Unfunded Mandates: Congress Is Targeting Business Instead of Governments

Commentary by Pete du Pont

One of the success stories of the Contract With America is that Congress has made it illegal for the federal government to impose unfunded mandates - requirements to take certain actions or provide certain services without providing the federal funds to pay for those mandates - on state and local governments.

Unfunded mandates have been a real burden in the past, forcing state and local governments to spend millions and even billions of dollars while members of Congress took the political credit for good deeds. For example, Columbus, Ohio, complained in 1991 that Congress was forcing it to spend $62 million to fulfill environmental mandates. The National Association of Towns and Townships estimated that unfunded federal mandates cost local taxpayers about $6.5 billion in fiscal year 1993.

The new Republican Congress with great fanfare put a stop to it. Or so it claimed. But the fact is that Congress hasn't really repented of its past sins, it has just changed its focus - from local governments to private businesses. Congress' new mandate addiction can best be seen with regard to the issue of health care reform.

People without health insurance sometimes develop a medical condition and then have difficulty finding an insurer to provide health coverage. Although this is a relatively small problem for the U.S. health care system - surveys show that less than 1 percent of the population has been denied health insurance because of an preexisting medical condition - it is nevertheless real. And its solution - Congressional mandates to help the poor and the ill - has irresistible political appeal.

But Congress does not have the money to solve the problem of the uninsurable, and under its new rule against unfunded mandates, it cannot tell the states to handle it. So it has decided, through the Kassebaum-Kennedy Health Insurance Reform Act, to tell health insurance companies - primarily those that write health insurance policies for individuals - that they must accept and pay the costs of medical care for the uninsurable.

While everyone agrees this bill will increase the cost of health insurance - the difference of opinion is only how much - Congress is not required to provide the funds to businesses. It just tells health insurers what to do, takes the credit for solving the problem of the uninsurable, and passes the costs of the unfunded mandate on to business, and ultimately consumers.

A second example concerns mental health. Health insurance companies often treat mental health problems differently than they do physical health care problems, primarily because mental health science is much more complex and less understood than physical health science, and mental health illnesses less specific. It can also be much more difficult to tell when a patient is "cured" of a mental health problem than of a physical ailment. A broken limb can be seen to mend. Mental uneasiness has no obvious limits and can linger indefinitely.

As a result, insurers have been reluctant to give mental health care the blank check it has provided for traditional health care and insurance coverage for mental health services is much more limited. Some in Congress would like to solve that problem by telling insurers that their policies must cover mental health care needs to the same extent their policies cover other medical conditions.

Once again, Congress praises itself for its compassion and passes the unfunded mandate - the costs along with the economic chaos - on to private-sector businesses.

Unfortunately, health insurance isn't the only place Congress is considering imposing unfunded mandates on business. Consider the recent struggle over increasing the minimum wage. Congress wants to raise the cost of labor to both state and local governments and private employers, requiring them to pay the cost.

This is a perfect example of members of Congress appealing to the American public, explaining how concerned and compassionate they are about the plight of the low-income employee, and how Congress is going to solve the problem by raising their wages. What they don't make so clear is that they intend to require business to pay for their compassion.

Worse, the 23 Republican Congressmen pressing the Republican leadership to increase the minimum wage all voted for the unfunded mandates prohibition. Most of them even voted against an amendment exempting the minimum wage from the unfunded mandate prohibition. So much for candor in government.

Perhaps what we need is a Contract With America II, with a provision that would protect private companies from unfunded mandates the way the first Contract protected state and local governments.

Simply put, if Congress isn't willing to pay for something, it ought not require someone else to buy it.