Individual mandate in Obama's health care law: good for freedom, bad for free-riders

The Supreme Court begins hearings today on the constitutionality of President Obama’s health-care law. At the heart of the hearings is the law’s “individual mandate,” requiring every American to purchase health insurance. Its critics tell us that the mandate violates basic constitutional principles of individual freedom and limited government.

Opponents ask: If the federal government has the power to compel all Americans to purchase private health insurance, why couldn’t it require every American to purchase broccoli and other foods that it deems healthy to reduce health-care costs?

They claim that if the government has the authority under the interstate commerce clause to penalize even inaction – in this case, the decision not to buy insurance – there is effectively no limit on what government could require. As Judge Stanley Marcus of the 11th Circuit Federal Court of Appeals asked: “If they [the federal government] could compel this, what purchase could they not compel?”

This idea has great currency in opponents’ circles, but its rationale is utterly flawed.

Why? Because of “free-riders.” A free-rider is a person who benefits from something without paying for it, meaning that somebody else must shoulder the cost. A primary aim of the insurance mandate is to prevent free-riders who receive health-care services but do not pay for them because they lack adequate insurance coverage.

In the health-care market, the only recourse that free-riders leave providers is to withhold their services in what are typically emergency circumstances – the very instances in which we all agree services should not be denied. It is often impossible, in any case, to determine whether individuals who are in severe pain or delirious can pay or not. Current law, in fact, does not permit providers to deny medical services in these circumstances. And beyond these logistical and legal obstacles, most providers are also reluctant to deny care for humanitarian reasons.

Free-riding, in turn, shoves the free-riders’ costs onto others through higher prices. This problem is so substantial that in 2009, Newt Gingrich castigated individuals who didn’t purchase health insurance yet could afford it, calling them free-riders and saying that they ought to be required by law at least to post a bond.

An insurance mandate aimed at stopping free-riders is in complete harmony with a free market. Indeed, the mandate is essential for a free market to be able to operate properly, which is why the Heritage Foundation, a fierce advocate of the free market, was among the first to propose mandating the purchase of health insurance as a solution to both the free-rider problem and rising health-care costs.

Other markets – like the ones for broccoli or spinach, or the vast majority of markets for other products and services – don’t normally face free-ridership issues at the point of service. Nor does free-ridership result from “inactivity” in these other markets the way it does in the health-care market. These distinctions provide clear grounds for differentiating the mandated purchase of health insurance from the myriad other purchase options individuals have within other markets.

Thus critics need not worry that the health-care mandate represents a “potentially unbounded assertion of congressional authority” as articulated by the 11th Circuit Federal Court, which ruled the mandate unconstitutional in August 2011.

Should the Supreme Court rule the insurance mandate to be unconstitutional, the mandate’s opponents will hail its decision as a victory for both freedom and limited government. The opposite will be so.

The court, instead, will have ruled for the one-sided autonomy of free-riders and rejected the freedom of providers, taxpayers, and consumers, subjecting them all to what is essentially a form of stealing.

Providers will be legally required, not to mention under the influence of professional obligations going back to the Hippocratic Oath, to deliver services to the free-riders without knowing or often even being able to determine whether they will be compensated.

To have to work without compensation is a core characteristic of forced labor. The providers then will be forced to finagle third-party consumers and their insurers – innocent bystanders – to pay for the free-riders’ costs by charging them higher prices.

If this is a victory for freedom, it will be for a fraudulent anything-goes notion of freedom that is amoral.

And if this is a victory for limited government, it will be so only in the false sense of a government rendered so impotent as to be incapable of protecting its own citizens from free-riders.

John E. Schwarz is distinguished senior fellow at Demos, a public policy organization in New York, and professor emeritus of government and public policy at the University of Arizona. He is currently writing "Common Credo: How Both the Left and the Right Have Led America Astray," to be published next March by W.W. Norton.