While Solicitor General Donald Verrilli Jr. made the Obama administration’s case for the constitutionality of the individual mandate in the health care law Tuesday, Supreme Court Justice Antonin Scalia interrupted and lectured Verrilli about American consumers, saying “These people [are] not stupid.”

Justice Elena Kagan, a former solicitor general appointed by President Obama to the high court, sided with Verrilli in arguing that young people should be required by the federal government to purchase health insurance because others will subsidize their health care in the future.

Scalia shot back, arguing that young people will make the decision to buy health insurance eventually and do not need to be forced by the federal government to engage in commerce.

The transcript of the exchange is below:

GENERAL VERRILLI: To live in the modern world, everybody needs a telephone. And the — the same thing with respect to the — you know, the dairy price supports that — that the Court upheld in Wrightwood Dairy and Rock Royal. You can look at those as disadvantageous contracts, as forced transfers, that — you know, I suppose it’s theoretically true that you could raise your kids without milk, but the reality is you’ve got to go to the store and buy milk. And the commerce power — as a result of the exercise of the commerce power, you’re subsidizing somebody else — JUSTICE KAGAN: And this is especially true, isn’t it, General — GENERAL VERRILLI: — because that’s the judgment Congress has made. JUSTICE KAGAN: — Verrilli, because in this context, the subsidizers eventually become the subsidized? GENERAL VERRILLI: Well, that was the point I was trying to make, Justice Kagan, that you’re young and healthy one day, but you don’t stay that way, and the system works over time. And so I just don’t think it’s a fair characterization of it. And it does get back to, I think, a problem I think is important to understand — JUSTICE SCALIA: These people not stupid. They’re going to buy insurance later. They’re young and need the money now. GENERAL VERRILLI: But that’s — JUSTICE SCALIA: When they think they have a substantial risk of incurring high medical bills, they’ll buy insurance, like the rest of us. GENERAL VERRILLI: But that’s — that’s — JUSTICE SCALIA: — I don’t know why you think that they’re never going to buy it. GENERAL VERRILLI: That’s the problem, Justice Scalia. That’s — and that’s exactly the experience that the States had that made the imposition of guaranteed issue and community rating not only be ineffectual but be highly counterproductive. Rates, for example, in New Jersey doubled or tripled, went from 180,000 people covered in this market down to 80,000 people covered in this market. In Kentucky, virtually every insurer left the market. And the reason for that is because when people have that guarantee of — that they can get insurance, they’re going to make that calculation that they won’t get it until they’re sick and they need it. And so, the pool of people in the insurance market gets smaller and smaller. The rates you have to charge to cover them get higher and higher. It helps fewer and fewer — insurance covers fewer and fewer people until the system ends. This is not a situation in which you’re conscripting — you’re forcing insurance companies to cover very large numbers of unhealthy people — JUSTICE SCALIA: You could solve that problem by simply not requiring the insurance company to sell it to somebody who has a — a condition that is going to require medical treatment, or at least not — not require them to sell it to him at a rate that he sells it to healthy people. But you don’t want to do that.

UPDATE: An earlier version of this story relied on a preliminary transcript, published by the Supreme Court, which described Justice Scalia telling Solicitor General Donald Verrilli “We’re not stupid.” Several other media outlets also relied on that early transcript in their reporting. A final corrected transcript on the Supreme Court’s website, however, now indicates that he was talking about U.S. health care consumers, saying “These people [are] not stupid.”

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