President Obama, who had previously opposed an individual mandate for health insurance, has now opened the door to including such a legal requirement as a central feature of health care reform.
An excellent explanation of the difficulties involved in the implementation of such a mandate was recently outlined in a New England Journal of Medicine article, “Universal Coverage One Head at a Time—The Risks and Benefits of Individual Health Insurance Mandates” published last year by Sherry Glied, Ph.D. Dr. Glied has just been nominated to serve as the Assistant Secretary of Planning and Evaluation at the Department of Health and Human Services (HHS). At this crucial time in the health care reform debate, Dr. Glied’s professional judgment on this vital issue is particularly important:
- It Won’t Be Easy: “The difficulties of finding, enrolling, and accounting for all eligible participants escalate when most of the financing is expected to come from premiums paid directly to multiple insurers rather than from funds collected centrally by the government through taxation. To address this problem, some reform models incorporate an individual mandate, a legal requirement that every person obtain insurance coverage.”
- The Free Rider Problem Is Smaller Than Imagined: “The free-rider problem remains a central element in the argument for an individual mandate. Research verifies the existence of such a problem but suggests the magnitude is quite small. Funds diverted from uncompensated care would not be sufficient to pay for the subsidies needed to cover most uninsured people. Eliminating the free-rider problem through universal insurance might make the health care system more fair, but it wouldn’t make it less costly.” “Although the desire to curtail free riding and strategic behavior by insurers provides the philosophical underpinnings of the individual mandate, policymakers’ interest in the mandate option owes as much to its fiscal implications. Universal coverage achieved through an individual mandate could cost much less than achieving the same result by giving people subsidies for buying coverage voluntarily.”
- Costs Will Be High: “The individual mandate responds to two lessons learned from previous efforts to expand coverage. First, although most uninsured people would like to have health insurance, the protection it offers against a potential adverse event is not an urgent priority for all of them. Many in this group are healthy. Most have relatively low incomes (see graph) and many other demands on their pocketbooks. A decade and a half of incremental expansion efforts have demonstrated that inducing all uninsured people to take up coverage will require very substantial subsidies—subsidies that might well exceed the cost of the coverage itself (graph referenced shows insurance status by income levels).” “Compounding this ‘take-up’ problem is a second characteristic of insurance coverage. As the graph shows, even in the group with incomes between 100 and 199% of the federal poverty level, more people currently hold private insurance than are uninsured. Almost all of those who hold private insurance now pay at least a portion of the premium for that coverage. If substantial subsidies were made available for the purchasing of new coverage, many who now pay for their own coverage would (eventually) make use of these subsidies instead. Subsidized coverage would crowd out existing private spending, greatly increasing the public cost of an expansion program. The individual mandate gives policymakers a new tool with which to respond to the take-up and crowd-out problems. Increasing the cost of remaining uninsured by imposing penalties in association with a mandate can promote coverage while keeping subsidy levels in check so that they do not lure the privately insured into the subsidized program.”
- Introduces New Risks: “The individual mandate offers new options, but it also introduces risks. The mandate is in many respects analogous to a tax. It requires people to make payments for something whether they want it or not. One important concern is that the government will provide insufficient funds for the subsidies intended to accompany the mandate. In that case, the mandate will act as a very regressive tax, penalizing uninsured people who genuinely cannot afford to buy coverage. This concern has led Massachusetts to create a hardship exemption for its mandate—an escape clause that effectively undoes the mandate if subsidies are insufficient. The ease with which it is possible to lift the mandate if the legislature fails to appropriate funds may make the individual mandate a rather rickety form of universal coverage.”
- Say Hello To Special Interests: “The relative invisibility of the mandate ‘tax’ may make it easier for special interests to achieve their goals. The mandate, then, would become a means through which special interests use government to force transfers of funds from consumers to the health care sector.”
- Unpalatable Intrusiveness: “A final concern about mandates relates to their administration. Like taxes, a mandate requires enforcement if it is to be effective. …Developing a system to promptly identify and penalize scofflaws will take effort and ingenuity, particularly in our diverse and mobile country. It may require a degree of intrusiveness and bureaucracy that some will find unpalatable.”
- It’s Only A Symbol: “The risks associated with individual mandates suggest that they are no panacea. … Perhaps the most important benefit of mandates is symbolic.”
Wow. In other words:
- The freeloader justification is weaker than imagined.
- Without a mandate, healthy, low-income people (think young people looking for change) will continue to spend their money on things they really want rather than on what the federal government tells them.
- Without a mandate, the score from the Congressional Budget Office will be disastrous because it would show that the federal government would be spending a lot of money to subsidize those who have already decided they don’t need unless they are sufficiently “bribed” or are currently already paying for their own health insurance with only a small reduction in the number of uninsured.
- With a mandate, the federal government and special interests will be able to hide what they have colluded to do to the citizens.
- With a mandate, government will need to expand its surveillance powers to make certain private citizens are not cheating their government, which is there to help them.
- A mandate may not really be a mandate, thereby tricking the health plan lobbyists.
- Congress will soon be tearing itself apart over a symbol.