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Obamacare as ‘Play or Pay’



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Today’s Supreme Court decision raises some interesting questions about how Obamacare will operate in the real world.

The Court held that the individual mandate is constitutional only because it really isn’t an obligation on citizenship after all. Rather, it is constitutional because the federal government is simply imposing a new tax on households that decline to sign up with government-endorsed health insurance.

Now, some might think this is a distinction without a difference. And that may be so. But, at least in the world of “behavioral economics,” it is potentially a distinction with a very big difference.

The Congressional Budget Office (CBO) and others have suggested that the presumed mandatory obligation to buy health insurance would be a very powerful motivator for those who today choose to remain uninsured to purchase coverage, even though the “penalty” they must pay is generally far less than the premiums for even bare-bones health insurance. In other words, the CBO assumes these people will go along with the program because everyone else is going along with it and, well, it’s the “right thing to do.”

#more#This was always a dubious assumption, as it presumes people will act against their own self interests. But it would seem even less plausible now because the Supreme Court, in its language today, has made it clear that the mandate cannot be viewed as a mandate at all; it’s just an optional tax that citizens can pay in lieu of securing health insurance.

But if that’s what it really is, is it still reasonable to assume that millions upon millions of people would rather pay high premiums instead of the much less expensive tax? Because, under Obamacare, they can always pay the tax for a while and get health insurance later when they need it.

And, if large numbers of Americans choose to pay the tax and not premiums, then Obamacare really isn’t a “universal coverage” program after all.

The bottom line here is that words still have meaning, in politics as well as law. Obamacare was constructed on the assumption, with the CBO’s blessing, that something approximating “universal coverage” could be achieved if insurance enrollment was made obligatory for citizens and legal residents in the United States. The Court now says that Congress can’t make it obligatory but can tax those who don’t participate. Those who issued the ruling today may not think there is a big difference in practice, but there very well could be.



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