Why Not Delay the Individual Mandate?

I wrote most of this comment on the post, Why Not Delay the Individual Mandate?. Then I thought of another individual mandate alternatives and added it this post.

Okay, let’s get real. My family is healthy and we purchase our insurance through the individual market. Our rates are low compared to the proposed rates available via Affordable Care Act. We have a real possibility of 100% increase in our insurance premiums. I have skin in this game.

I read the Urban Institute article and I remain unconvinced by their argument. Although I am at the greatest risk for unintended consequences, I am still in favor of postponing and eventually getting rid of the individual mandate. Despite their arguments the Individual Mandate is still a really dumb idea. Here is my reasoning:

  1. If uncompensated hospital care is the primary problem, then I prefer our existing system in which these costs are spread over a much larger population.
  2. If adverse selection is the primary problem, the Affordable Care Act proposal is only slighter better than doing nothing. Even the ACA supporters recognize that their proposal most likely will not work if the a few high cost patients get insurance(charity) in the individual market. This market is just too small to support many high cost participants. The only workable solution is to spread this charity over a larger population group. There are several ideas on how this can handled.
    1. Some ACA supporters argue that we need to go to a single payer system and the failure of the individual market is part of the path to this final solution.
    2. A few others are arguing that we should single pay these high cost un-insurable patients. I call this the Medicaid solution.
    3. A variation of #2 is that we expand the high risk insurance pool. The ACA high risk pool is presently closed to new participants.
    4. Another possibility is a Federal re-insurance plan to cover high cost customers. When you go over a certain payout amount, the government re-insurance kicks in. I think the Dutch use a variation of this idea to limit the risk a single unlucky customer will bankrupt the insurance company. I call this the FDIC solution.

My gut feeling is that the most successful plan to create a workable individual insurance market is to stick the insurance companies with the un-insurables and let them lobby the state/Congress for help. When you piss off the middle class, you should expect that there are consequences.

Another point that I did not make in the original comment was the point that the Urban Institute article made that one of the objectives of the Individual Mandate was to “to maximize insurance coverage” as if this would magically lead to better health care outcomes rather than outright theft from the middle class. Their idea is that if you build it, they will come. I call this the “Field of Dreams” health insurance argument. Unfortunately health insurance was a product created for the middle class. The rich do not need it and the poor cannot afford it. It worked for the middle class when it was affordable thirty years ago but not so well for the rich and poor. Despite the fact that health insurance was not working for the middle class, the ACA supporters took this idea and said that if we subsidize the the health premiums it should work for lower income people. This is a variation of the “free health clinic” argument. Unfortunately our experience with “free health clinics” is that they have been for around for a long time and we are still dealing with the same health problems. Do the ACA supporters really expect that “free health insurance” will have a different result than the free health clinics? My best guess is that health insurance does not heal people. Hospitals do not heal people.  People heal people. Middle class people schedule doctor’s appointments when they find a health problem. Lower income people go to the emergency room when they find a health problem. Different strokes for different folks. As an example of the problem we are facing, for at least the last twenty years we have had approximately “free medical care”  for “at risk” mothers in Hamilton county. This “free medical care” was tied to an aggressive campaign by Cincinnati Children’s Hospital to reduce infant mortality and yet we still have an infant mortality rate for black mothers that is twice the rate of white mothers. I only have to drive thirty miles to be surrounded by third world infant mortality outcomes. Health care outcomes for the poor is truly “complicated” and health insurance is a small piece of puzzle. I have no confidence that the Affordable Care Act will improve health care outcomes for the poor and I doubt that any progress in health care outcomes will be the result of a federal program. It was purely a political maneuver completely disconnected from the needs and desires of the poor and middle class. I find it truly amazing that people who did not buy health insurance before will become magically happy when they are forced to make their first health insurance payment. Obviously they are better people than me. I do not remember ever being happy making an insurance payment. My most amusing thought is that the ACA supporters think that a single, working mother who is living paycheck to paycheck will pay a health insurance premium rather than buying the latest basketball shoe for her teenage son. Talk about someone who is out of touch. I was recently reminded of this situation when I listened to Planet Money’s podcast, Episode 487: The Trouble With The Poverty Line. As a volunteer for Habitat for Humanity I heard several variations of this same story. The outcome of each story is still the same. Poverty is complicated.