Another way to look at the mandate

post by Paul Kelleher

In two recent posts I've considered two arguments for how to view the individual mandate. Some view it as a personal responsibility requirement that offsets the uncompensated care that un- or under-insured individuals receive at hospitals. Others view it as implementing a conception of social justice on which it is everyone's duty to pitch in to ensure everyone can have decent health care.

It now seems to me best to view the mandate in both of these ways. Perhaps that's the (intended?) genius of the mandate: it lets people decide for themselves which of these perspectives to adopt. This stems from the following fact that I noted yesterday:

Absolutely no one is forced by the mandate to have health insurance. Rather, the mandate is a "pay or play" provision: people can just pay the penalty instead of getting insurance. 

The mandate forces citizens to make a choice. Either they pay the penalty, or they acquire "minimum creditable" insurance coverage. This choice could be further described as the choice between paying a "nonrefundable emergency room deposit" or paying for a decent level of health care. Viewed in this way, the mandate is a downright bargain, since the annual cost of uncompensated hosptial care is $39 billion, while the annual revenue generated by mandate penalties is expected to be only $2.8 billion. 

So the choice imposed upon citizens by the mandate is simple: Do you want to avoid being a complete free-rider, or do you want to pay for decent coverage that also promotes social justice by helping others acquire decent coverage? And here's ingenious part: It's really up to each citizen to decide!

Comments

[Brendan Saloner]

Let's put aside the legal issues for a minute and frame the question like this.

If the sole purpose of the mandate was to eliminate free riding, what kinds of regulations on individuals and insurance markets would be permitted?

My thought is -- very little. The most stark proposal, which Scalia actually did not reject, is to simply let people die who do not purchase health coverage (this is a world in which emergency rooms can turn people away, a world without EMTALA).

Less stark, is a world in which everyone has to pay an emergency room deposit (the most extreme version of catastrophic coverage). This is a world in which medical underwriting would clearly be permitted (the young invincibles would pay premiums that reflected only their expected costs). This would also be a world in which a 50 year old man with congestive heart failure and diabetes would face very cost for even ER care, since we can expect that he will be making numerous visits. So actually in this world, some people would pay much more for ER only insurance than the current PPACA penalties, and perhaps some would pay even less.

Clearly, in this world nobody would be compelled to purchase insurance that covers any services that they wish to opt out of (such as the childless person who does not care for coverage that offers well-child visits).

This is not a world with a functioning insurance system as we know it.

There are only two ways to justify a regulated insurance market with required participation. Defenders of health reform should not run from these justifications.

1. Reasons of efficiency (essentially utilitarian): regulated insurance markets pool risks across a population, which benefits everyone on average since it reduces unpredictability of medical expenses. Better regulations also reduce adverse selection, and various market failures that selection induces.

2. Reasons of social justice: insurance is one vehicle for ensuring that everyone in society has access to affordable health benefits that prevent or cure illnesses and disabilities. On many different competing theories of justice society has an obligation to its members to protect population health.

I think your suggestion in this post has some theoretical appeal, but we should be really honest: the mandate is a mechanism for doing things that benefit the population overall. (On a related note, I find this whole vocabulary of "shared responsibility" very misleading, sometimes we are simply compelling people to do things that do not benefit them because they owe that to their fellow citizens as a matter of justice).

[Paul Kelleher]

I really don't disagree with any of that, except for the part where you suggest I'm not being full honest. You don't have to read it, but I *did* just publish a post yesterday entitled "The Mandate is About Social Justice." Today's post simply points out that the ACA allows people to opt out from that project of social justice, albeit while still requiring them to pay in a little something that can be justified independently on grounds of preventing free riding. Unless the mandate penalties become significantly stiffer, the facts on the ground support the framing I describe in this post: if you don't want to participate in a project of social justice, we're at least going to insist that you do not become a complete free rider.

(I do not know who you are referring to when you criticize the use of "shared responsibility" or how you intend to distinguish the idea of shared responsibility from the idea of owing something to fellow citizens as a matter of justice")

[Brendan Saloner]

Paul -

I hope you didn't read my comment as saying that you are being dishonest -- and I very much agreed wit the social justice post you wrote yesterday -- what I was really trying to say is that "we", defenders of health reform, should emphasize that mandates are a necessary way to realize a claim that all members of society have to have their health protected. I think your argument is interesting as a matter of theoretical interest, and I simply suggested how the system would have to be modified to align policy with that two-pronged justification (either participate in the minimal coverage, or pay for social justice). But my larger point, is that as a practical matter of public justification we should highlight the social solidarity argument much more.

On the shared responsibility -- this is an argument that is frequently made by policymakers and by some ethicists (I'd have to dig for names) -- but I don't think it stands up to serious scrutiny. I mentioned it as an aside, but I'd like to dismantle that argument in a longer piece some time.

Anyway, I'm very glad you wrote these posts. I hope you write something longer for publication.

[Paul Kelleher]

Let's pool resources (ha!) and publish something together.

[Brendan Saloner]

I'm for it!