Why Might the Supreme Court Overturn the Health Care Reform Law?

In an interesting article at The Atlantic, Megan McArdle speculates about what might happen if the Supreme Court declared the Health Care Reform Law unconstitutional.

What Would Happen if the Supreme Court Struck Down Health Care Reform?

(Excerpt Below)

This weekend, I had a conversation with someone non-crazy who thinks there is a not-insignificant chance that the Supreme Court will overturn health care reform, or at least the individual mandate (it’s not clear what happens to the rest of the law if the mandate goes down; there’s some possibility that this would invalidate the entire law).  Mind you, this person was not suggesting that the chances were, say, 85%; more like 25%.
But in a case like this, 25% is a big chance.  So we spent a bit of time speculating about what would happen next.

At one point in the article, there’s an interesting link to a discussion of insurance and risk that touches on the issue of moral hazard.

(Excerpt Below)

The problem of moral hazard also affects government programs that insure people against misfortune. A variety of programs help people who suffer the misfortune of poverty. Aid to dependent children helps people who suffer the misfortune of having children to raise that they cannot financially support. Unemployment compensation pays people who suffer the misfortune of losing their jobs. Food stamps and public housing help the poor. Yet all these programs also suffer from problems of moral hazard. They increase children born out of wedlock, unemployment, and poverty.

Moral hazard is the result of maximizing behavior. A person weighs the costs and benefits of an action, and when benefits exceed costs, he takes the action.

This idea of moral hazard and maximizing behavior is one very good reason why the U.S. goverment should stay out of the healthcare (and charity) business. Bureaucracies are notorious for allowing the perpetuation of fraud, abuse, and scams.

But even more striking is the idea that if the penalty for not carrying health insurance were lower then the cost of purchasing a plan, and one didn’t qualify for significant assistance in the purchase of health insurance, then many people might choose to forgo coverage altogether. Therefore, the reasons given for the necessity of including within the law a mandate that everyone have approved coverage don’t hold up. If everyone must have coverage to keep rates affordable, but people can opt out by paying a lower-cost penalty instead, then the rates won’t be affordable, because the moral hazard is that people will choose the option that is best for them—not the option that’s best for everyone else—and who can blame them when it’s merely human nature and valid self-interest?

But back to my point.

By declaring the Healthcare Reform Law unconstitutional, the U.S. Supreme Court could redraw the lines marking the boundary of the Federal government’s power. The mandate, to me, seems the most likely area where the Federal government has overstepped its bounds. There’s also the issue of the Federal government using the commerce clause as the authority that gives it the power to regulate the health care insurance market. I think this is a clear stretching of the clause’s intent and purpose and I have high hopes that the Supreme Court will agree.

Would the entire law be thrown out if the U.S. Supreme Court invalidated any particular part of the law? I don’t know, but I would certainly hope so.