Entitlement Reform Deja Vu

Re.: Jim, states clearly have the power

States currently require auto insurance, for example. So, Congress simply requires the states to do so as a condition of keeping their medicare and medicaid subsidies.

Just so -- except for the word "simply".

Consider the case of the national 55-miles-per-hour speed limit, which was simplicity itself compared to national health care.

Congress couldn't constitutionally impose it on drivers directly, so it went through the process of giving states a reason to do so individually via the "federal highway funds" incentive.

The federal requirement was very unpopular in lots of places and the states had very different responses, with a good number enacting technical "loophole" minimums to keep the highway funds...

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Arizona, Idaho, Montana, Nevada, and Utah replaced traditional speeding fines with $5-$15 energy wasting fines as long as drivers did not exceed the speed limit in effect before the 55 mph federal requirement
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... while whatever state law was enacted, it was always a simple thing just to ignore enforcement, even in states with big fines "... on New York's Interstate highways an 83% noncompliance rate was found despite extreme penalties ranging from $100 (1982 dollars) or 30 days jail on a first offense."

Congress looked the other way, of course, and never pulled any state's highway funding. Even though its mandate was basically -- in many cased overtly -- ignored. What else was it going to do? Eventually it dropped "55".

That's about the simplest example of Congress "requiring" states to do its will -- and it turned out to be not so simple.

Consider the simplest version of requiring states to make everybody buy health insurance -- much simpler than the Democrats' actual proposal (whatever it may turn out to be, since they don't actually have one but five conflicting ones so far.) Supppose it says, "every state should require that everybody purchase insurance coverage, the federal government will pick up the cost for the uninsured who can't afford it", then passes some "stick" rules to punish states that don't go along. That's the whole proposal for universal coverage.

Remember too the larger context, how federal law segregates each state's insurance market from competiton ... exempts state government rules on health insurance from the Commerce Clause (enabling states to establish protectionist rules for local politically-protected favorites -- which enables those favorites to collect way high premiums for politically mandated benefits) ... and exempts state-regulated insurers from anti-trust rules (securing the protectionist-monopoly local insurance arrangements).

Now two issues immediately jump to mind, with hardly any thought:

1) People in low insurance cost states object "Why should we pay income taxes to transfer them to New York to pay for premiums that are five times higher than we pay, because New York mandates that insurance pay for all kinds of benefits (whether people want them or not) that we don't get here?"

2) Worse, politicians in New York right away, and elsewhere soon enough, start thinking: "Hey, let's ladle *more* mandated benefits into policies -- from coverage for sex change operations to Weight Watchers memberships to medical seances with missed ancestors. Premium costs can't possibly be pushed up too high now! Because if people drop coverage due to it being too expensive, the feds will pay for it for them!.

This is not a mere theoretical concern. Say: Medicaid. It's the worst financial mess of the US health care system, with the most fraud (not to mention waste), least management, and fastest expense growth, now rivaling Medicare and crushing many state budgets. How could a single-payer system be so bad?

The answer is incentives. Medicaid cost-bearing is split, so nobody pays the full freight. In NYS, where Medicaid finances are the worst anywhere, they are split three ways -- feds, state and local overnment each pay a share. Local politicians who set benefit levels pay only around 33 cents in taxes or borrowing for every $1 they spend. "Wow, for 33 cents I get to hand out $1.00!" Overspending! And as for cost control: "For every $1.00 I save I get only 33 cents? Yuch. Who's going to do that?"

Results: Serious reports of 40% fraud levels, while ... "Over half of states now spend less than one-tenth of 1 percent of their Medicaid budgets to fight fraud ... New York cut the number of health-department staffers combating Medicaid scams from 200 to 50 [as] expenditures have grown by $30 billion ...[CJ]

That's the direct result of the incentives in the structure of the program.

Economics is about incentives. If you tell the states: "If you have uninsureds we'll pick up the cost of them for you", the states will create uninsureds. How will *that* "bend the cost curve"?

All that is to be argued over in just the simplest schematic of things. Now imagine all this is introduced in the middle of the current big fight over Obamacare -- a new element of the plan becomes that state goverments will be required to enact mandatory insurance purchase rules on their own, state by state. Like with the 55 MPH speed limit.

Now state-level politicians are drawn into the fight. They'll have to start conducting town hall meetings of their own to explain their positions, how they'll enact local mandates, whether they want to or not, and deal with the crowd response.

The Dems' health reform plan, whatever it may finally be, is tanking in the polls. Clearly, with such low and falling numbers, in some states the majority of voters are against it. National-level Dem politicians from such states may feel the unhappy duty to stay "on board" with the proposal for reasons of party discipline, et. al.

But state-level politicians have no such obligation. Why would state-level Dems in such states feel obligated to risk getting themselves unelected by coming out with some sort of "universal purchase mandate" (subsidizing New Yorkers) that their voters don't want, to support a larger reform program that their voters don't want? What if state-level Dems in just a few of these states say to their Congressmen: "No! And we run the political organizations that get you elected."

If one is a supporter of Obamacare, does one really want to extend the political fight in this direction?

If not, then one had better hope somebody has already thought of this and found a Contstitutional "hook" to hang mandated individual insurance purchases on, directly. But the authors of the WaPo op-ed are correct in that if someone has, nobody has explained it in public and been noticed.

So in sum, sure, Congress can set up a carrot-and-stick arangement to push the states to all enact their own rules mandating individual health insurance purchases. But "simply"? No.

Remember, Congress's simple attempt to compel the states to enact the universal 55 MPH speed limit failed.

Re. Constitution has nothing to do with this

Medicare is a tax-and-spend program.

It's not a program regulating individual behavior.

It's a rather basic point that the Constitution was adopted specifically to limit the power of the federal government to regulate individual behavior.

You'll note that when Congress wanted a national 55 miles per hour speed limit, it couldn't simply enact one and impose it directly.

Instead, it had to go through the process of giving the states incentives to enact it individually. (And the states had highly varying individual responses and degress of compliance.)

If you think Congress can directly require individuals to buy insurance or any other financial (or non-financial) product, you'll have to suggest the enumerated power of the federal government in the Constitution that authorizes this.