Was the mandate a miscalculation?

Paul Starr (who literally wrote the book on health care in America) has a thoughtful piece up about the individual mandate and health care reform. In it, you will find many of the themes that we have discussed here time and again. These include the fact that the mandate was more of a Clinton-campaign-supported tactic than an Obama one, the fact that the insurance industry required the mandate as the price for going along with health care reform, and the fear that although making the mandate a tax would have made it more arguably constitutional, it would have made passage even more difficult.

I encourage you to read the entire piece, though, as Starr does a thorough job pulling together all these points. My only quibble is that I think he doesn’t give enough time to the idea that the mandate is a really just a convenient foil for many (but not all) opponents to the ACA. I want to focus here, though, on his alternative to the mandate:

My preferred alternative has two parts—one to make the law more forgiving, the other to make it more tough-minded. First, the government would allow individuals to opt out of the new insurance system without any penalty; people would do so by signing a form on their tax return acknowledging that they would be ineligible for benefits under the law for a fixed period—say, five years. Second, the government would raise the annual penalties for neither buying insurance nor taking the opt-out.

An individual opt-out would provide an escape valve for people who, rationally or not, see the mandate as a threat. With this added provision, people without coverage through a group or Medicaid would have three basic choices. They could use the new insurance exchanges to buy coverage, receiving subsidies if they qualified. They could take the five-year opt-out. Or they could do neither and pay the annual penalties, though those penalties would be higher, defined as a tax, and backed up with enforceable sanctions.

What if someone took the five-year opt-out and later reconsidered? They could then try to buy health insurance without the subsidies, use of the exchanges, or guaranteed coverage of preexisting conditions. In other words, they would face a market much like the one that existed before the law. I would not advise anyone to opt out. But, if they did, they would be no worse off than they are now.

As with all policy considerations, this had pros and cons. It would likely be more difficult to declare this unconstitutional, as people could decide not to buy insurance, and would face no penalty if they so chose. But I don’t think that this would solve the essential problem. Many young people, and perhaps people of more limited means, would opt out. But, if they got really sick, or if they had an accident, would hospitals and physicians really be able to turn a blind eye? I doubt it. I think that just as now we often, on an individual basis, have difficulty letting the uninsured suffer, we would continue to be unable to do so in the future. The news is full of recent examples of people who have made decisions similar to these with respect to fire insurance regretting their decisions; most of us value life more than property.

Moreover, the market that Starr refers to as the “later reconsidering” option would be even worse than the one we have now. Even fewer people would be in the non-exchange indivudial market, and the prices would largely be unaffordable to anyone.

The bottom line is that we keep on proposing solutions that depend on people being able to correctly weight the risks and benefits, and being willing to stand by their decisions if they lose the gamble. It’s hard for people to do that when their lives are on the line. It’s also hard for the rest of us to stick to our guns and watch people die because they made the wrong choice. I worry that a proposal that depends on a certain amount of willful callousness will be doomed to fail in the public arena.

To Starr’s credit, he also suggests some other alternatives:

There are also other alternatives to the mandate, such as raising premiums for individuals who fail to sign up for coverage during the initial open-enrollment period. (Medicare Part D, the prescription-drug program, works that way.) Or the Affordable Care Act could have delegated the responsibility of curbing free riding to the states—giving them an open-ended menu of policies to choose from, which might have included the mandate as well as these other options. A state that followed the example of Massachusetts and enacted a mandate would then do so under state law, eliminating any constitutional challenge that could be brought in federal court. The other advantage of this approach is that the states could experiment with different policies, and the nation could learn from their results. The CBO estimates have created a false sense that we know exactly what the effects of the law’s non-mandatory mandate will be, even though relevant empirical evidence is scant. Letting the states adopt different policies would have been an appropriately modest way to proceed.

Kicking it to the states is an interesting idea. Penalties for late-signup might also work. But we should recognize that all of these will likely cost more than the ACA. Are we ready for that tradeoff? In this financial climate, it’s hard to imagine that a compromise can be reached to save the ACA by making it cost more. But politics is strange, and we’ll have to wait and see what the Supreme Court says this summer.


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