The individual mandate is too good of a deal, not too bad of one
"While the eventual health care legislation is likely to be a boondoggle, it at least holds out the hope of partially remedying the present system’s worst injustice," writes Ross Douthat on his new blog. "The way our mix of semi-free markets, tax breaks and government subsidies interact to price millions of Americans — some of them lower-middle class, some of them sick, some of them employees of small businesses, some of them self-employed — out of the insurance market entirely."
Moments later, however, Ross goes on the attack against the individual mandate. Millions of Americans -- he uses 18 million, the same number that won't have coverage, but many of those folks are exempted from the individual mandate -- "will be paying more and getting exactly nothing in return."
But what's the alternative? No one wants an individual mandate. But the folks who spend all their time trying to solve the first problem Ross describes have concluded that you can't do it without an individual mandate. After all, why do people get priced out of insurance? The answer, aside from "they're poor," is that they're bad risks. They're older, or they're sicker, or they've been sicker at some point in the past, or they work at a dangerous job or a job associated with chronic injuries.
If reform simply forces insurance companies to sell to these people, then prices skyrocket for everyone, as the sicker or the older rush into the market, while the young and the healthy hang back. In that scenario, you've not solved the problem of pricing people out. You've arguably worsened it. If you want to solve the problem of pricing out but you don't want an individual mandate, you need to think of an alternative to it.
Moreover, it's simply not true, as Ross says, that the people paying the $750 individual mandate penalty get nothing in return. Far from it, in fact. For one thing, they get access to emergency care, as happens now. For another, they get the chance to come back into the system when they actually need insurance. Someone who puts off purchasing coverage and then tries to buy Aetna's plan the first time they collapse unexpectedly will not be sold a plan. Having chosen not to buy insurance when they didn't need care, they can't buy it now that they do need care. They become the priced out or, in some cases, locked out.
Under reform, these people get the chance to come back into the system when they need coverage. They can't be discriminated against. Indeed, you can argue that these folks, the ones willing to game the system, are the most advantaged of all the groups. It's why the individual mandate should be stronger, not weaker, than it is now. This isn't the biggest deal at the outset of the plan, as there's fair evidence showing that people overvalue insurance and will buy it even though paying the penalty is a better deal. If that turns out to be wrong, you can strengthen the mandate down the road. But the economics of the situation favor the people who decide to pay the penalty rather than purchase insurance, not the other way around.
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