• 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.

    AEC

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    • Maybe part of the solution is that we become a bit more callous, at least on the economic end. We would still treat, but extract a significant payment premium. Perhaps an income linked sliding scale penalty fro failure to buy insurance should you ever need care and are not insured. At the least, we could, sort of, continue what we currently do, and let providers charge much higher rates for care to those not insured. The poor who opt out, not sure why they would except for ideological reasons, are not able to pay anyway, but we could make it pretty painful for those who could have afforded to pay, but chose to free ride.

      Steve

      • I always find this a little odd. We do go after payment. I can think of plenty of times I’ve seen people turned over to collection agencies for money owed for care. We know people go bankrupt. We can debate the number who do, but it’s a positive number.

        Very few people get to not buy insurance, get care, and skate freely.

    • “making the mandate a tax would have made it more arguably constitutional”

      As logically inconsistent as some of the conservative-majority opinions have been lately (try and figure out how Heller divines an inalienable right to handguns but not M16s), I can’t imagine an entire decision hinging on a single word. If it did, why don’t Democrats just use the GOP brinksmanship method to demand that Obamacare be amended to change the bill’s wording? It’s so arcane a maneuver that you can’t really fight against it in any effective, public way. If there’s a majority to overturn the mandate, the Court will invent a rationale that can’t be defeated by a minor change in the law.

      Axing the mandate entirely would have gotten rid of the “regulating inactivity” argument, but you’d still have an argument that mimics those used to challenge aspects of the New Deal with mixed success. Obamacare arguably requires states to construct and fund bureaucracies that are potentially larger and more complex than anything to date. The Court can say this goes beyond some arbitrary limit of Federal authority without reversing other laws in the process. The Wyden/Brown opt-out proposal or a structure like Medicaid could get around this variety of objection.

      When it comes down to it, Obamacare is unprecedented in size/scope even if it’s got boatloads of precedent in programs of the same type. If 5 Justices think this is not where they want the country to go, they’ll come up with a rationale that’s as bulletproof as possible without touching other programs.

      • If they had taxed everyone the amount of the mandate and then said – “Hey, join or don’t, we don’t care. But if you do, you’ll get a mandate sized tax credit.” – that would have achieved the same exact policy goals, but would have been no different than the mortgage deduction or child tax credit. We can debate the value of those policies, but no one says they are unconstitutional.

        As to the limits of bureaucracy, this is way smaller than Medicaid. No one is challenging Medicaid.

    • Uwe Reinhardt on this very subject. Does not get much better:
      http://www.youtube.com/watch?v=j9Bc8ieyfOQ

      Interesting connundrum re: states initiating their own lock outs and mandate provisions. Raises mobility issues, and controlling inward migration or exodus based on exclusions/genrousity could create more problems than they solve. Firewalls and exclusion periods would ensue–another burdensome overlay. Not prohibitive, but a real hassle.

      Brad

    • Speaking of Uwe, he recently proposed an alternative based on the German system.

      Social Insurance and Individual Freedom

      Germany’s population of close to 82 million is served by two distinct health insurance systems:

      1. The Statutory Health Insurance System, founded in 1883 by Otto von Bismarck and constantly amended over the ensuing century.

      2. A private commercial health insurance system….

      What if Americans at, say, age 26 (beyond which they can no longer be included on their parents’ insurance policy) or even as late as age 30 were offered the choice of:

      1. joining the community-rated health insurance offered through the insurance exchanges called for in the Affordable Care Act;

      2. remaining in a private insurance system that is free to charge in any year “actuarially fair” premiums, that is, premiums that reflect the applicant’s projected health status and spending for that year and is free to refuse issuing a policy altogether;

      3. simply self-insuring, by remaining uninsured?

      For want of better terms, we might call the exchange system the “social insurance track” (because it leans heavily toward social insurance) and the second and third options the “rugged individualist tracks,” because they cater to Americans with individualist preferences.

      http://economix.blogs.nytimes.com/2011/12/09/social-insurance-and-individual-freedom/