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Taking the Individual Mandate Off Life Support

9:29 AM, May 13, 2011 • By TOM MILLER
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What’s missing from the Obamacare debate is a more realistic understanding of the limits of government coercion within our political system, the balance of power between government and citizens in our Constitution, and the longstanding societal values that sustain both of them. The individual mandate touches exposed nerves and offends core principles in ways that other elements of the modern regulatory state do not.  

Mandate alternatives often presume that if subsidies are generous enough, they can make purchasing insurance a no-brainer. But continuing to chase after rising health care costs with open-ended public subsidies for comprehensive insurance coverage across the board, amid a slow-growth/deficit-ridden economy, is a no-brainer in a far different sense. This just in: we’re running out of private money to waste in the public sector.

Instead of pursuing coverage mandates at lower dosages or through more partly disguised means, we should consider a better mix of four policy reform ingredients.

First, rely on persuasive incentives rather than coercive commands. Part of this approach actually was proposed first in the House Republican alternative to Obamacare, back in November 2009. The basic idea is to extend insurance portability rights and protection against new medical underwriting due to changes in health status (already provided since 1996 by the HIPAA requirements for employer group health plans) to those entering, exiting, or remaining in the individual health insurance market—as long as they maintain continuous qualified insurance coverage. In short, the incentives to get insurance and maintain it would be strengthened. Switching between group and individual markets would become less complicated and stressful. However, those who delay obtaining coverage when healthy, or drop it and stay uninsured for too long, would run the risk of paying higher premiums in the future or facing restrictions on coverage of pre-existing conditions they develop in the interim. This is the health policy equivalent of winging two lame ducks (the individual mandate and the new regime of over-reaching federal insurance regulation) with a single shot.

Second, redistribute and prioritize current insurance coverage subsidies. There just isn’t a sustainable line of credit ahead or enough tax revenue to keep financing the levels of tax expenditures and public program benefits that foster the illusion we can pay most, or at least a substantial share, of everyone’s health insurance premiums with other people’s money. We should not, and actually do not, need to bribe upper-middle class and wealthier Americans to purchase and maintain insurance coverage. They already have assets to protect themselves, and generally live healthier lifestyles. We could instead lower their other taxes to offset the net effects of making the full unsubsidized costs, and real value, of their current coverage and care more transparent to them. However, that doesn’t mean that additional subsidies (offset by other spending reductions in the health care portion of the federal budget) won’t be needed to help other populations targeted on the basis of lower-income and higher health-risk needs. Those dollars can help pay for some, and sometimes all, of the actuarially-equivalent costs of their basic care, but almost everyone needs to start seeing more of the real price tags in health care markets again, instead of the fake ones at the government discount store.

Third, because no system of coverage incentives and need-based subsidies is fool proof, we have to maintain a back-up system of safety-net protections for those who fall through the cracks or must be protected from the unbearable consequences of their irresponsible behavior. Beyond a narrowed base of Medicaid assistance for the temporarily low-income and more permanently disabled, the next layer of support should involve more sustainably financed, high-risk pools that are operated by states within basic federal parameters. Such subsidized coverage would still cost more than the conventional insurance for standard-risk customers, but its premiums would be capped in proportion to an enrollee’s income and likely risk-related health costs.          

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