• All is not lost if the individual mandate is struck down

    The breaking news is that the 11th Circuit Court has ruled the individual mandate unconstitutional but that the rest of the ACA is not. This presents the possibility of an eventual ruling by the Supreme Court that jettisons the individual mandate while keeping in place all other provisions of the health reform law. Should that happen, what might it mean? What could be done?

    Turns out, Kevin and I visited this issue in February. What we wrote then is still relevant today. So, here’s the key part of our piece:

    States can also do their part to bring the remaining free riders into the system. Massachusetts has an individual state mandate in place, which appears to be working.  Some “blue states” can follow Massachusetts’s lead and pass a state-level individual mandate. Others, like Vermont, are exploring single-payer reforms. A natural experiment is unfolding, with additional encouragement from legislation recently introduced in the Senate by Sen. Ron Wyden, D-Ore., and Sen. Scott Brown, R-Mass., that would permit immediate flexibility for coverage expansion under the health law.

    The Centers for Medicare and Medicaid Services also has some plausible regulatory options, even without new federal legislation. Under existing law, CMS can grant such waivers, but they become effective no earlier than 2017. The following suggestions could partially bridge the gap until waivers become possible or the Wyden-Brown bill is passed.

    One idea is to follow the examples set by Medicare Part B, which covers outpatient physician services, and Medicare Part D, the prescription drug program. CMS could permit “qualified health plans” in the exchanges to impose Part B and D-style premium surchargeson customers who delay obtaining coverage. The mechanism would be through an exception to the anti-discrimination rules, and the law gives the secretary of Health and Human Services some flexibility to issue regulations to limit adverse selection.

    Another possible regulatory adjustment is the definition of “qualified individual” in the law. The definition currently excludes undocumented aliens, and CMS also could try to exclude free riders unless they pay a surcharge to rejoin the system. While there is little direct textual support for this rule itself, the ACA grants significant rule-making authority to implement the law.

    A complementary approach would be to amend the definition of a “qualified individual” under state law. The NAIC’s American Health Benefit Exchange Model Act defines “qualified individual.” The suggestion would be to exclude free riders from this definition, with the state law approved by CMS. Exceptions might be necessary for individuals who lacked the financial capacity to have previously purchased insurance, but as seen above, these people aren’t really free riders in the classic sense.

    Others have suggested alternatives, like significant waiting periods after failing to enroll, or significantly higher copays or deductibles for late enrollees. These ideas would require federal statutory amendments to implement them properly.

    The end result could be that losing the individual mandate primarily hurts “red state” individual insurance markets, while blue states would enjoy more coverage and stability. After a couple years of that transparent dynamic, red states (and their residents) might be willing to gradually follow suit. While the absence of an individual mandate will certainly slow coverage expansions, it does not spell the doom of health reform.

    UPDATE: Add link to WSJ article that confirms the tweets I had seen.

    • Your comments about red and blue states are not inaccurate, but sadly it sounds like the debates about civil rights in the 1930’s and 1940’s.

      Back then, the liberal states like Minnesota began passing equal education and accomodation laws, however tame those laws were.
      But the Southern and Western states were more or less left alone.

      It took about 12 years I think for Congress to pass an anti-lynching law. How could Southern congressmen contest this law with a straight face?

      Back to health care — the states which may pass their own mandates are those which do not have a serious uninsurance problem. The red states by and large are where the problem is.

      The real issue I believe is subsidies, not mandates. The new high-risk pools are not very popular because there are no subsidies.
      $500 a month for health insurance is actuarially a bargain for millions of the uninsured, but for someone making $30,000 a year it is completely unaffordable.

      With or without a mandate, the new health exchanges are going to be expensive. Partly from antiselection, and also because maternity and prevention and diagnostic tests are going to be
      broadly covered.

      It might be better to keep pushing up the income limits for Medicaid. Not perfect, but it is reliable health insurance.
      Medicaid is paid for by income taxes, which are the most progressive source of funding that we have.

      Bob Hertz – The Health Care Crusade

    • @Frakt and Hertz: Many “alternatives” can occur through reconciliation, too, but the Obama administration’s “mandatory” position in the ACA was not
      new. In United States v. Lee, a unanimous 1982 Supreme Court gave judicial notice to the legislative history of our Social Security system at the time Medicare benefits were made available to participants in the system. In deciding that Old Order Amish employers and employees must participate in Social Security, the High Court quoted from Senate Report Number 404 of the 1965, 89th Congress, which stated that “a comprehensive national social security system providing for voluntary participation would be almost a contradiction in terms, and difficult, if not impossible, to administer.”

      The Court said (in footnote 12): “We note that here the statute compels contributions to the system by way of taxes; it does not compel anyone to accept benefits.”

      On the false “inactivity” issue: The ACA allows that American Indians do not have to buy such insurance, and those with religious objections or a financial hardship can also avoid the requirement. In addition, if a person would pay more than 8 percent of his or her income for the cheapest available plan, that person would not be penalized for failing to buy coverage. Thus, the Supreme Court’s precedential view of “choice” and “conscience” in Lee in relation to a “comprehensive national program” runs counter to the “inactivity” concept put forth by Judge Vinson as irrelevant to a constitutional issue.

      In fact, many federal requirements for mandatory participation in
      public-health systems have been in place for decades, ranging from insurance required for driving a car on the public highways to Medicare and Medicaid, requiring citizens to be vaccinated, to file an income tax return, or to register for the draft—not one to acquire health insurance. In light of Lee, that would not make it novel or a
      case of first impression. On the contrary, the ACA is consistent both with Supreme Court decisions on comprehensive social schemes and congressional consideration. The only real “inactivity” relating to healthcare appears to come from those who refuse to seek medical attention—such as many Christian Scientists—who can nonetheless be coerced by courts if they extend their religious views to their
      minor children’s health.