Should all Americans be required to purchase health insurance?
This was a major bone of contention among conservative reformers during the health care debates of the 1990s. It was an issue during the 2008 contest for the Democratic presidential nomination, with Hillary Clinton saying yes and Barack Obama saying no (President Obama ended up flipping to the Clinton position).
After its inclusion in the Affordable Care Act, the individual mandate became the primary issue in legal challenges that ended up before the U.S. Supreme Court. Remember that the majority opinion upholding it, by Chief Justice John Roberts, didn’t actually conclude it was constitutional for Congress to compel private purchases. Rather, Roberts retroactively redefined Obamacare’s policy as simply a tax on the uninsured.
As a matter of health policy, the mandate had a seemingly inescapable logic. If government were to force insurers to cover everyone, but not require everyone to purchase insurance, then people would wait to sign up until they are sick. There wouldn’t be enough revenue to finance payouts. Insurance pools would contract, then collapse.
In practice, however, the ACA’s individual mandate didn’t really work this way. The heavily regulated plans on the insurance exchanges were also heavily subsidized. If insurers lost money because their subscribers were older and sicker than expected, they raised their prices. The extra cost was borne not primarily by exchange customers but by taxpayers, so enrollment didn’t plummet.
At the same time, the mandate proved insufficiently stringent and inadequately enforced to pull younger, healthier customers into the exchange pools. Particularly if they weren’t eligible for massive subsidy, Americans compared the soaring cost of ACA plans with the penalty — oh, sorry Justice Roberts, the “tax” — they would incur from being uninsured, and chose the latter, cheaper alternative.
I’m reminding you of this history because, at last, the individual mandate is going away. It was eliminated by the federal tax-reform bill passed in December. And the sky is not about to fall.
As American Enterprise Institute scholars Joseph Antos and James Capretta pointed out in a recent Health Affairs article, the Congressional Budget Office has downgraded its estimate of the number of Americans who will choose not to buy insurance in the absence of the mandate. CBO’s earlier predictions were distorted beyond all recognition by progressives — choosing not to pay inflated prices for a product you don’t want isn’t the same thing as “losing health coverage” — but now it seems those forecasts were exaggerated, as well.
What will happen next? On the Left, there is still a widespread belief in a single-payer, government-run system. Here in North Carolina, Rep. Verla Insko (D-Orange) even filed a bill to make that happen in our state next year. But Insko pulled her bill from consideration last week when legislative staff estimated its total cost at $72 billion, including $30 billion in federal funds and a whopping $42 billion in state dollars. By comparison, North Carolina’s entire General Fund budget is about $24 billion.
On the Right, there are some unrealistic expectations, too. The ACA exchanges aren’t going to wither away. And as long as Medicaid expansion exists as an option, the powerful interests who actually receive Medicaid funds — hospitals, doctors, and pharmaceutical companies, not the low-income enrollees — will lobby strenuously until they get it.
Conservatives should hasten and formalize the transition of the exchanges into high-risk pools, the policy Washington and the states should have pursued in the first place. In other words, the cost of treating people with expensive preexisting conditions will be spread over a broader pool of taxpayers, rather than overcharging others in the individual insurance market.
Federal policymakers should reform Medicaid to limit its scope and cost, while state policymakers should deregulate both insurance benefits and medical providers to reduce the actual costs of policies and medical services, rather than trying to shift and hide those costs.
The individual mandate was an affront to American principles of freedom. It’s finally gone. Now, let’s make sensible decisions about what comes next.