Almost two years after being passed into law, the Patient Protection and Affordable Care Act—known to most of its enemies as “Obamacare”—remains a subject of great controversy. Some argue that, by allowing the federal government to require citizens to buy health insurance or pay an extra tax, it goes too far. Others argue that, by failing to offer citizens a public option for health insurance, it does not go far enough. Professor Hadley Arkes of Amherst College belongs to the first group. In the December 2011 issue of First Things, he makes the claim that the health-insurance mandate in the Affordable Care Act is not only unconstitutional; it also violates natural law (“Natural Rights Trump Obamacare, or Should”).
Arkes rehearses several standard objections to the Affordable Care Act. He claims the law will allow the federal government to control more than one-sixth of the economy, and that it will lead to health-care rationing and even death panels (though he doesn’t use that term). Such claims have nothing to do with natural law, of course, and they can be easily rebutted without reference to natural law. Health insurance will still be in the hands of private companies, not the federal government, so the claim that the government will now “control” a sixth of the economy is false, unless the word “control” here simply means “regulate.” As for rationing, health care is already rationed in America, not only for the 50 million or so people who can’t afford it, but even for those who have private insurance policies that define and limit their benefits.
Arkes’s argument about death panels rests upon the assumption that “the generous provision of care to the poor would come along with controls that would deny to ordinary people the medical care they would regard as necessary to the preservation of their own lives, perhaps when they were even willing to pay for that themselves.” In fact, the Affordable Care Act does no such thing: it doesn’t “deny” necessary medical care to anyone, and it doesn’t prevent “ordinary people” from buying supplementary coverage if they feel they need it and are willing to pay for it—any more than Social Security prevents supplementary retirement-savings programs.
But these claims function as little more than emotional intensifiers in Arkes’s essay; his real argument is that the Affordable Care Act’s “individual mandate” will force people to enter into insurance contracts against their will, and that “imposing on people a contract that they do not want would be quite as wrong as dissolving, without their consent, a contract they had knowingly made.” How strong is this argument?
By mandating that everyone buy health insurance (or pay some kind of penalty), the Affordable Care Act would seem to violate the principle that contracts must be entered into freely. The actual content of a contract is not supposed to have any bearing on this principle. What matters is only that the signer of a contract had the choice to take it or leave it.
But is the content—and the social context—of a contract really irrelevant when we are talking about natural law? Are current insurance contracts unencumbered in the way that Professor Arkes suggests? To see why they are not, one has to consider who pays for what in the U.S. health-care system.
There are four general groups of people who receive health care in the United States. These are Medicare patients, commercial patients (workers with insurance), Medicaid patients, and patients who are either “self-insured” or who cannot pay anything and are not able to join any of the three other groups. On average, hospitals get 98 percent of their costs for Medicare patients, maybe 60 percent of costs for a Medicaid patient, and maybe 25 percent from people who are entirely uncovered. Medicare patients usually represent the largest portion of the payer mix in any hospital, so the two-percent gap between what it costs hospitals to pay for Medicare patients and what Medicare actually pays in medical fees turns out to be a large part of hospitals’ uncovered expenses. (The federal government withholds the 2 percent to create an incentive for hospitals to become more efficient.) But Medicaid patients and the uninsured also leave a large gap in any hospital’s finances. While most hospitals are not-for-profit, all of them need to generate what would ordinarily be called a profit for future expansion or capital improvements.
So the funding gap has to be made up by someone, and this someone is the privately insured patient, who pays between 120 and 140 percent of costs. This is why commercial insurance rates tend to rise even faster than the overall cost of health-care. Commercial payers have to cover the cost gaps for everyone else, as well as the ones generated by inflation. Every commercial insurance contract contains this subsidy, and while one can choose freely to buy or not to buy insurance, one cannot choose to buy insurance without paying the subsidy. (The underlying inflation for hospital charges is higher than the general rate of inflation even without counting the subsidy, because medical advances are expensive, and because they keep more sick people alive longer to use more services.)
Together, the cost of inflation and the cost of the subsidy are no longer sustainable. Many businesses can no longer afford to provide medical benefits, and so they drop out of the commercial-insurance pool. On the one hand, this means fewer commercial payers to shoulder the subsidy. On the other, it means more people migrating to the other three categories—Medicare, Medicaid, and those who are neither insured nor rich—which increases the need for the subsidy.
This is the cause of the current crisis in the American health-care market. This crisis also affects our economic competitiveness with other industrialized countries that have figured out how to control these costs. Hence the Obama administration’s decision to mount what is in effect an intervention in the market.
But to really get to the bottom of the health-care crisis—and to see what’s wrong with Arkes’s argument—you need to understand more than the dynamics of the market. You must also understand the social contract that underlies it. As it happens, this contract actually has a name. It’s called the Emergency Medical Treatment and Active Labor Act (EMTALA), which was passed in 1986 under President Reagan. With that law, the nation decided that it wouldn’t allow health-care providers to toss indigent patients into the street. Hospitals have to treat anyone who comes to them, whether or not the patient can pay. Because of this law, there is no longer a neutral market space, of the kind imagined by Arkes, in which people can choose either to have health care or to forego it. Those who pretend to be taking their own chances by not buying insurance are really doing no such thing. If they show up at an Emergency Room before they are eligible for Medicare, they will be subsidized by tax-payers and those with private insurance. In other words, EMTALA is—in addition to being a very humane piece of legislation—an unfunded mandate. If Arkes believes that hospitals should be allowed to deny care to sick and injured people without health insurance (or without enough money to pay for services out of pocket), he should say so outright, for this is one of the consequences of his argument about contracts. That hospitals cannot do this now is one of the things that makes health insurance different from all other forms of insurance.