Five years have elapsed from the Chief Justice’s saving construction in NFIB v. Sebelius, and we are still debating the ACA’s individual mandate. The Congressional Budget Office predicted that because the AHCA eliminates the individual mandate–replacing it with a continuous coverage provision–14 million people will choose to go uninsured in 2018. Specifically, 6 million will drop out of the individual market, 5 million will leave Medicaid, and 2 million will drop their employer-based coverage. That is, because these 14 million people are no longer facing a penalty for going uninsured, they will instead make the choice to go uninsured. CBO’s estimates are premised on the notion that the individual mandate has been effective at nudging people into the insurance market. History does not support this presumption.
First, the individual mandate has not been effective. Don’t take my word for it. Listen to Jonathan Gruber. The mogul of MIT wrote in the New England Journal of Medicine, “When we assessed the mandate’s detailed provisions, which include income-based penalties for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law.” The mandate is simply not high enough to be an effective cudgel. Health care analysts always predicted that the penalty would ultimately be raised. Jonathan Gruber explained, “I think probably the most important thing experts would agree is we need a larger mandate penalty.” But, as I noted in my first book, doing so could run afoul of the Chief’s saving construction. In any event, in light of the numerous “special” enrollment periods, people who wanted to gain coverage have been able to gain it. The mandate hasn’t worked.
Second, the individual mandate has not been enforced. Rather, due to a series of illegal executive actions, millions of Americans have been exempted from the mandate, yielding instability in the individual marketplace. And don’t take my word for it. Listen to Solicitor General Donald Verrilli, who warned the Supreme Court that the ACA operating without an individual mandate would “create an adverse selection cascade,” the dreaded death spiral, “because healthy individuals would defer obtaining insurance until they needed health care, leaving an insurance pool skewed toward the unhealthy.” Without the mandate, Verrilli wrote, “premiums would increase significantly” and “the availability of insurance would decline.” This implosion, the government explained, was “exactly the opposite of what Congress intended in enacting the Affordable Affordable Care Act.” The mandate was essential for nudging the uninsured into the health care market. Yet, the mandate would never go into effect as designed. The government’s numerous exemptions from the mandate’s penalty risked the very parade of horribles the government warned about. As I noted in a post earlier this week, the enrollment in the individual marketplace has been nearly half of CBO’s estimates, in part due to the illegal exemptions provided by the Obama administration.
Third, CBO’s estimates that five million people will drop out of Medicaid is bizarre. Avik Roy explains:
Remember that Medicaid is basically free to the eligible enrollee. There are no premiums, and almost no co-pays or deductibles. The value of the Obamacare Medicaid subsidy is about $6,000 per enrollee per year. And yet, CBO believes that 5 million people will only enroll in Medicaid because the individual mandate forces them to. Given the difficulties in enforcing the mandate for low-income populations, this is highly unlikely.
Think about it. How would the IRS enforce the individual mandate for people near the poverty line, who rarely owe income taxes, and often don’t file tax returns, thereby limiting the IRS’ ability to collect a fine?
I don’t pretend to have the actuarial chops to parse every line of the CBO report, but to the extent their models are premised on the effectiveness of the individual mandate, the estimates are belied by history.
At bottom, the mandate as drafted has not been as effective as planned.