Necessary and Proper: Health Care Costs and the Individual Mandate

Hillary Stemple, University of Pittsburgh School of Law Class of 2012, worked in the health care industry for five years prior to entering law school and is now in the Health Law Certificate program. She says that the individual mandate must be constitutional as a necessary and proper regulation of commercial activity due to the way in which the growing uninsured population negatively impacts the entire market...


As Americans, we generally abhor being told by our government that we must do something. It is natural for Americans to think, "How can the government force me to purchase health insurance?" Perhaps this is why the individual mandate provision in the Patient Protection and Affordable Care Act (PPACA) has been so controversial. The idea that the government can compel an individual to purchase health insurance has led to numerous challenges of the PPACA. The argument most frequently used when arguing that the PPACA is unconstitutional is that Congress lacks the authority under the Commerce Clause to regulate inactivity, and that not purchasing health insurance is inactivity. This argument, however, fails upon closer examination of how the health care system, and perhaps more importantly, the health insurance system work in the United States today. The US Court of Appeals for the Sixth Circuit, in its opinion upholding the constitutionality of the PPACA, recognized the key fallacy in the "inactivity" argument—failure to purchase health insurance does not guarantee inactivity with regard to health care.

As of November 2010, the Centers for Disease Control and Prevention (CDC) estimated that almost 60 million Americans lacked health insurance. While the morality of allowing so many of our citizens to go without adequate health care access can be debated, what is not debatable is the effect those 60 million people have on the overall cost of health care. The reality is that while these people do not have health insurance, they still become sick or injured and must seek treatment from doctors and hospitals. As the Sixth Circuit stated in its ruling, "[v]irtually everyone requires health care services at some point."

Unfortunately, health care providers bear a large burden when it comes to providing services to the uninsured. Hospitals receiving federal money in the form of Medicare payments are required by the Emergency Medical Treatment and Active Labor Act to treat all patients presenting with emergency conditions, without consideration for their insurance status. This means that individuals without insurance will receive hospital treatment, regardless of their ability to pay. While hospitals are allowed to bill uninsured patients for the cost of their care, these individuals often lack the funds to pay for the care they have received, meaning that hospitals are left holding large uncollectable balances for care already given. In 2008, the cost of uncompensated care for hospitals nationally was about $43 billion, or 5 percent of hospital revenue.

A 5 percent drop in hospital revenue can have a large impact, particularly hospitals in lower population density areas that struggle to provide adequate care in their communities while competing with larger health care entities. As a result, hospitals must attempt to make up the lost revenue by raising costs for all patient care in hopes of obtaining higher payments from insurance companies for the care of insured patients. Health insurance companies then pass on the increased costs to the general public in the form of higher premiums. The last part of this self-perpetuating cycle, which leads to the ever-increasing cost of health care in America, is that as insurance premiums rise, more and more individuals are priced out of the insurance market, resulting in a continual increase in uninsured individuals.

The Sixth Circuit rightly acknowledged that a failure to purchase insurance is not a failure to participate in the health care system, stating, "[v]irtually everyone participates in the market for health care delivery," and "far from regulating inactivity, the [individual mandate] regulates active participation in the health care market." With the PPACA, Congress was not attempting to regulate the inactivity of purchasing health insurance but rather was attempting to regulate the broader health care system.

The US Supreme Court has a long history, dating back to their ruling in Wickard v. Filburn, of acknowledging Congress's broad powers under the Commerce Clause in regulating economic activity, even activity that may only affect commerce in the aggregate. It would be almost impossible to argue that health care in America is not a commercial activity. In 2009, health care expenditures in the US were nearly 18 percent of the gross domestic product (GDP). Clearly, health care is a commercial activity, and in reaching the conclusion that Congress was regulating health care with the individual mandate provision, it is necessary to conclude that the individual mandate is constitutional under the Commerce Clause.

Even if the Sixth Circuit had found that the individual mandate exceeded Congress's authority, it is likely that the authority for the provision could be found under the Necessary and Proper clause. The Constitution gives Congress the authority to "make all Laws which shall be necessary and proper" for the execution of its enumerated powers (in this case the authority to regulate commerce). With the almost certain conclusion that health care is an economic activity, the individual mandate would need only be essential to the broader regulation to be constitutional.

The basic nature of insurance is what makes the individual mandate necessary to the broader efforts to regulate health care costs. The basic aims of the PPACA are to lower health care costs in America, and grant more individuals access to health insurance. In order to accomplish these goals, the PPACA places more restrictions on insurance companies to prevent them from denying access to high-risk, or high-cost patients. Basically, the PPACA is opening the doors to all individuals regardless of medical history. In doing this, the insurance companies are going to be taking on individuals with expensive medical needs, making their profits decrease. In order to compensate for the more expensive individuals, insurance companies will be forced to raise their prices, again contributing to the self-perpetuating cycle resulting in a higher number of uninsured individuals.

However, there is another way to insure the "sick" population, without causing insurance companies to increase costs—require healthy individuals to purchase insurance as well. When enough "healthy" individuals purchase insurance, they offset the "sick" population the insurance companies are forced to insure under the PPACA. This will stabilize the cost of health insurance, making it more affordable for all. The PPACA relies on the influx of healthy and currently uninsured individuals into the health insurance market to make the overall scheme function. Therefore, the individual mandate is a necessary aspect of the broader health care regulation scheme.

The Sixth Circuit's opinion was an important first step in settling an issue that will ultimately be resolved by the Supreme Court. It provides a strong foundation and a compelling argument for why the PPACA is constitutional. Hopefully, the Supreme Court will come to the same conclusion.

Hillary Stemple, a senior editor on JURIST Paper Chase, is the 2011 recipient of the University of Pittsburgh Esther F. Teplitz Award for Health Law. She graduated from Pennsylvania State University with a degree in Biology and Nutrition and later served as the manager of an orthopedic practice.

Suggested citation: Hillary Stemple, Necessary and Proper: Health Care Costs and the Individual Mandate, JURIST - Dateline, July 8, 2011, http://jurist.org/dateline/2011/07/hillary-stemple-health-care-costs.php.



This post was prepared for publication by Megan McKee, the head of JURIST's student commentary service. Please direct any questions or comments to her at studentcommentary@jurist.org

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