Marginal Utility

by Tom Bozzo

Mark Kleiman has a good analysis (via MaxSpeak) of the moral dimensions of the recent decision from a panel of the 9th Circuit Court of Appeals in Jane Doe. In that case, among other things, the John Ashcroft Justice Department was compassionately (*) seeking reimbursement for the abortion of an anencephalous fetus that a lower court had ordered TRICARE (the medical benefits program for military service members' dependents) to pay for.

The decision hinged on the language of 10 USC §1093(a), which the court interprets as banning TRICARE from paying for abortions:

(a) Restriction on Use of Funds.--Funds available to the Department of Defense may not be used to perform abortions except where the life ofthe mother would be endangered if the fetus were carried to term.

and a Supreme Court decision, Harris v. McRae, in which similar statutory language applicable to the Medicaid program was upheld:

[6] McRae’s applicability here cannot be denied. Doe challenges a statute nearly identical to one that passed constitutional muster almost 25 years ago. The only difference Doe urges upon us, that the Hyde Amendment affects women on Medicaid whereas § 1093(a) prohibits funding for women covered by TRICARE, is insufficient to distinguish it from controlling the outcome of Doe’s appeal. See Britell II, 372 F.3d at 1384. Therefore, we are bound by the Supreme Court’s holding in McRae.

I'll leave the court's application of the law to the lawyers. However, the court failed to note a significant economic difference between Medicaid and TRICARE: dependent medical benefits are part of the compensation package for active duty servicemembers, whereas federal Medicaid funds are (indirectly) grants to the eligible poor. So the decision economically relates to the freedom to use various forms of compensation for any otherwise legal purpose.

The upshot is that the decision treats cash compensation of servicemembers differently from in-kind compensation like the TRICARE insurance benefits. The former, after all, comes from "funds available to the Department of Defense." But that Jane Doe is evidently permitted to use her own money (**), which comes in part (possibly substantial part) from a servicemember's DoD-funded cash compensation, suggests that those funds are somehow de-federalized when they pass into the servicemember's hands. (***) Compensation via TRICARE, in contrast, is never so transformed, the only economic difference being that the compensation is in-kind.

It could be argued, no doubt, that servicemembers enlist knowing the rules limiting TRICARE benefits, and thus understand that restrictions on the benefits merely reduce the cash-equivalent value of the benefits (something that is more likely legally rather than literally true). But consider a counterfactual world in which servicemembers were paid the expected cash value of the benefits. The same amount of DoD funds are committed in that world, but the funds in lieu of TRICARE benefits would seemingly be allowed to be spent on any legal medical service.

It's funny how economic liberty is more important in some parts of the economy than others.

Additional comment: I wrote this under the assumption that it's a settled matter that at least some types of strings attached to in-kind compensation are legally permissible, but I am curious to know if there are general principles as to how one's employer can or cannot restrict employees from using their compensation as they see fit.

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(*) Irony alert.

(**) The issue is that Ashcroft was seeking the money back, not to prevent the abortion itself.

(***) It should be noted that part of the supposed rationale behind the "global gag rule" is that money is fungible among organizations' accounts, so financial controls can't be counted on to ensure that federal funds are only used for permissible pueposes.