a result of a loophole which allows the office to be considered an extension of the hospital. They also get RVUs (relative value units ) added when they do surgery or do a MRI or order PT or home health. Why would there be difference In the reimbursement for the same tests when done by the hospitals or hospital employed MDs and private practice MDs ? Additionally, new drugs and technologies add quite a bit to risign costs . e.g ICD cost $29000 plus hospital cost , treatments of pulmonary hypertension with new drugs is as much as $50,000 a year and cardiac stents and other modalities add to the cost. HIV treatment is quite successful and it adds to the cost of healthcare .The cost of a mobility scooter and many other DME costs is adding to the expense. Unless we decide to change some rules as to what is covered and what is not covered, this will continue to rise. There is no way we can hope to reduce premiums, no matter how many more healthy people are forced to buy insurance.

Here are some thoughts: We divide the entire population into five or six groups: Group.1: Individuals in the lowest socioeconomic group who cannot afford any premiums and have little to no resources - they will receive Medicaid. Group 2: Those individuals who do not qualify for Medicaid (as they make slightly more money than those individuals in group 1) but cannot afford to pay for a health care premium. These are the truly 'indigent,' and are in a difficult situation financially. For these individuals, I believe the medical society should take care of them, provided 3 conditions are met: 1) All the providers , physicians , surgeons, hospitals out patients clinics , radiology centers, labs , one and all will participate. 2) They cannot sue. 3) Providers will get 'tax credit' for the services that they provide in the amount of say 5-10% of the charges (Medicare fee schedule) Group 3.These are individuals who can afford some cost for health care but not the entire amount. These are people between ages of 20 to 40 or so. They should buy 'high' deductible policy and in turn get tax credit. (Not for the entire amount but some amount in case they have to spend the deductible amount. Group 4. The people who can afford regular insurance policy. Group 5. The Medicare population. Group 6 the 'older population which needs 'expensive 'procedures. E.g. ICD the cost could be as high as $50,000.There should be higher deductible. Other example could be bariatric surgery. The last bit of change that I would suggest would be the 'cookbook' approach to medicine in certain situations. Avoiding this would prevent Medicare from acting as a 'blank check'. We have too many physicians who order too many tests without knowing their patients. This has increased significantly with hospitalists taking over from PCPs who knew their patients. Avoiding the cookbook approach will help every field and will certain cut costs.

SHIRISH KIRTANE M.D.

ALTAMONTE SPRINGS , FLORIDA.

Conflict of Interest:

None declared

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