Re: Repealing the Individual Mandate Is a Terrible Idea

by Mario Loyola


Avik, you write that repealing the individual mandate in Obamacare, without repealing the rest of the law, would be a terrible idea. Well, not necessarily: As Eisenhower used to say, in order to solve a problem, it is sometimes necessary to enlarge it.

Forcing Democrats to vote on repeal of the individual mandate might be a great idea, both for political and policy reasons. First, I can’t wait to see what happens when we force them to vote on perhaps the most unpopular aspect of their own law. Second, the health-care law is unsustainable without the individual mandate, as you point out, but whose problem is that? You point out that if the mandate is repealed, the health-insurance industry will be destabilized. Actually, it will collapse. Democrats will be desperate to avoid a disaster created by their health-care law, and for which the public will blame them. Republicans will then be in a position to dictate terms.

As you point out, if we repeal the individual mandate, but leave in place the prohibition on denying coverage for pre-existing conditions, an “adverse selection death spiral” will set in. If people can get health insurance whenever they want, they will tend to wait until they are sick; with a much smaller pool of healthy insured, insurance companies will raise premiums, which will force even more healthy people off the insurance rolls, which will force insurance companies to raise premiums further, and so on — that’s the “death spiral.” Well, if you remove the funding stream for universal coverage — namely the requirement that all healthy people purchase insurance — the federal government will have exactly three choices: (1) let the health insurance industry collapse, and with it, health care as we know it; (2) absorb the cost of subsidizing the health insurance companies somehow, which would bankrupt the government; or (3) repeal or revamp the entire law. Republicans will be able to eliminate option (2) by refusing to appropriate the necessary funds. That will leave Democrats with a choice between (1) and (3) — either take the blame for bankrupting the entire health insurance industry, or replace Obamacare with a new law that will require at least seven Republican votes in the Senate, and the agreement of the Republican-controlled House.

Republicans at that point could extract concessions far more sweeping than the effective repeal of Obamacare — such as giving states full authority to regulate their own health care according to market principles. We might finally have the chance to fix what’s really wrong with our health care system, problems that existed long before Obamacare came along to make them all worse.

— Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation.

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