A Weak Argument For The Individual Mandate
In today’s Washington Post, Ruth Marcus offers what she calls “116 billion reasons to be for the individual mandate.”
The most compelling sentences in the Obama administration’s brief defending the constitutionality of the health-care law come early on. “As a class,” the brief advises on Page 7, “the uninsured consumed $116 billion of health-care services in 2008.”
However, Forbes does a pretty good job of debunking this, or perhaps we should call it pre-debunking, because it was posted over a month and a half before Marcus’ piece.
In Massachusetts, the uncompensated care pool did shrink after the installation of Romneycare: but only by two-fifths. Uncompensated care in the Bay State was $661 million in the pool’s 2007 fiscal year, $409 million in PFY 2008, and $414 million in PFY 2009. That’s not terrible, but underwhelming compared to what Massachusetts residents were promised, especially considering Romneycare’s staggering cost: remember that the mandate comes with large subsidies so that lower-income individuals aren’t forced to buy something they can’t afford. (The percentage of uninsured went from 5.7% in 2007 to 2.7% in 2009.)
Whether you support or oppose PPACA, the fact is, it doesn’t cover everyone. If you go by the Congressional Budget Office’s numbers, which are flawed in many ways, the uninsured population will shrink under PPACA from 50 million in 2010 to 23 million in 2019. Therefore, under Obamacare, there will continue to be a sizable population of uninsured individuals, including much of the illegal immigrant population, which isn’t eligible for PPACA’s benefits but will still gain access to uncompensated care via EMTALA.
Yes, Massachusetts has saved about $250 million in uncompensated care. On the other hand, in 2011, the state’s insurance subsidies will cost more than $830 million, and are growing at 5% a year. Why is spending large gobs of taxpayer money to only partially address a problem costing less gobs of taxpayer money called an improvement?
And two updates to the Forbes piece drive two more nails into the coffin of Marcus’ argument:
UPDATE 1: John Cogan, Glenn Hubbard, and Daniel Kessler, writing in the Wall Street Journal, discuss some of the economic research surrounding cost-shifting and the uninsured. I thought this observation, in particular, was interesting:
Where did Congress go wrong [in calculating the cost of the “free rider” problem as $43 billion per year]? We traced its estimates of the magnitude of the hidden tax of $43 billion per year, or an increase in family premiums by an average of $1,000 per year, to two sources—the aforementioned Health Affairs study, and a non-peer-reviewed study commissioned by FamiliesUSA, a Washington, D.C., group long known for its advocacy of greater government involvement in health care. Yet Congress simply ignored the evidence in the Health Affairs study and failed to recognize the serious flaws in the FamiliesUSA analysis.
Specifically, Congress ignored the $40 billion to $50 billion that is spent annually by charitable organizations and federal, state and local governments to reimburse doctors and hospitals for the cost of caring for the uninsured. These payments, which amount to approximately three-fourths of the cost of such care, mitigate the extent of cost shifting and reduce the magnitude of the hidden tax on private insurance.
In other words, a large part of the bill for uninsured care is already taken care of by various programs, so I doubt that the real cost is $116 billion.
UPDATE 2: Philip Klein quantifies the revenue generated by the individual mandate, relative to the costs of uncompensated care in Massachusetts:
In fiscal year 2010, according to the Massachusetts Division of Finance, the state government collected just $17.8 million in fines from people not complying with the mandate. But uncompensated care was a stubborn $475 million, according to the state’s Division of Health Care Finance and Policy. (The state could only pay $405 million, with shortfall cost falling on hospitals.)
So, the individual mandate in the test-bed state for ObamaCare came far short of solving the uncompensated care problem.
In short, Marcus’ article looks good on paper, like a lot of lefty policies, but once you start looking at the real world, her argument falls apart.
Kind of like David Axelrod’s statement that ObamaCare would become more popular after it was passed.