Can Health Care Reform Survive Without the Mandate?

Can Health Care Reform Survive Without the Mandate?

Printer-friendly version
a a
Type Size: Small

A bitterly divided Congress passed health care reform without a single Republican vote. The judiciary branch of government is responding in a similar fashion.

On Monday, Richmond, Va., federal district court judge Henry Hudson, who was appointed to the bench by President George W. Bush in 2002, overturned the constitutionality of the law’s mandate that individuals buy insurance. Opposition to the mandate has been a rallying cry for conservative opponents of reform, who cheered Hudson’s decision.

Two prior cases, both decided by federal judges appointed by Democrats, upheld the law. In all, about 20 cases are pending.

Clearly, the individual mandate is headed for the Supreme Court, where the fate of that section of reform will eventually be decided. Hudson did not overturn the entire law, nor did he issue an injunction against its implementation – a clear win for the Obama White House and supporters of the law.

“This decision is very defective constitutionally,” said Timothy Jost, a law professor at Washington & Lee University. “I believe it will be reversed by the appellate court, certainly by the Supreme Court.”

Yet the possibility exists that the mandate will eventually be struck down by the Roberts Court. So the question that reform supporters need to ask is whether reform can succeed without it.

Most of the key players involved in crafting the law believe it cannot. The insurance industry says the individual mandate is necessary in order to meet the other elements of reform, particularly the provisions that insurers sell to all comers at similar rates no matter what their existing medical conditions. They’re afraid people will simply wait until they get sick before buying their guarantee coverage.

Economists make the same case. “A bill without the mandate is no longer real health reform,” said Jonathan Gruber, an economist at the Massachusetts Institute of Technology and a key architect of both the Massachusetts law and the federal law.

In a paper prepared for the Obama administration, Gruber estimated premiums would rise 27 percent without the mandate because of these “free riders,” as opposed to the 10 percent expected increase in the non-group market expected under reform.

Why will premiums rise at all? Reform sets higher standards for insurance policies that will be sold after 2014. It bans so-called “mini-med” plans like those offered by McDonald’s Corp. and other employers of low-wage workers.

“At the core of the health law is a ‘three-legged stool’ approach to reforming these markets – new rules that prevent insurers from denying coverage or raising premiums based on preexisting conditions; requirements that everyone buy insurance; and subsidies to make that insurance affordable,” Gruber wrote. “All three legs of the ‘three-legged stool’ are necessary to assure affordable coverage.”

Gruber pointed to the example of Medicaid, where 10 million Americans eligible for the program fail to sign up. That winds up increasing costs for government when Medicaid-eligible patients do get sick because the government, unlike a private insurer, can’t say no when that entitlement-eligible person shows up. And that is usually when the patient is sickest and has postponed care to the point where he or she has become very expensive to treat.

There’s also the behavioral economics angle behind the push to include the mandate in health care reform. People who live in states with auto insurance mandates have accommodated themselves to the requirement. Coverage rates are generally greater than 90 percent in states where mandates exist, and significantly lower where they don’t. The “nudge” of the mandate, to use the name of a popular book about behavioral economics, works.

Are there alternatives? I can think of one. Since the federal government is already picking up the tab for Medicaid-eligible poor people who don’t respond to that entitlement (don’t forget that half the 32 million people who will get coverage under the new law in 2015 will be getting it through Medicaid), the reform law if the mandate is struck down would only have to be changed for those who plan to buy coverage through the exchanges.

All the same rules on pre-existing conditions and levels of coverage could still apply to policies sold through those exchanges. But people wouldn’t have an automatic right to them. There will be an open-enrollment period every year – say between November 1 and December 1 as there is now in the private market – where people can sign up for health plans at the same guaranteed low rates that everyone else gets.

If they don’t sign up (because there was no mandate), then they have to wait until the following November to buy insurance at the guaranteed rate. What happens if they get a heart attack in July and go to the emergency room for care? It’s on their nickel.

But at the same time, let’s also amend the requirement in the Hill-Burton Act that federally-subsidized hospitals – and that’s nearly all of them – don’t have to treat uninsured patients who can’t pay their bills. My guess is most hospitals will still treat the uninsured, just as they do now. And they will still pass along the costs they can’t collect from those patients to the rest of us and our employers through higher premiums on our insurance, just as they do now.

But by removing that guarantee of emergency room care, and limiting the enrollment period to a narrow window once a year, I’m guessing it would scare enough people who otherwise might try to game the system into going to the exchanges and buying coverage.

Health care reform can survive the loss of the mandate. It just won’t be as kind.

Click here to visit the GoozNews home page.

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.