Last week, we analyzed a comment made by Forbes blogger Avik Roy (@aviksroy) during the Congressional IPAB hearings about Medicaid being worse than having no insurance. Simply put, we (and others such as Austin Frakt) disagree. The recent Oregon study showing increased self-assessed health and medical care usage alone should make a listener skeptical of anyone tossing out throw away lines like "[s]tudies show that health outcomes for many Medicaid patients are worse than those who have no insurance at all," as Roy did in his recent IPAB testimony.
It might seem like the New Health Dialogue and Avik Roy are worlds apart in policy positions, but as with so many things in health reform, unlikely ideological bedfellows abound. Though we disagree on the benefits of public insurance for the poor and the necessity of a failsafe mechanism to constrain health care cost growth (i.e. IPAB), we definitely agree about one thing: repealing the individual mandate is a terrible idea.
Under the Affordable Care Act, insurers are required to sell health insurance to people who want it, and they can’t exclude coverage of people with pre-existing conditions. Denying coverage for pre-existing conditions was never a popular practice (and may have been abused by insurance companies to get out of paying claims through recision), but it also served an important purpose: it incentivized people to buy insurance before they got sick.
Without fearing an insurer might deny them coverage, people who don’t expect to have high medical expenses have little incentive to buy insurance. That creates two problems: it pushes up prices in the insurance pool for those (less healthy) people who do buy insurance, as the low-risk people (read: cheap) opt out. Second, it means that when the uninsured do get sick, they can buy insurance that they know is going to cost the insurer more than they pay for it. The incentive to wait until you actually get sick is what economists call “moral hazard,” and it can destroy an insurance market.*
Repealing the individual mandate is a bad idea, but a truly terrible one is forcing the repeal of the individual mandate as a stipulation to a deficit reduction deal. If it should come to pass that the Supreme Court does not uphold the constitutionality of the individual mandate, it would at least come as the result of a slow and predictable process that would allow Democrats to draft and implement a workable alternative such as tax rebates, subsidies, or auto-enrollment (Center for American Progress Issue Brief). Allowing Republicans to hold the individual mandate hostage to a debt-limit negotiation could easily result in a sudden dismissal of the rule in the midsts of a vicious political fight. Such a situation would be utterly incompatible with crafting a workable solution to a de-mandated Affordable Care Act.
MIT professor Jonathan Gruber analyzed the Congressional Budet Office's projections and found that "removing the mandate would significantly lower the “bang for the buck” of health policy, reducing coverage by 50 percent to 75 percent while only lowering costs by 25 percent to 30 percent." In this, policy experts from across the ideological spectrum can agree. You might not like the Affordable Care Act, but you'll like an Affordable Care Act without an individual mandate even less.
Polls show the American people, in contrast to Congressinal Republicans, really like most of the Affordable Care Act. Changes like guaranteed issue and requiring coverage for pre-existing conditions are very popular. In fact, a recent article in Health Affairs showed that during the ACA debate, even the individual mandate had majority support from the American people. Though we might not expect Joe Kansas to understand the actuarial problem that makes individual mandate necessary, the American people understand the moral imperative to take financial responsibility for your own action. Our conservative counterparts in the blogosphere certainly understand. We can only hope Speaker Boehner understands as well.
*Here’s the general process of a death spiral: People with higher-than-typical levels of health risk join an insurance plan. Since the people in the plan are sicker than the population at large, the plan’s costs are higher than expected. That makes premiums go up, and lower-risk members of the pool drop out in favor of self-insurance. The pool has become riskier once again, so the plan’s costs are once again higher than expected, premiums go up again, and the cycle repeats until nobody can afford the premium or the system stabilizes at some much higher premium level, where risks aren’t effectively shared among people. (For a real-world example, check out Philip Klein, on Kentucky’s experience.)