• A solution to the individual mandate

    I was part of an email discussion this morning on alternatives to the individual mandate. Here’s an idea: why not just implement a phased in tax increase (equal to the mandate penalty) for all Americans, and simultaneously implement a $695 tax credit for everyone who buys insurance. This would be, in effect, the same as a $695 penalty for not buying insurance. The difference is that raising taxes and giving tax credits for buying things is clearly not unconstitutional.

    Why didn’t the administration just make this part of the tax deal currently being pushed? Problem solved.

    UPDATE by Austin: For more details on the size of the ACA tax penalty, see this prior post. It isn’t $695 in all cases. Still, it could have been implemented as Aaron suggests.

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    • The individual mandate (§1501 of ACA) added §5000a to the Internal Revenue Code. If this provision is a “tax” then Virginia loses. The problem is that Congress and Obama sold it as any but a tax. From the Virginia opinion:

      “On an alternative front, the Secretary contends that
      the Minimum Essential Coverage Provision is a valid
      exercise of Congress’s independent taxation power under
      the General Welfare Clause in Article I. Despite preenactment
      representations to the contrary by the Executive
      and Legislative branches, the Secretary now argues that the
      Minimum Essential Coverage Provision is, in essence, a “tax
      penalty.” The Secretary notes that the Provision is codified in
      the Internal Revenue Code and the penalty, if applicable, is reported and paid as a part of an individual’s annual tax return. (at *13)

      In the weakest part of the opinion, Judge Hudson claims that Congress did not intend to rely on its taxing power, despite the fact the provision ended up in the Internal Revenue Code:

      “In concluding that Congress did not intend to exercise
      its powers of taxation under the General Welfare Clause,
      this Court’s analysis begins with the unequivocal denials by
      the Executive and Legislative branches that the ACA was a
      tax.” (at *18)

      Congress could fix this in the current tax bill before the House – a simple provision saying the Congress intended Section 1502 of the ACA to be a valid exercise of the Taxation Power.

    • The cynic in me believes that the administration wanted [wants?] to establish the mandate conceptually for things they hope to do in the future…

      The alternative route would have been “safer” – but is probably closed out as an option once the new congress is in place.

    • I actually thought Kevin’s idea from earlier would be the best option, especially considering the political landscape of taxation values. I think any time you mention more taxes regardless of the justification and refund associated with it would receive major push back from the right. They would argue that the tax code is already too confusing and a large number of folks wouldn’t receive their refund based on lack of knowledge of the tax code. If the open enrollment option were in place the elimination of coverage rejection could remain in place because if people were to need major medical attention and they had to buy into the system out side of the open enrollment period the providers could cover some losses with the penalty for enrolling outside the time frame. I don’t think this is perfect because some of the other benefits of the mandate would be in question like community ratings. However it could be the option most likely to survive ACA reorganization if the SCOTUS upholds the Virginia ruling.

    • Dr. Carroll is this not something we do not like our politics to do? Is it not best to have politicians and legislation that is open and honest? Let’s not start a habit of trying to “trick” the public into buying into something they were not fully aware of . I think is immoral politics

    • Aaron G,

      It’s not a trick. It’s completely open and transparent.

      If you want the three-legged stool to work, you need to encourage people to buy insurance, even if they are healthy. So offer a tax credit. We incentivize TONS of things through tax credits.

      For those who complain that we need to compensate for the cost of the tax credits, you can raise taxes a bit. So that it becomes a wash.

      This is a perfectly legal and open way to encourage people to buy insurance in a cost-neutral way.

      Medicare-for-all would also be legal, by the way.

    • Wouldn’t a phased in tax increase cause people to have to pay for their insurance concurrently with a payroll deduction designed to make sure they maintain their insurance?

      The vast majority of people who are set to be harmed by this, young, healthy, low income workers, would have overpriced insurance premiums and have a tax to fund a penalty withdrawn from the same paycheck.

      How much are you willing to harm a particular section of the population (which will already be increasingly burdened by demographic shifts within the social security programs) in order to stabilize health insurance markets?

    • Umm, this is exactly the same thing as the mandate, which incidentally is also not unconstitutional as written. Remember, the mandate is batting .667 in the federal courts. Sooo, yeah.

    • @Superking: Both Judge Vinson in Florida and Judge Hudson in Virginia have specifically ruled that the individual mandate is not a tax. Judge Steeh in Michigan upheld the individual mandate under the Commerce Clause, and (IIRC) did not mention the Tax & Spending Clause. This post’s suggestion is not the same thing as the currently-enacted individual mandate.