‘Cost Shifting’ Again

This Associated Press story about yesterday’s oral argument in one of the Obamacare cases notes:

Parts of the overall law should still survive, said government lawyer Katyal, but he warned the judges they’d make a “deep, deep mistake” if the insurance requirement were found to be unconstitutional. He said Congress had the right to regulate what uninsured Americans must buy because they shift $43 billion each year in medical costs to other taxpayers.

This cost-shifting argument is just not true. John Cogan, Glenn Hubbard, and Daniel Kessler did a good job of reviewing the data and showing why the $43 billion number is bogus in this Wall Street Journal op-ed a few months ago. As they note, cost shifting from the uninsured to the insured today is pretty negligible. Cost shifting from Medicaid—which pays doctors very poorly, forcing them to overcharge patients with private insurance—is greater, but it will grow, not shrink, under Obamacare, since the law would vastly expand the scope of Medicaid coverage without reforming the program. Cost shifting does not provide a legal justification for the individual mandate, but it does contribute to the policy argument for repealing Obamacare.

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