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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

The Mandate



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As expected, we’re now hearing thoughtful, honest assessments of flaws in the Affordable Health Care for America Act that were largely overlooked during the “natural heat of political competition.” 

Ezra Klein, one of the leading advocates of the president’s proposal, offers a primer on the individual mandate.

The irony of the mandate is that it’s been presented as a terribly onerous tax on decent, hardworking people who don’t want to purchase insurance. In reality, it’s the best deal in the bill: A cynical consumer would be smart to pay the modest penalty rather than pay thousands of dollars a year for insurance. In the current system, that’s a bad idea because insurers won’t let them buy insurance if they get sick later. In the reformed system, there’s no consequence for that behavior. You could pay the penalty for five years and then buy insurance the day you felt a lump.

While I’m confident that some have presented the mandate as a terribly onerous tax on decent, hardworking people who don’t purchase insurance, my sense is that conservative critics like Yuval Levin and James Capretta have repeatedly noted the risk posed by the so-called cynical consumer — I actually don’t see the decision to pay the modest penalty as terribly cynical, but that’s a separate issue — yet these arguments were hardly ever addressed. 

Ezra goes on to note that the mandate has proven fairly effective in Massachusetts, but of course the penalties have been somewhat more onerous, Massachusetts is a more affluent state in which the number of uninsured was already fairly low, and the there are many ways in which Massachusetts is a cultural outlier, e.g., a majority of births in Massachusetts are to mothers over the age of 30, which is one reason why the state has a relatively low rate of child poverty. A policy that works relatively well in Massachusetts might not work as well in the United States as a whole.

All the same, we now have a one-size-fits-all policy. 

Back in October, Capretta, a leading expert on the insurance sector who has done consulting work for private insurers, wrote the following:

The Obama White House and congressional Democrats convinced themselves months ago that they could avoid the fate of these failed state reform efforts by forcing the young and healthy to buy insurance, whether they wanted it or not. And so, all of the bills under consideration in the House and Senate would make government-approved health insurance enrollment compulsory for all Americans. Those not complying would have to pay a new tax, collected by the IRS.

But the assumption that Congress would be able to hold the line and permanently sustain a punitive new tax on Americans for not buying government-approved insurance was always dubious. And, sure enough, Democrats, staring political reality in the face, have been backing away from a tough “individual mandate,” step by step, ever since they returned from their August recess. The Finance Committee adopted amendments that delayed the mandate’s full implementation and dramatically reduced the tax penalties for non-compliance.

But as Democrats watered down the mandate, there was no commensurate adjustment in the insurance rules. The Baucus plan continues to require insurers to take all comers without regard to health risk starting in 2013. And therein lie the makings of an insurance market fiasco.

The rest of the post is worth reading. 



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