Further, the individual mandate itself isn’t likely to work as the CBO assumes it will. For starters, the taxes imposed on those going uninsured are far below the premiums most households will be required to pay for “qualified” insurance. For instance, in 2014, a family of four with $50,000 in total income will have to pay an uninsured tax of $500. But their premiums in the Obamacare exchange, even with a large federal subsidy, are likely to come in around $3,000.
Obamacare advocates argue that the tax on the uninsured need not be onerous to compel enrollment in health insurance. The mere existence of the tax is supposed to create an “aura of obligation” that magically convinces millions of Americans to sign up with expensive insurance coverage that is not in their self-interest. In other words, the mandate was supposed to create the perception that not buying health insurance was somehow “unlawful.” The CBO bought into this way of looking at the legislation and assumed that eventually large numbers of Americans would sign up for health insurance even though they could reduce their costs substantially by paying the tax instead and waiting to get health insurance until they need it.
The CBO’s approach to estimating the effects of the mandate was always suspect, but it is even more so in the wake of the Supreme Court’s decision on Obamacare last year. The majority opinion of the Court makes it clear that Congress had no authority under the Constitution to create an obligation to purchase health insurance. All Congress could do was to create a legitimate choice between two perfectly legal options: either sign up for government-sanctioned health insurance or pay a tax. Both are equally legitimate — at least in the eyes of Chief Justice John Roberts. If this becomes the prevailing understanding of the mandate, then many millions of relatively healthy people will quite naturally pay the tax rather than sign up for coverage. The result will be far more uninsured in the future than the CBO currently estimates.
So despite all of the self-congratulatory rhetoric from the law’s advocates, there’s little prospect that Obamacare will actually deliver on “universal coverage.” Instead, it should be viewed for what it will likely become: a very expensive new health-entitlement program that the government will try to control like the other programs already on the books — with regulated prices. In the end, that approach will lead to the same problems with quality that plague Medicaid.
It doesn’t have to be this way. It is possible to construct a real universal insurance plan — with everyone in the country protected from the kind of high-cost medical event that insurance is intended for — without the onerous mandates, taxes, and regulations of Obamacare. What’s necessary is a truly functioning marketplace, with consumers, not the government, driving the allocation of resources. As more and more Americans see up close the failures and shortcomings of Obamacare, there will be renewed interest in pursuing such a commonsense plan.
— James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.