The Agenda

Ezra Klein on the Limits of the Individual Mandate

I was delighted to read a new post by Ezra Klein on “the irony of the individual mandate.” Defenders of the mandate have insisted that it is the only way to prevent an adverse selection death spiral. Yet as Ezra points out, and as many critics of PPACA observed while we were debating the health law, the mandate is actually very weak:

The fact of the matter is that $695 a year or 2.5 percent of your annual income is likely to be a lot less than a decent insurance policy will cost you. In a way, paying the mandate is like buying an option to purchase insurance at some future date, when you need it more, for a price that you could never have gotten before the mandate.

The enforcement provisions appear to be quite weak, as Ezra explains. That is why many private insurance companies sought a more strenuous individual mandate and why many critics, mainly on the right, have argued that it won’t be enough to prevent an adverse selection death spiral and that PPACA will thus exacerbate premium cost growth. Ezra, however, ends on a positive note:

Most analysts are more optimistic, and for two reasons. First, Americans want health insurance, they want access to care before they get sick, and with the subsidies in place, they’re getting help to buy it. Second, Americans tend to follow the rules. In Massachusetts, where the mandate is similarly weak, compliance has been extraordinarily high.

If the particular kind of health insurance Americans are purchasing is best understood as pre-payment of medical care rather than protection against catastrophic medical risks, one wonders if we will see a significant increase in the utilization of medical services that doesn’t actually contribute to improved health outcomes. 

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