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The Reid Bill: coercive and unconstitutional

December 22nd, 2009 - 9:35 am

A few years ago, Hilton Kramer and I commissioned a series of essays for The New Criterion on the illiberal underside of liberalism. We later published revised versions of the essays under the title The Betrayal of Liberalism: How the Disciples of Freedom and Equality Helped Foster the Illiberal Politics of Coercion and Control. I mention this now not only to help readers out with their last-minute Christmas shopping but also to highlight the message of our subtitle: “How the Disciples of Freedom and Equality Helped Foster the Illiberal Politics of Coercion and Control.” It is one of the underappreciated ironies of our age, I believe, that many who call themselves “liberals” habitually support policies that are distinctly illiberal — often, indeed, are downright coercive — in their effect.

A proper anatomy of this phenomenon would take a book. It might start with Jean-Jacques Rousseau, whose deficient sense of the reality of other people could never compete with the satisfaction he took in contemplating his own virtue. And it might end with the revolutionary health care bill now wending its way through the U.S. Congress. Of course, the people touting the bill say — perhaps they even believe — that it will be good for Americans and that it will save money. Critics (of whom I am one) say that it will be a catastrophically expensive suite of legislation that will limit choice, impede medical innovation, and degrade the quality and timely delivery of medical care.

Like any ambitious piece of legislation, however, the bill to restructure American health care raises issues that go far beyond its primary purpose. The President touched on this obliquely in his “precipice” gaffe: we are, he said, “on the precipice of achievement . . . that will touch the lives of nearly every American.”

“Precipice,” “threshold,” whatever: he is right, anyway, that if the current bill becomes law it “will touch the lives of nearly every American.”

How will it “touch” us? Let me count the ways. Colloquially, first of all, as when we speak of “touching” someone for money. (What easy touches we have all turned out to be!)

But it will touch us in other ways as well. To appreciate one central way in which the bill will touch our lives, consider “Impermissible Ratemaking in Health-Insurance Reform: Why the Reid Bill is Unconstitutional,” the somber essay the eminent legal scholar Richard Epstein has written. (It appears on the web site of PointofLaw.com, but like so much important commentary these days, I came across it here, at Instapundit.) If you read nothing else this holiday season, read this. It is not cheering, exactly, but it is, after its fashion, bracing. For it not only makes good on its subtitle, explaining “Why the Reid Bill is Unconstitutional,” it also lays bare the coercive heart of the bill.

Really, the whole essay is worth reading, but here are a couple of snippets to set your heart beating:

On the one hand, the Reid Bill depends on a combination of huge general tax increases, which is coupled with special levies on industries such as medical-device and pharmaceutical companies. These tax revenues are then used to fund subsidies for large segments of the population in order to allow them to purchase qualified health-care plans that are sold through a set of State Exchanges that the Reid Bill creates. In order to prevent these subsidies from flowing through to the various health-insurance issuers, the Reid Bill imposes extensive obligations on any health-insurance issuer or health-plan provider that wishes to participate within the system in order to keep them from capturing subsidies meant for others. The effect of the subsidies is to increase the level of health care that will be demanded in the United States. The effect of the regulations is likely to be to impose huge costs on various health-insurance companies as they struggle to meet the influx of demand when they are at the outer limit of their capacity.

There are at this point enormous uncertainties about how this entire scheme will play out. My view is that it will prove ruinous on all three fronts. The general public tax increases will be so sharp that it is unlikely that they will generate additional revenues. The subsidies will be so large that the demand for medical services will be left largely unsatisfied, so two consequences are likely. First, an increased queuing for various health care services is to be expected. Second, there will be increased pressure to exclude large groups of people from the system, on the lines of Massachusetts’s recent decision to cut from its system 31,000 legal immigrant aliens (who pay taxes but do not vote).

The boldface is mine. Pour yourself some eggnog, and don’t stint on the brandy. Then look at this:

Furthermore, on the supply side of the market, all health-insurance companies will find themselves in an impossible dilemma. If they decide to offer their health-insurance plans outside the State Exchanges, they will be unable to compete for the subsidized consumers who are only able to spend their tax dollars within the framework of the State Exchanges. Their position will be worse because they shall continue to be subject to all present mandates and regulations that have an impact on their business. Insurers outside the Exchanges also face the likely prospect that they will still be further taxed and regulated to help finance the intolerable burdens that arise under the subsidized insurance supplied within the State Exchange system.

This level of systemic coercion frames the debate about the constitutionality of the Reid Bill. Those parties that do not wish to suffer the Bill’s regulations in order to gain access to a subsidized consumer base are not free to compete in an unregulated market. Direct federal and state government regulation remains a fixed feature of their life. Government regulators at the state and federal levels have both the power and the motive to hit non-Exchange health insurance issuers with a range of taxes and regulations that could quickly make their economic position intolerable.

The twin burdens of Professor Epstein’s essay are to show 1) the coercive nature of what he calls “the Reid bill” that is on the cusp of being passed by the Senate and 2) to show why, as a point of law, several aspects of the bill raise serious questions about its Constitutionality. I think Professor Epstein makes a powerful case, though I have my doubts about whether a Constitutional challenge would be successful. Still, it is worth understanding the case and it is worth reminding ourselves why the Constitution is important. The Constitution was framed in order to enshrine certain rights and to protect people from capricious interference from the state. The larger question we face, larger even than the fate of this obscene piece of legislation, is to what extent the state still respects the provisions of the Constitution that its servants have sworn to uphold. Richard Epstein has outlined a devastating case. What happens next?

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