Peter Passell
Editor, The Milken Institute Review; Senior Fellow
California and Capital Markets and Europe and Finance and Global Economy and Labor and Public Policy and U.S. Economy
Peter Passell is editor of The Milken Institute Review, the Institute's economic quarterly. A senior fellow, Passell joined the Institute after eight years as economics columnist for the news department of The New York Times. He previously served on the Times' editorial board and was an assistant professor at Columbia...
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The new nuclear option
By: Peter Passell
December 15, 2010

Conservatives' wishes were fulfilled this week, as a federal judge in Virginia declared the individual insurance mandate - the requirement under the new health care law that everybody buy insurance by 2014 or pay a financial penalty - to be unconstitutional. But it's a bit early for opponents of Obamacare to declare victory. Indeed, even if they prevail in the Supreme Court and dismantle a key provision of the law, they may yet rue the day.

First, a reality check: Only one of three federal district courts hearing the case against the law has decided that the mandate goes beyond the powers of Congress. That means the Supreme Court won't be able to duck the case. But opponents will still have to convince the swing justice - Anthony Kennedy - that individual rights trump Washington's authority to regulate interstate commerce.

And even if the Supremes do deep-six the mandate, there could well be a legislative fix that bypasses the constitutional issue. For example, one could imagine a rule that eliminated the penalty for those who did not insure themselves, but required them to pay far more for insurance once they get wiser (or just older) and decide to buy in.

Ah, you say: Republicans might not be able to repeal the law, but they certainly have the power to prevent Congress from repairing the one already in place. You're right, of course. But that would only be the beginning of the political game.

The mandate was put in the law (ironically, in spite of candidate Obama's opposition to protect insurance companies as well as buyers of insurance. If young, healthy people are allowed to opt out of purchasing insurance in a world in which insurers are not allowed to refuse coverage to the middle-aged and the sick, the price of insurance becomes (even more) astronomical. Indeed, one would expect a downward spiral in which insurance becomes too expensive for everyone except for those who are already sick, destroying the whole private insurance system.

So the Republicans' decision to prevent a fix would amount to a nuclear option - one that buries the private insurance industry as well as leaving pretty much everybody without coverage but the poor and the old (whose insurance is paid for by government). Would the insurance industry lobbies really allow this to happen?

Of course, one could turn this brinkmanship on its head. The Republicans could say the responsibility lies with the Democrats, who could join them in repealing the detested law and restoring the pre-reform system. But that would anger a lot of voters who had already grown accustomed to the provisions of the law that allowed them to insure their adult children through their own carriers, and guaranteed that insurance companies couldn't refuse coverage to anybody.

The political games that would ensue would no doubt enthrall news junkies and keep the cable ratings up. But my guess is that it would also discredit politicians who tried to undo an imperfect health care reform law, rather than to work to improve it.


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