Healthcare Mandate's Precedent Is The Pandora's Box

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by: Carlos X. Alexandre

MarketWatch's article, "Health-care ruling could be a blow to insurers," highlighted a serious issue regarding the outcome of the Supreme Court's decision on the constitutionality of the health care law.

The central issue before the court is whether Congress can mandate that all individuals buy insurance, as spelled out in the Affordable Care Act that was passed in 2010. But if the court strikes down the mandate and leaves the rest of the law intact-a distinct possibility-that could spell disaster for health insurers and result in skyrocketing premiums for policyholders.

In short, without a mandate to buy insurance while insurers are forced to accept existing medical conditions, the insurance industry will find itself in a pickle. I understand social responsibility, but the question being asked, as always, is wrong. It's not "Why isn't everyone covered?," but rather "Why is it so expensive?," and "Where is the money going?" The Journal of the American Medical Association had an idea, and the emphasis is on "actually help."

Here is a better idea: cut waste. That is a basic strategy for survival in most industries today, ie, to keep processes, products, and services that actually help customers and systematically remove the elements of work that do not. The opportunity for waste reduction in health care is enormous.

Yes, I understand the political divide and the rainbow of arguments that litter the media, although the precedent that the ruling may set is truly what is at stake. The article also provided one of the opinions from a lower court.

The most recent ruling came from a three-judge appeals court in the District of Columbia. Writing for the majority, Judge Laurence H. Silberman, an influential conservative who was appointed by President Ronald Reagan, held that the mandate is "certainly an encroachment on individual liberty," but no more than requiring restaurants or hotels to serve customers regardless of race.

The reasoning presented by Judge Silberman constitutes grounds for his dismissal due to incompetence. Restaurants are not the ones forced to buy anything from customers - they're forced to sell, or serve -- and customers only buy if they choose to, and do not face penalties if they fail to consume restaurant food. Furthermore, the issue at hand is not discrimination, but, as he initially pointed out, "an encroachment on individual liberty." The U.S. Court of Appeals for the 11th Circuit in Atlanta had the issue correct, as reported by WSJ.

The opinion, jointly written by judges Joel Dubina and Frank Hull, said Congress had broad power to deal with the problems of the uninsured, "but what Congress cannot mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die."

But the other side of the argument was also captured as presented by Stephanie Cutter, an adviser to President Barack Obama, and please keep her words in mind.

"Individuals who choose to go without health insurance are making an economic decision that affects all of us-when people without insurance obtain health care they cannot pay for, those with insurance and taxpayers are often left to pick up the tab," Ms. Cutter said

This is not about whether this is a tax, because everyone pays taxes and we understand that. If Congress decided to impose taxes and then use the money to create a healthcare system, it would be legal, even if we didn't like it. Another argument is that we're already "forced" to buy auto insurance, and not only is that not a federal mandate, it's also not true. One is required to buy liability insurance to protect others, and one is not required to buy full coverage, leaving the responsibility of how to deal with personal losses to one's own devices.

The argument that everyone is "entitled" to healthcare is dumb at best, and the correct argument is that it's socially beneficial for the country to figure out a practical way to provide medical care for the masses without infringing on people's freedom, and exacerbating our already fragile fiscal condition. And for one to be "entitled" to something, somebody must provide that something. Here's my argument, and I would only take three minutes of the court's time.

Mr. Chief Justice, and may it please the court:

Let's put politics aside, and then assume that your sons and daughters would like to follow in your footsteps and attend law school. However, if at some point in the future there's a shortage of doctors, the government can mandate that a percentage of high school graduates must attend medical school, so we can provide the medical services being demanded. Thus, some of your sons and daughters will be forced to follow a career path that they did not envision, and potentially have no interest in. After all, government may mandate medical services to be available to everyone, but government itself, and insurance companies for that matter, cannot guarantee that medical services will be available, and both government and insurance companies are not qualified to deliver health care, and must rely on private citizens. And let's assume that the penalty for your kids not attending medical school, as mandated, will not be monetary, but measured by time in jail.

But why would my kid be forced to become a doctor, you may ask. How can the government tell my kid what career to follow? The answer lies in Ms. Cutter words: because they "are making an economic decision that affects all of us," and I am certain that you can find parallels with that line of thinking. In fact, your kids, or more likely you, would be forced to buy tuition from a private or public university to receive an education that your kids, and maybe you, would not want. For all you know, your kids may want to become American Idols.

The added dilemma here is that I am being forced to buy a policy for a product and/or service that I may not easily obtain, unlike choosing to buy a Big Mac at the local McDonald's (NYSE:MCD) whenever I choose, and pay for it at the time of delivery. But even that may be in jeopardy, because, based on the healthcare mandate logic, government can order McDonald's to cease operations because its food contributes to health care costs, removing personal responsibility from the equation.

What else can Congress mandate private citizens to do or buy? Let your imagination run wild. I shall leave you with a quote from Albert Einstein:

"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."

Thank you for your time.

Unfortunately, politics within the court will play a part in the final decision, but I can only expect that the justices will rise to the occasion and do what's right, and that a precedent will not be set that will come back to haunt us, economically speaking, not to mention the "encroachment on individual liberty."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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