Critical Condition

An Individual Mandate and the Moral High Ground

Advocates of Democrats’ health-care-reform agenda commonly stress that universal health insurance is a moral imperative — and that opposition is therefore immoral.  But the House and Senate bills would force many people with relatively low incomes to buy expensive health insurance.  They would also force many younger people and people with healthy life-styles to pay higher premiums to subsidize lower premiums for middle-aged and older people and people with unhealthy lifestyles.  What’s moral about either requirement?

An adult’s failure to obtain health insurance would result in an annual penalty of 2.5 percent of income under the House bill and $750 under the Senate bill.  The mandate would be combined with expanded Medicaid eligibility and premium subsidies for persons with income up to 400 percent of the federal poverty level.  Even with significant premium subsidies, however, the mandate would require many persons with relatively low incomes to buy health insurance against their will.  Households with income of 300 percent of the federal poverty level, for example, would be required to spend up to 10 percent of their income in the House bill (9.8 percent in the Senate bill).

Insurers would have to offer coverage without pre-existing condition exclusions at premiums that do not reflect health status and vary based on age only within a limited range. Due to these restrictions, a single 30-year-old with income equal to 300 percent of the poverty level ($32,490 in 2009) could easily be required to pay much more for mandated coverage than would be needed to buy a high-deductible health plan under the status quo.

Proponents regard an individual mandate as a practical necessity for moving towards universal coverage.  Requiring individuals to obtain coverage or pay a fine can reduce the amount of subsidies needed to achieve a given expansion in coverage, thus reducing the cost.  An individual mandate also might be necessary to support the bills’ underwriting and rating restrictions.  Without either a mandate with meaningful penalties for non-compliance or larger subsidies, many people, especially those younger and healthier, might wait to buy coverage until they needed expensive care, driving up the costs of coverage.

 

Mandate proponents may believe that most people compelled to buy coverage would be better off with insurance.  If this paternalistic/altruistic rationale has any force, the alternative of providing better information and educating the uninsured about the benefits of being insured would presumably motivate many of them to buy coverage without a mandate, especially those who would receive premium subsidies.

The bills’ “individual responsibility” rationale for a mandate has its roots in the negative externality that arises when people who receive medical care are unable to pay for it, and the costs are borne by hospitals, physicians, private payers, and taxpayers.  But a mandate on average requires some transfer of income from people with lower incomes to parties with higher incomes.

 

It is one thing for a liberal to argue that universal coverage is a moral necessity.  It is another thing altogether to argue that people with low to moderate incomes should be compelled to buy expensive health coverage, or that the young or people with healthy lifestyles should be compelled to subsidize middle-aged people or those with unhealthy lifestyles.

 

Liberals’ support for an individual mandate rests on their view that the ultimate end — universal coverage — justifies the means.  If forced to admit the collateral damage on individual people, they might well reply with Lenin’s adage:  If you want to make an omelet, you have to be willing to break a few eggs.

– Scott Harrington is professor of health-care management and insurance and risk management at the University of Pennsylvania’s Wharton School.

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