Academic journal article Harvard Journal of Law & Public Policy

The Constitutionality of the Patient Protection and Affordable Care Act: Swimming in the Stream of Commerce

Academic journal article Harvard Journal of Law & Public Policy

The Constitutionality of the Patient Protection and Affordable Care Act: Swimming in the Stream of Commerce

Article excerpt

In March of 2010, Congress enacted the Patient Protection and Affordable Care Act (1)--to which I will refer simply as "the Act"--to cope with what Congress believed was a crisis in the $2.5-trillion healthcare industry, which accounts for about 17% of our GDP and covers an array of providers, consumers, supply chains, and financing schemes operating across state borders.

Congress viewed this situation as a crisis. Tens of millions of people have no health insurance. Some lack coverage because they cannot afford the premiums, others are denied coverage by restrictive industry practices, and still others are uncovered because they choose to gamble that they will never need healthcare beyond what they can pay for out of pocket. Yet virtually all of these people participate actively in the healthcare market, and many end up consuming healthcare services for which others pay, because a basic feature of American law and culture is that hospitals cannot turn away people who need emergency treatment. In this respect, the healthcare market is unlike any other in our society. The result is that uninsured patients end up inefficiently shifting well more than $73 billion a year in healthcare costs to other market participants, raising the average family's annual insurance premium by about $1000, making health insurance unaffordable for even more people, increasing taxpayers' health-related burdens by at least $30 billion, and exacerbating the healthcare crisis. (2)

After extensive study, Congress addressed this vicious cycle through a comprehensive program of tax measures and market regulations. The Act builds on the existing nationwide system of employer-based health insurance by creating new tax incentives for businesses to pay for insurance for their employees. It provides for the creation of health-insurance exchanges through which individuals, families, and small businesses can leverage their collective buying power to obtain health insurance at more favorable rates; establishes federal tax credits to help households with incomes between one-and-one-third and four times the federal poverty level to buy insurance on those exchanges. The Act also expands Medicaid eligibility to those with incomes below one-and-a-third times the federal poverty level, with the federal government paying all of the added expense through 2016, and all but about 10% beyond 2020. (3) The Act forbids insurance industry practices that have kept individuals from obtaining and maintaining health coverage because of preexisting medical conditions, and it requires that premiums be based on community-wide criteria rather than on a person's individual medical history. (4) Finally, the Act amends the Internal Revenue Code in a manner that Congress expressly found essential to make these reforms of restrictive industry practices work. (5)

The Act does so by providing that any nonexempt individual who fails to maintain a minimum level of health insurance and who is not otherwise covered must pay a tax penalty calculated as a percentage of household income, capped at the price of the foregone insurance coverage, reported on the individual's federal income tax return, and assessed and collected in the same way other assessable tax penalties are civilly collected under the Internal Revenue Code. (6)

The Congressional Budget Office estimated that imposing this tax penalty as part of the Act's comprehensive reforms will induce about 16 million otherwise uninsured people under the age of sixty-five to purchase health insurance without waiting until they need care, (7) while raising about $4 billion in tax revenue from people who opt to pay the penalty rather than purchase the required insurance. (8) The other provisions, the Congressional Budget Office estimates, will reduce the number of uninsured people under the age of sixty-five by between 16 and 17 million, bringing to roughly 33 million the added number who will be insured. (9)

There are a number of excellent policy arguments both for and against the Act. …

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