• Charge a toll to get back on the bus

    An interesting post by Paul Starr yesterday got me thinking about alternatives to the mandate.   As I’ve written before, perhaps we should just charge a toll (at p. 54) to get back on the bus.  Facing a similar free rider problem in Medicare Part D, the Republican majorities in Congress in 2003 had a simple solution:

    1. Part D is voluntary, but a great deal.
    2. You have one chance a year to enroll, similar to open enrollment in commercial plans.
    3. If you opt out, but change your mind later,  you pay a late enrollment (free rider) penalty for the years you skipped.

    Clearly constitutional; vast Republican support in 2003; what’s not to like?

    Oh – and 90% of the eligible population signed up (Heiss, McFadden & Winter in Health Affairs; Neuman & Cubanski in NEJM ).  Some free riding is occurring (Levy & Weir in J Gerontology), so perhaps the price to get back on the bus should be increased.

    Any other ideas?

    UPDATE:  Pear discusses the Part B and D late enrollment penalties in the NYT.

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    • Kevin, are states already given the authority to do the things you/Starr suggest?

      Of course, states can just implement a mandate. One way or another, any state setting up an exchange would want to do something unless their goal is for the exchange to fail. But the insurance industry pressure will be immense. Hard to see how this doesn’t work out OK in the long run even with the mandate struck down nationally.

    • Looking at the individual and small group eligible ~16 million in 2014, in a world without a mandate, but with some kind of penalty a la Starr:

      Assumptions:

      –Put aside the new 16 million Mcaid enrollees–they are in the system by fiat, no mandate required

      –Put aside cost control, decreased employer coverage crowd out

      What % would defer coverage and how many would have either a catastrophic illness or something serious enough to cause financial hardship or ruin? Their misfortune would translate to societal cost as they go on Mcaid, get govt assistance, etc.

      Figure 20% of 16 Million dont buy, and of those, a small percent go on the dole. Cost: a couple of billion. Not much.

      In an individual mandate world, how many dont buy and pay penalty and have same outcome?

      From a philosophical perspective, huge difference. From a finanical perspective, to at least get system off ground, are we talking big bucks?

      Brad

      • @Brad F – See Gruber’s article or Aaron’s recent post on it. It may not answer all your questions but his estimates are probably the best we have. CBO may have scored a mandate-free bill too, but I’m not sure. I’m sure you can find other ballpark numbers out there (% with chronic illness is available from the AHA ).

        See also Laszewski today: http://www.kaiserhealthnews.org/Columns/2010/December/121410laszewski.aspx .

        I see your point though and I’ve thought the same. Could we try a mandate-free plan? Leave it to the states, some will have one, some won’t? If there is a problem, then states will act to fix it. If there isn’t then the mandate wasn’t really necessary (and Obama, the candidate, was right).

    • @Austin – State-based mandated coverage is of course Massachusetts, but personally I’ve never understood why some group didn’t attack that law under the dormant Commerce Clause – a state impermissibly interfering in commercial activity outside of the state. This was successful against Maryland’s short-lived WalMart pay or play law.

      As for other anti-free rider tools, I don’t know whether the state insurance exchanges could require annual enrollment for previously eligible individuals or charge late enrollment fees. I’ll get back to you on that (or perhaps a reader knows). One of the most interesting free rider tools in the ACA is allowing the children back on their parents policies until age 26, without regard to educational status.

      @Brad F – as you say, if the free riders are Medicaid or would have qualified for subsidized premiums, then the financial implications are smaller. The free riders we worry about are the healthy young with incomes but no employer-based or other health insurance coverage.

      • @Kevin – It is my understanding that exchanges can impose annual open enrollment periods. I blogged as much, citing Gruber I think, on this. I could dig up the post and the Gruber reference if you like, though the truth should be in the law itself.

    • @Austin – ACA §1311(c)(6)(B) allows the Secretary to require annual open enrollment periods after the initial enrollment period for the Exchanges.

      One additional potential lever could be §1311(c)(1)(A), which requires the Secretary to establish marketing rules to prevent “marketing practices or benefit designs that have the effect of discouraging the enrollment in such plans by individuals with significant health needs;”

      Ordinarily, HHS would be quite aggressive on these rules. If the mandate goes away, perhaps they could make partial exceptions for people who failed the minimum coverage rules, permitting some discrimination against free riders.

    • Just a political point. Republicans have been willing to refute their prior plans in the recent past. I would not assume they will go along. If individual states pass the mandate and others do not, which states get what?

      Steve