Government by Coercion
What Obamacare’s individual mandate and Medicaid expansion have in common.


Mario Loyola

George Will recently touted an elegant amicus brief by the Institute for Justice that assails the individual mandate on the novel ground of contract law: It requires individuals to enter into insurance contracts. Because voluntariness is a basic element of contract formation, IJ argues, the mandate runs counter to centuries of contract law. As Will puts it, “a compulsory contract is an oxymoron.”

In many areas of private law, including insurance, that proposition is correct. But by the same token, the rules have always been different for those who occupy a monopoly position. When one of the parties is a monopoly, the law has long required that the contract be reasonable and nondiscriminatory. The fear is that monopolies will exploit parties who have nowhere else to go.

That limitation on contractual freedom is thought to benefit the state as a whole. Yet the result is otherwise when the monopolist in question is the state itself. American constitutional law has dealt with that problem through the doctrine of unconstitutional conditions, which seeks to prohibit the use of the taxing power to accomplish things the government could not accomplish through direct imposition. 

Alas, that principle has had a hit-and-miss history at the Supreme Court, which takes a far more permissive view of coercion (by the government) than of “compulsion.” Indeed, in some recent cases, the Court would have you believe that what the federal government cannot compel you to do, it has the power to “encourage” you to do, even if the encouragement is just the opportunity to avoid a penalty. 

The philosophical difficulty here rests on the observation that the presence of choice does not imply the absence of coercion. On the contrary, coercion implies choice. “Your money or your life” is what the robber says. He leaves you a choice, but has engaged in coercion nonetheless.

Where recent Supreme Court cases have gone astray is to imply that some forms of coercion can be thought of as “encouragement” while other, more severe forms, can be regarded as “compulsion” where the law is concerned. If that is true, then no “law,” properly so called, is really compulsion, because every law is backed by a penalty — and you always have the freedom to choose between complying with the law and accepting the penalty. The great Positivist legal philosopher Hans Kelsen demonstrated at least that much in his Pure Theory of Law (1960).

If the Supreme Court’s doctrine of coercion is taken to its ultimate conclusion, all “laws” are merely “encouragements.” From that standpoint, the Constitution’s limits on government power, including even the right of due process, appear to depend entirely on the arbitrary application of a distinction without a difference.

The individual mandate, for example, does not really “compel” individuals to purchase health insurance. It is, rather, a choice between purchasing health insurance or paying a tax. But precisely the same may be said of Obamacare’s Medicaid provisions, which require states to expand their Medicaid programs as a condition of continuing to receive federal Medicaid matching funds. That statutory command is at bottom a choice between complying with the federal dictate or losing money the state’s residents are paying in taxes — in other words, a tax penalty.

Recent Supreme Court decisions nevertheless see a profound difference between these two kinds of law. Hence, if the mandate cannot be justified as an exercise of the commerce power, it will be struck down, because the mandate is considered a “requirement” and is therefore subject to the Constitution’s limits on federal power. But the Medicaid expansion will almost certainly be upheld, because it is not classified as a “requirement,” just a form of “encouragement,” and is therefore not subject to the Constitution’s limits.

This false distinction lies at the root of the most fatally flawed of its modern precedents: South Dakota v. Dole (1987), the case that will receive the most attention during today’s oral argument on the Medicaid expansion provision in Obamacare.

Dole held that the federal government could dock states up to 5 percent of federal highways funds if they did not raise their drinking age to 21. The Court has long paid lip service to the danger that, by withholding public moneys, the federal government might accomplish things that it cannot not compel directly under its affirmative powers.