• Is the mandate necessary?

    Alan Krueger and Ilyana Kuziemko collaborated with Gallup to augment one of their representative surveys that includes questions on health insurance coverage. They worked in additional questions to elicit individuals’ willingness to pay for coverage. The key survey question was, “If you could get a health insurance policy for yourself that is as good as the one that members of Congress have, given your current financial situation, would you buy it for $X a year, which works out to $X/12 per month?” Their findings appear in a recent NBER working paper.

    [W]e estimate that about sixty percent of the uninsured would voluntarily enroll for an annual premium of $2,000. Under the current specification of subsidies in the ACA, we estimate that over 75 percent of uninsured adults would enroll, implying that some 39 million uninsured individuals would gain coverage as a result of the law. We also estimate that stripping the individual mandate from the law […] would lead to between 7 and 12 million fewer individuals gaining coverage.

    The Gallup data included extensive information on health status, and thus allow us to gauge the extent of adverse selection for a given subsidy schedule. […W]e find no evidence that less healthy individuals would be more likely to enroll, with or without a mandate.  […]

    [W]e estimate higher take-up rates under the provisions of the ACA than does the Congressional Budget Office. (Bold mine.)

    If the purpose of the mandate is to mitigate adverse selection, this study suggests it isn’t necessary. It is still significant that fewer would be covered without a mandate, but without an adverse selection externality, the strongest argument of the mandate evaporates. (I never take one study as definitive evidence of anything. Notably, at least one other study provides evidence consistent with the view that a mandate is necessary for selection reasons.)

    Here’s Krueger’s and Kuziemko’s estimated demand curve. As expected, it is broadly downward sloping, but with bunching at certain prices.

    UPDATE: Included the survey question.

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    • Love to see the results if coupled with limited enrollments and increasing cost with late sign up ala Medicare.

      Steve

      • Seems like a stretch for a survey though. In fact, I think one can be skeptical of these results on those grounds. What people say and what they do are often different.

    • Either this conclusion is wrong or there is some problem in the marketplace or some confounding variable that has not been identified here, because there are many, many health plans availiable in the Texas marketplace that have total premium prices below $2000. Yet the state’s uninsured rate is near 25%. If the study conclusion were correct, at least the healthy part of the uninsured population would be covered in MUCH greaater numbers RIGHT NOW, without subsidies or mandates.

      • The survey question: “If you could get a health insurance policy for yourself that is as good as the one that members of Congress have, given your current financial situation, would you buy it for $X a year, which works out to $X/12 per month?”

        My guess is that those $2k premium plans in TX are nothing like what members of Congress have.

        • Creating an accurate survey is very difficult. Asking a question about a health plan that doesn’t exist and/or will never be offered is a sure way to make it worthless. Or at least the conclusions drawn from it.

          The real cost of that plan is nearer the left of that graph. Notice how few people buy at that cost. Heck, my individual plan is much closer to the 4000 mark and is not very good (notice the sudden drop in coverage rates).

    • If the purpose of the mandate is to mitigate adverse selection, this study suggests it isn’t necessary

      Every time I have seen evidence about adverse selection is surprisingly small. It makes sense because more conscientious a person is, the healthier and more likely to buy insurance they will be.