Individual mandate: A sticking point in the healthcare debate

Should the government force everyone to purchase health insurance? Few topics in the healthcare debate are more controversial than the so-called individual mandate, which would fine citizens without insurance and lies at the heart of the now-stalled healthcare bills in Congress.

President Barack Obama has said that a major goal of healthcare reform is to reduce the number of legal residents who are uninsured (currently estimated at 17% of adults).

One strategy is for the government to require insurance to be sold at a fixed price regardless of preexisting conditions, but in that case, many people might wait until they get sick before they purchased insurance, which could bankrupt the system.

However, if everyone had to buy insurance, the contributions of the healthy would help pay for expenses of the sick and therefore support the program.

In Massachusetts, which approved such a mandate in 2006, residents who fail to purchase insurance can be fined up to one-half the cost of the lowest-priced premium on the market, although actual fines have been much lower. Those who cannot afford private insurance are offered a subsidized public option.

Experts on both sides of the aisle have criticized the mandate for forcing people to buy a product from a private company, but some conservatives have suggested that the mandate is not even allowable under the U.S. Constitution. In a legal memo published in December by the Heritage Foundation, a conservative think tank in Washington, D.C., three lawyers argue that a person’s failure to purchase insurance does not count as interstate commerce, and therefore Congress lacks the authority to regulate it.

A commentary by a lawyer published this month in the New England Journal of Medicine disputed that interpretationdisputed that interpretation. But practical questions remain in any case about whether the individual mandate is the best strategy for achieving universal health coverage and overhauling the country’s increasingly costly health system.

Two competing views on the topic:

The individual mandate is essential to healthcare reform

Linda Blumberg, a health economist and senior fellow at the Urban Institute, a policy think tank in Washington, D.C.:

“For comprehensive healthcare reform to work, we have to have some way to broadly spread the cost of those with high medical needs, and this can either be done through the tax system or an individual mandate. The mandate is one useful and effective strategy.

“Under the House and Senate healthcare bills as passed, insurance companies would be required to take people on as customers regardless of preexisting conditions. If there were no individual mandate included in the legislation, this would create a situation where people would be likely to wait until they had a health problem diagnosed before they applied for insurance. That would cause premiums to increase and make coverage increasingly unattractive to people who are young and healthy. In order to make coverage affordable in the absence of a mandate, we would have to subsidize the program so that insurers did not charge sicker people higher premiums.

“Alternatively, we can put an individual mandate in place, which would spread the costs of those with medical needs across the broader population through insurance premiums.

“The best evidence in support of an individual mandate comes from Massachusetts, where it has been very effective: Just 2.6% of the population remains uninsured. While some additional subsidies might increase that rate of coverage a little bit, that’s about as close as you can get to universal coverage without making everybody automatically enrolled through a single-payer system that draws from taxes.

“Some of the uninsured are undocumented residents, who are not eligible for subsidized coverage, some are unable to find affordable coverage exempting them from the mandate, and a small number of people choose to pay a penalty instead of buying coverage. In fact, compliance has been so high that the state hasn’t even charged the highest penalty it is allowed to under the law. People by and large want to comply with the law and have healthcare coverage.

“One problem with the Massachusetts system -- and for many workers under the proposed national system -- is that if you have an employer-sponsored health insurance offer, you are generally prohibited from getting subsidized insurance. However, the employer may not be contributing much to the coverage, and so low-income workers may not be able to afford what the employer is offering. It would be best to treat all individuals with the same incomes in the same way with regard to the financial assistance being provided by the government.”

The individual mandate is a bad idea

Glen Whitman, an economist at Cal State Northridge

“The individual mandate is not a solution to problems in the healthcare system but a deceptive patch for problems created by other features of the proposed healthcare bill. In fact, it will exacerbate the real problem with American healthcare, which is that it is too expensive.

“The point of the individual mandate is to balance the risk pool, but that’s not really what insurance is supposed to do. With car insurance, the idea is not that you want good drivers to pay for accidents caused by bad drivers. Instead, you want there to be pools of people with similar risk: bad drivers and good drivers who pay different premiums.

“What the government is trying to do is transform insurance into a welfare system. In Massachusetts, it turns out that subsidies are needed in order to get people to comply with the mandate anyway. There are reasonable arguments for taxing the public and providing subsidies for specific people in need. But why should we re-engineer the insurance market to serve a function it was not meant to serve?

“The biggest practical problem with the individual mandate is the political incentives it will create, which will continue to drive up healthcare costs. You can imagine the special interests lobbying to add not just oncology for cancer patients but hair transplants, chiropractic and acupuncture to the basic medical benefits package. If that sounds paranoid, keep in mind that state legislators have already passed 1,900 mandated benefits laws that cover these areas. These force everybody to buy Cadillac health insurance. Nobody can get a Honda Civic insurance policy, and that’s one reason health insurance is so expensive.

“As for real solutions, subsidies would make more sense. But why not try making insurance affordable first? Let people buy health insurance policies across state lines, which would create a national insurance market while putting pressure on state legislators to repeal benefits laws.

“We should also move toward a system where people use health insurance for catastrophic expenses while paying routine costs out-of-pocket. But President Obama’s plan would eliminate high-deductible insurance. That’s the opposite of what we should be doing. We need a greater variety of insurance options, not fewer.”

health@latimes.com