Could the individual mandate’s death resurrect the public option?

On June 29, the Sixth Circuit federal appeals court ruled that the individual insurance mandate in Obamacare is constitutional. Today, the Eleventh Circuit appeals court ruled that the mandate is unconstitutional.

While it has been pretty clear from the beginning that the appeals courts were just stopovers on the way to the Supreme Court, the rulings call into question what will happen if the Court finds that the individual mandate is indeed unconstitutional.

Opponents of Obamacare are hoping that the Supreme Court will come to this conclusion. They assume that the entire law will then fall into pieces and that Obamacare will thus have been defeated. But this is a premature conclusion: The Obama administration has an ace up its sleeve. It’s called “the public option.”

As of today, the public option is confined to the political shadow realm, having taken a beating during the 2009 congressional fight over health care reform. However, it will resurface as soon as the time is right. That time is when the Supreme Court has declared the individual mandate unconstitutional.

The public option does what the individual mandate was supposed to do, but instead of using a string of words in a law text, the public option utilizes another instrument of force: federal taxes. Because the public option is tax-funded, it is a mandatory purchase that is even more difficult to get away from than the original individual mandate.

Ultimately, the public option is a more ominous threat to our individual and economic freedom than the individual mandate. Because it will be tax-funded, it will compete with private insurance plans on unfair terms. Little by little, it will push private plans out of the market. After all, why should employers buy private plans when they can simply dump their employees into the public option, which everyone is paying for anyway?

Once everyone is on the public option, it is going to be incredibly difficult to return to a private insurance market. As the rest of the world can tell us, the consequences of such a government monopoly are hard to exaggerate. In 2005, a Quebec court declared the Canadian government health monopoly unconstitutional, yet Canada’s system is still standing. It has proven extremely difficult to re-introduce a market-based system.

Canada, Britain, France, Germany, Denmark and Sweden all exemplify the disasters that come with a completely government-run system. In every country with government-only health care — a public-option monopoly — medicine and treatment are rationed on a systemic level. And yes, countries with socialized health care do have death panels. (My book Remaking America: Welcome to the Dark Side of the Welfare State accounts for the health care disaster in Sweden. For another good account, see here.)

It may actually prove easier to maintain a private insurance market under the individual mandate than with a public option in place. Countries like Switzerland and the Netherlands have private insurance market coupled with mandates for employers to provide, or individuals to buy, health insurance. Both countries have working, though far from perfect, private insurance markets.

The legal challenges to Obamacare’s individual mandate are well-intended and morally right in theory. It remains to be seen whether they also are morally right in practice. Friends of market-driven health care should be prepared for yet another fight, namely the fight to stop the public option once it resurfaces.

Sven R. Larson is a research fellow with Wyoming Liberty Group, a free-market think tank. He has written two books and numerous research papers and articles about economic policy, state budgets, health reform and the welfare state. He is often interviewed by TV, radio and newspapers on his topics of expertise.