• Mandate alternatives: How well can they work?

    I’m moving this conversation from the comments of another post to here. To help me, I’ll quote Igor Volsky, who sums up pretty much everything I could say about alternatives to the mandate (that is, not much). As always, if you’re aware of relevant studies, let me know.

    Sen. Claire McCaskill (D-MO) is considering a plan that would create “an open-enrollment period for people who want to buy health insurance, and assess a penalty on anybody who tries to enter the insurance market after that window closes.” […]

    In today’s political climate, this idea sounds better than the individual mandate — although that had bipartisan support as late as August 2009 — but what makes for good politics doesn’t translate into better policy. As far as I can tell, and from what health economists who study these things told me, giving individuals a defined period of time to purchase insurance would cover far fewer people than mandating it (that’s because lower participation would lead to higher premiums since healthy people would stay out of the risk pooil.) Or at least, that’s what economists say — nobody has really scored the alternatives. One big advantage with the mandate is that we have experience in Massachusetts where, because of that policy, 98 percent of Massachusetts residents now have health insurance.

    One thing I can add is that the late-enrollment penalty model is what’s used for the Medicare prescription drug program. It works fine for that, but that’s a totally different product for a totally different population. I would not want to extrapolate.

    Finally, what’s of utmost importance is how the insurance industry feels about this. They’re fine with the mandate, naturally. Will they accept an alternative if they don’t have to (i.e., if the mandate is not struck down as unconstitutional)? This is probably the most important question in terms of what can pass. Whether it is good policy is also important. But if it can’t pass, that’s kind of irrelevant.

    • I keep thinking that a limited enrollment period coupled with penalties for buying into insurance later in life should work pretty well. Like most of these fixes, it would take the political will to make it stick.


    • It is certainly a remarkable achievement that 98 percent of Mass. residents have insurance. Even more remarkable, and not much mentioned, is this:

      “More than 90 percent of Massachusetts residents, however, had coverage prior to the mandate. That is a level well above those in most other states and was surely an advantage for Massachusetts in achieving high compliance.” (Joseph Newhouse, “Assessing Health Reform’s Impact On Four Key Groups Of Americans,” Health Affairs 29 (9) (2010).

      Now *that* is impressive!

    • If the individual mandate is necessary and essential to health care reform it should be driving down the insurance premiums. What is truly amazing is that with a 98% participation rate, the current insurance rates and their growth rate have been unaffected. If individual mandate or its alternatives were showing cost reduction results, this subject would be worthy of a “general welfare” debate. Without a measurable cost reduction result this looks like a tax on the healthy similar to the British tax on tea in 1773.

      • @Bill Huber – I’m going into snark mode. This is rare. If you can’t take the humor, you’re probably posting in the wrong place:

        Ah, you’re the guy I’ve been wanting to talk to. You know the counterfactual. This will save a lot of money. Who needs randomized studies or careful IV designs. Just ask Ben. He knows.

        Snark off. Seriously, if the mandate part of the MA law caused premiums to go up–controlling for all other relevant factors–that’s not good and I would not be afraid to say so. But I need to see a credible study that convinces me that premium increases are causally related to the MA mandate. You got one?

    • I don’t see how this is “similar to the British tax on tea in 1773” – wasn’t Massachusetts’ health care reform law put in place by a government elected by its citizens?

    • @Austin – Let me be clear, I am a person with “skin in the game” and I have done my homework. I am trying to influence the debate on health care spending priorities. For my contribution I ran a price check for an insurance plan in Ohio via http://www.ehealthinsurance.com and compared it to the lowest cost plan available via the Massachusetts Health Exchange. The Ohio plan costs $305 per month and the Massachusetts plan costs $1,296 per month. If we use Massachusetts as our model for a nationwide plan, my costs will go up $991 per month or $11,892 per year. I don’t need a randomized study to see where Ohio insurance rates are going if the Individual Mandate and regulations on what constitutes an ‘acceptable’ health care plan are left intact. I think it is fair to say that the Massachusetts insurance industry received a windfall by overcharging healthy citizens. Where did the money go if it did not reduce rates for everyone? Was the case for the Individual Mandate as an essential part of the health care reform grossly overstated? If we knowingly sacrifice an individual liberty, shouldn’t we expect to see a readily apparent “general welfare” benefit in return?

    • @Bil- What do the two plans cover? Who is eligible? Can you be dropped? What is the cost of living in Ohio vs Massachusetts? Who picks up the costs of care if the Ohio plan does not cover, as I suspect is the case, a lot of care?