Imagine we dug a 15-foot hole in the ground and got in it. Our only means of escape is a rope ladder, hanging from above. But then a federal judge rules that the rope ladder is constitutionally impermissible. So I say, “This ruling is terrible. We are all doomed!” How would you respond?
If you are normal and rational, you would say: “Hold on, Goodman. Did anybody make you dig that hole? Did anyone force you to get into it? Your problems are not caused by a judge. They’re all your own making.”
Easy. Right? I know I’ve said many times that people’s IQs drop about 15 points when they start thinking about health care. The supporting evidence for that position has become so overwhelming I’m thinking about elevating it to the status of a social science law.
Anyway, that’s why it’s good to give non-health examples, just to get the first principles down. Let’s try something else that’s really close, but still not health care. Imagine that Congress required insurers to sell life insurance for the same premium, regardless of health status. So a terminally ill person only a few days away from death could pay the same premium as someone who is healthy and fit. Then, with insurance companies only a few months away from complete bankruptcy, imagine that Congress steps in to save the day by mandating that everyone buy life insurance.
Pretty stupid, right? Okay, now we’re ready for health care.
What Congress did for health care is the very thing I just described in my imaginary regulation of life insurance! Under the Affordable Care Act (ACA), someone in the intensive care ward can buy health insurance for the same premium as someone competing in the U.S. Open. So to keep the system from imploding in short order, all the health policy wonks — well, almost all of them — think we need a mandate, forcing the healthy to buy insurance long before they face any serious medical bills.
(By the way, lest you think this is unusual, almost everything we do in health policy is an attempt to prevent the bad effects of all the perverse incentives created by previous legislation.)
Now, at this point, you are probably thinking that Congress had no choice. The voters demanded the right to buy insurance after they get into the intensive care ward. Right? Wrong. Yes, the general public wants something done about pre-existing conditions. But at no time has there ever been the slightest indication of public pressure to allow people to shamelessly game the system. Consider that:
- Medicare enrollees who fail to enroll in Part B when they are eligible and not covered elsewhere are subject to a higher premium, equal to 10% a year for every year you fail to insure.
- Failure to enroll in Part D (drug coverage) will result in a higher premium, equal to 1% per month for every month you delay enrolling.
- If you fail to sign up for Medigap insurance when eligible, you can be denied coverage altogether if you later develop a serious medical condition.
- People who enroll in high-risk pools can pay as much as twice the premium other people pay.
These are common features of public health insurance, and there is little evidence of any public outcry. The one exception might be the high premiums for risk pool insurance. But although these costs are unfair to people who were continuously insured and lost coverage through no fault of their own, most people don’t object to the higher premium for people who have been willfully uninsured.
Bottom line: We do not have to have a health care system that allows people to remain uninsured (with little or no penalty) and then enroll after they get sick (paying the same premium as everyone else). The public isn’t demanding that and no one thinks that is just, fair or desirable, other than some health policy wonks who are way out of touch with ordinary Americans.
Another mistake that advocates of mandates make is the belief that mandates make a big difference in the uninsurance rate. We have pointed out before that the national uninsurance rate for auto liability insurance (mandated in all but three states) is only a couple of percentage points below the national health uninsurance rate.
The example of Massachusetts was misused by David Leonhardt the other day in The New York Times. As Mark Pauly has pointed out, the drop in the uninsurance rate in that state is almost completely explained by tax and spending subsidies, not by the Massachusetts mandate. Moreover, only 7.1% of the newly insured in Massachusetts are individuals buying unsubsidized insurance on their own.
A third mistake of the pro-mandate crowd is the failure to see that with a rational set of tax subsidies, mandates are largely irrelevant. I would guess that if you combined all the existing tax subsidies for health insurance with, say, half the new revenue raised by ObamaCare, you could afford to offer a refundable tax credit of $3,000 to every individual and $7,500 to every family to purchase health insurance. If so, it would be foolish for the family not to buy at least $7,500 of insurance (probably a catastrophic plan). But in case it did not, we could cashier the $7,500 in a fund to pay for uncompensated health care — should the need arise. (See the grand scheme here.)
A final point is that the federal government can save quite a bit of money with no mandate. The ACA without a mandate, according to the Congressional Budget Office, would:
- Increase the number of uninsured by 16 million.
- Save the federal government $252 billion over 10 years — primarily because of reduced Medicaid spending, lower health insurance subsidies and more taxable wages replacing untaxed employer-provided health insurance.
- Raise premiums by 15% to 20% in the individual (exchange) market because of adverse selection.
As noted, this last result can be ameliorated by imposing modest premium increases on people who delay enrollment and could be largely eliminated if we were willing to be even more aggressive.
John C. Goodman is president and CEO of the National Center for Policy Analysis. The Wall Street Journal and the National Journal, among other publications, have called him the "Father of Health Savings Accounts," and the Media Research Center credits him, along with former Sen. Phil Gramm and columnist Bill Kristol with playing the pivotal role in the defeat of the Clinton Administration's plan to overhaul the U.S. health care system. He is also the Kellye Wright Fellow in health care. The mission of the Wright Fellowship is to promote a more patient-centered, consumer-driven health care system.
Dr. Goodman's health policy blog is the only right-of-center health care blog on the Internet. It is the only place where pro-free enterprise, private sector solutions to health care problems are routinely examined and debated by top health policy experts throughout the country-conservative, moderate and liberal.
