Problems with the Uncompensated Care Hypothesis

by Avik Roy

Ezra Klein has a post up discussing the “policy questions behind the legal questions” in Florida v. HHS, namely, the fact that the individual mandate is necessary to address the problem of uncompensated care.

In a new post over at The Apothecary, I point out a number of problems with the argument that the individual mandate is necessary to address the uncompensated care, or “free rider,” problem: (1) the problem was created in the first place by clumsy government policy that forces hospitals to treat patients regardless of their ability to pay, without reimbursing them for the cost; (2) the individual mandate forces individuals to purchase comprehensive, not ER-only, coverage, thereby overshooting the problem; (3) the individual mandate purports to address one taxpayer problem (uncompensated care) by creating a larger one (subsidies to fund the individual mandate); (4) under-compensated care due to low Medicaid and Medicare reimbursement is a far larger problem than uncompensated care due to the uninsured; (5) the mandate-plus-subsidy approach leads to significant ER overcrowding, and thereby problems of access for the most needy.

The argument that PPACA’s individual mandate will successfully address the uncompensated care problem is at best hypothetical. In many ways, it makes things worse. Hence, the argument that the courts must uphold a constitutionally suspect provision because it is “necessary” as a way to deal with uncompensated care is, as a matter of policy, a flawed one.