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Despite the hysteria from the health care industry and its friendly economists, the Affordable Care Act would still work without the individual mandate, according to a new study published in Health Affairs. From the study: (h/t ThinkProgress)
We estimate that if the mandate were lifted, premiums in the individual market would increase by 12.6 percent—somewhat less than other estimates—with 7.8 million people losing coverage, versus other estimates for coverage loss of 16–24 million people. In sum, the Affordable Care Act would still cover 23 million people who would have been uninsured without the law.
According to the study, coverage would increase by 23 million without the mandate, and about 30 million with the mandate.
The study found that despite the widely cited claim that eliminating the mandate would cause a premium death spiral, with only the sickest buying coverage and everyone else dropping coverage, there is no solid real-world data showing this does happen in places with guaranteed issue. Even if death spirals could happen in the health insurance markets, because most newly insured individuals’ personal costs under the ACA will be based on their income, and not the amount of the insurance premiums, it would be unlikely to happen with the ACA.
But it is not clear that eliminating the mandate would inevitably result in a premium spiral. Despite the widespread acceptance of this notion, researchers have been unable to document coverage loss attributable to premium spirals in states that have implemented some elements of the Affordable Care Act, such as the guaranteed-issue and community-rating requirements in New York.
As we describe below, some researchers suggest that although premiums increased in these states, many people responded by moving to less expensive health maintenance organizations or by taking less comprehensive coverage rather than doing without insurance altogether, which averted an overall loss of coverage. However, as discussed below, the New York reforms differ from those in the Affordable Care Act, so the outcomes are not strictly comparable.
The premium subsidies provided under the act would also serve to restrain a premium spiral by absorbing much of the impact of premium increases. According to the Congressional Budget Office, about two-thirds of people with nongroup coverage under the act would receive premium subsidies.
This is a critically important point for dealing with the death spiral argument that I have brought up several times in the past. Most of the newly covered will either get Medicaid or income-based subsidies.
You simply can’t have a death spiral if the amount it costs most people to buy insurance on the exchange isn’t affected by how much the premiums actually are. There is no spiral when income-based subsidies create a price ceiling for most people.
This is not to say that removing the mandate wouldn’t have an impact. It would cause some people, mostly those who don’t want insurance, to go without. It would also likely modestly increase premiums in the individual market, but that wouldn’t have much of an impact on what the vast majority of the newly insured end up paying for coverage.
The important take-away is that the health care law will still function even if, for example, the Supreme Court strikes down only the individual mandate.
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There’s another way to look at that study. The quote notes that coverage did fall, because people either took less coverage or moved to a different type (lower quality?) of coverage. That’s like saying the rising price of granny smith apples did not decrease the consumption of such apples, because more people ate smaller, less flavorful apples. The point is to maintain the level of full coverage, and this says you can’t.
Second, the claim made by this model’s supporters is that the mandate plus the subsidies, plus guaranteed issue results in lower costs. If you drop the mandate, average costs and prices will rise. This study appears to confirm that. It is not a reassuring argument so say, yeah, but coverage will not fall much because the government subsidies will absorb the price/cost increases. That assumes that the government will pay whatever increased subsidy is required to sustain the same level of coverage. As we have seen in the last year, there is no guarantee the government will do that. Not even Democrats will make that pledge. Governments will tend to pass costs back to consumers, or reduce coverage, just as businesses are doing now with employer-provided insurance. So even though the effect is delayed, it still happens over time.
So I don’t think this study undercuts the basic theory. The model they’ve adopted depends on making sure they get as many people covered and contributing –either directly or via subsidies — as they can to spread the costs and lower the average. Once you allow people to drop out, it will logically lead to higher average cost, which will in turn discourage others or discourage the government from covering the difference. It’s a stupid way to do this, and we shouldn’t be saying, well, even if you undermine the model’s logic by removing the mandate, it will still work.
The goal is: everyone in, full coverage, at a cost we can afford. This will fail, and I think we should hammer that home.
The GOAL is ‘full coverage, at a cost we can afford’.
The law under any current permutation, with or without the mandate, will NOT give us either the full coverage or the ‘can afford’.
Less profit for the insurance companies. They wrote the law. That’s why there’s a fully subsidized mandate. It’s all about The Benjamins.It has nothing to do with providing health care.
The only workable solution is a single payer government health care system, anything less and we will be at the mercy of a private corporation trying to please the banksters on Wall Street every quarter. The private corporations will never be satisfied with a fixed profit, even if it’s a guaranteed profit. That model doesn’t afford the CEO’s ever larger paychecks and bonuses year to year.
Just change one line in the medicare law to make everyone eligible at year zero and adjust the medicare tax accordingly.