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Posted at 3:20 PM ET, 02/ 1/2011

An interview with Mark Pauly, father of the individual mandate

By Ezra Klein

pauly_mark_rdax_192x226.jpgIn 1991, economist Mark Pauly was the lead author of a Health Affairs paper attempting to persuade President George H.W. Bush and his administration to adopt a universal health-care proposal that would keep the government from eventually taking over the sector. "Our view is that excessive government intervention will make matters worse," wrote Pauly and his co-authors. "Our strategy, therefore, is to design a scheme that limits governmental rules and incentives to the extent necessary to achieve the objectives."

At the heart of that strategy was the individual mandate, which would go on to be promoted by congressional Republicans, the Heritage Foundation, and Massachusetts Gov. Mitt Romney before being adopted by Democrats and becoming a bete noire of conservatives. I spoke to Pauly earlier this afternoon, and an edited transcript of our conversation follows.

Tell me about your involvement in the development of the individual mandate.

I was involved in developing a plan for the George H.W. Bush administration. I wasn't a member of the administration, but part of a team of academics who believe the administration needed good proposals to look at. We did it because we were concerned about the specter of single payer insurance, which isn't market-oriented, and we didn't think was a good idea. One feature was the individual mandate. The purpose of it was to round up the stragglers who wouldn’t be brought in by subsidies. We weren’t focused on bringing in high risks, which is what they're focused on now. We published the plan in Health Affairs in 1991. The Heritage Foundation was working on something similar at the time.

What was the reaction like after you released it?

There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea [It did make it into a bill -- Ezra], but Democrats in Congress said it was "dead on arrival." So that was the end of my 15 minutes.

Was the constitutionality of the provision a question, either in your deliberations or after it was released?

I don’t remember that being raised at all. The way it was viewed by the Congressional Budget Office in 1994 was, effectively, as a tax. You either paid the tax and got insurance that way or went and got it another way. So I've been surprised at that argument. But I’m not an expert on the Constitution. My fix would be to simply say raise everyone’s taxes by what a health insurance policy would cost -- Congress definitely has the power to do that -- and then tell people that if they obtain insurance, they'll get a tax break of the same amount. So instead of a penalty, it’s a perfectly legal tax break. But this seems to me to angelic pinhead density arguments about whether it’s a payment to do something or not to do something.

That gets to one of the central questions in this argument, which is whether the individual mandate is a penalty for economic inactivity or whether it's part of a broader system of regulations affecting a market for health care that we're all participating in, whether we're buying insurance that day or not.

I see it in the latter way. We thought it was a good idea to do everything possible to encourage people to get insurance. Subsidies will probably pick up the great bulk of the population. But the point of the mandate was that there are a few Evil Knievals who won’t buy it and this would bring them into the system. In our version, the penalty was effectively equal to the premium of a policy. You paid the penalty and you got the insurance. That’s one of my puzzlements here: In the new law, the actual level of the penalty is quite small compared to the price of a policy. It’s only about 20 percent of the cost of a policy.

Do you think the mandate is severable from the larger bill?

I think you could do that. I’d want to take some other things out of the bill, too. But the main part I favor and the part that deals with the uninsured are these subsidies for lower-middle-income people. The great bulk of them would take insurance with those breaks. That won’t go away. The mandate props up community rating, which I’m not a fan of. So I’d throw overboard both the mandate and the community rating. Then I’d add high-risk pools.

You say the mandate was developed as a way to avoid single-payer health care. As I see the evolution of this issue, Richard Nixon countered single-payer with an employer mandate, then Clinton co-opted the employer mandate and Republicans moved to an individual mandate, and then Obama co-opted the individual mandate. But there's nowhere else to go, as far as I can tell. If the individual mandate dies, it seems to me that the eventual universal coverage solution will rely heavily on government programs -- we'll have single payer in fact even if we don't have it in name.

I think there’s a slippery slope in that direction. I have mixed feelings about the mechanics of the current bill. Our idea was to have tax credits and very little additional government control over insurance markets, and the legislation has an awful lot of that. I believe you could achieve almost the same reduction of the uninsured with the subsidies and without the mandate. But CBO says that you leave about 40 percent of the uninsured population without coverage in that scenario. If we want to close that gap, then either we have to have a mandate or make insurance free for everyone and run by the government.

Photo credit: Wharton School of Business.

By Ezra Klein  | February 1, 2011; 3:20 PM ET
Categories:  Health Reform, Interviews  
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It's true that any "universal coverage solution will rely heavily on government programs." That statement acknowledges that fact that a nation-wide system of universal coverage implies the expansion of the federal government beyond limits tolerable by the citizenry.

That's sort of the missing piece: IF there is a desire for universal health care -- IF the rank and file citizen truly wants to subsidize those lounging in the "safety hammock" -- there is then a need for universal health care and that need for universal health care requires a massive new tax and an invasive federal expansion.
Over the past year, it's become clear that -- worldwide -- the remnants of Johnson and Roosevelt ideology are unable to convince most workers to pay for the "safety hammock" enjoyed by non-workers.

I'd be interested in re-hearing recent Presidential speeches touting the goodness of universal coverage. Until there is a universal cry for universal coverage -- and that day is long, long away -- there is no need to expand taxes and federal government to implement the (unwanted) universal coverage. The cart (implementation) need not be placed before the horse (a universal desire for universal coverage).

A parallel historical question: is it wise or cruel to vaccinate African children who can't be fed?

Posted by: rmgregory | February 1, 2011 4:01 PM | Report abuse

"I believe you could achieve almost the same reduction of the uninsured with the subsidies and without the mandate. But CBO says that you leave about 40 percent of the uninsured population without coverage in that scenario."

I'm scratching my head at these two contradictory statements. So Mr. Pauly is saying to get universal health coverage, we have to have an individual mandate. But he's afraid to state the obvious. We either settle for individual mandates or go full bore with single payer. There's no other choice.

Conservatives should be very careful what they wish for. They keep touting Singapore, Switzerland, and Germany. All these countries have some form of mandated health insurance policies.

Posted by: jasonr3 | February 1, 2011 4:04 PM | Report abuse

This is interesting to me:
"There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea, but Democrats in Congress said it was "dead on arrival." So that was the end of my 15 minutes."

So everyone is now blaming Republicans for not being on board with this idea, and completely absolving Democrats for killing it at the time? If one party is guilty, both parties are guilty. If it was such a good idea, and beyond all reaches of politics and political calculation, it is the Democrats fault for originally rejecting it. Now, all of a sudden that Democrats propose it, it's a necessary part of health care reform that we can't do without. Whereas when Republicans proposed it, it was "dead on arrival."

Posted by: puzzlemuse | February 1, 2011 4:22 PM | Report abuse

Love the phrase "angelic pinhead arguments." Entirely changes the meaning of "how many angels can dance on the head of a pin?"

Posted by: randrewm | February 1, 2011 4:51 PM | Report abuse

"If we want to close that gap, then either we have to have a mandate or make insurance free for everyone and run by the government."

I'll take option "B", please.

Posted by: KarenJG | February 1, 2011 5:07 PM | Report abuse

"Make insurance free for everyone." How is that possible? Someone has to pay! Have we become such a stupid society to think that anything is "free." I thought the people who post here were smarter than that! OMG!

Posted by: my4653 | February 1, 2011 5:12 PM | Report abuse

my4653, pretty sure he meant paid for through taxes rather than paying an additional premium.

And, yes, of course taxes would have to be adjusted to pay for it, so no, it's not really free. But it's not any less "free" than, say food stamps. Or the military, for that matter.

Posted by: KarenJG | February 1, 2011 5:40 PM | Report abuse

Interesting piece. It would be ironic if Republican defeat of the current law led to single-payer. Pauly's comment that the penalty should be the same as the premium illustrates something I've noticed for a long time: legislators can screw up anything.

By the way, the question of how many angels can dance on the head of a pin was answered long ago: all of them.

Posted by: scientist1 | February 1, 2011 10:54 PM | Report abuse

Hint to Democrats: there are certainly a non-trivial number of people lounging in the safety hammock. These people really really piss off conservatives, and every conservative knows of a handful of them. You will never ever win the hearts and minds of Limbaugh country unless you address the free-loaders.

Hint to Republicans. The vast majority of people using our safety nets are NOT lounging. Grow up, get over it, and help us make the system work rather than endlessly trying to drown it in a bathtub.

Posted by: brickcha | February 1, 2011 11:25 PM | Report abuse

His puzzlement is due to his belief that Republican objections are rooted in some principle. They are not. Republicans have no policy beliefs. They are animated simply by partisanship and resentment. This bill was proposed by a Democrat, so, regardless of whether or not it’s based on ideas that they themselves had proposed for the past few decades, Republicans claim it’s tyranny. The end.

Posted by: eelvisberg | February 2, 2011 7:54 AM | Report abuse

"If we want to close that gap, then either we have to have a mandate or make insurance free for everyone and run by the government."

I'll take the second option. Thanks.

Posted by: destor23 | February 2, 2011 10:37 AM | Report abuse

eelvisberg> I couldn't agree more. All of these earnest discussions presume that national Republicans are interested in creating any actual policy.

Posted by: nickthap | February 2, 2011 5:32 PM | Report abuse

Three more of the non-stop ironies of our current political theatre:
1: watching (as was noted by another commenter) alleged "liberals" running around defending the very policy they deemed heinously unacceptable when it was proposed by Publicans.
(Although, credit where it's due: a very large number do, in fact, deride the ACA as it wound up being written. Those are pretty much the only people in this whole travesty with a consistent, principled stance to which they can point.)
2: watching the current crop of Publicans and their teatard supporters reviling and abhorring the very policy that they claimed to support not that long ago (right up to the instant the Dem's caved on it, in fact)
But best of all,
3: helpful people suggesting that Jane and Joe Sixpak (as opposed to, say, themselves?) won't stand for paying for the healthcare costs of those unproductive "non-worker" hammock-occupying leeches and moochers.
Well, guess what, people?
You already do.
When Rush and the other blowhards say there's no health-care crisis, because anyone w/o insurance can always go to the ER, who do you think is covering the tab for that?
YOU are, partly thru your taxes, partly thru higher purchase costs for your own insurance, and partly thru the higher co-pays and deductibles that you're still responsible for under your policies.
Except -- and here's the hilarious part -- you're doing so in just about the most inefficient way possible!
So there you have it; in your greed, selfishness, and arrogant presumptions of who is and is not "productive," in your shortsightedness and ignorance of how the current system actually works (ie, fails to), you're once again fighting directly against your own financial interest -- and you don't even know it.
It would be hilarious, if it weren't so tragic.

Posted by: smartalek | February 3, 2011 12:16 AM | Report abuse

smartalek- thanks for pointing out #3. We dont buy health insurance, not because we don't want to support welfare recipients, but because it is more efficient to pay directly for services. (self employed paying Individual premiums, no group rate. Plus -preexisting conditions for 2 children born into our fabulous system, with health disabilities). Also, we are not the ones getting a free ride. We use that extra money that isnt going to premiums to pay directly for our health services.
I see your point about how inefficient that really is, since taxes and private monies have to supplement our lack of paying into the insurance system.
We arent likely to change though, because the combination of taxes and premiums is still higher than taxes and directly paid health care, even with additional health issues like thyroid cancer, diabetes, treatment for high cholesterol and high bp.

Posted by: momo3 | February 5, 2011 6:19 PM | Report abuse

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