Monday, January 4, 2010

Constitutionality of mandate part 3

Today's WSJ has an op-ed by Orrin Hatch (R-UT) and two others arguing that the individual mandate in unconstitutional. Lets assume they are correct (which I don't think they are) and you can't mandate the purchase of individual insurance. Then what?

There are three things you can do in response to the uninsured problem.

(1) Nothing. Either because you don't think it is a problem or you are worried you will mess things up worse by addressing it.

(2) Cover folks with government insurance. The current bill expands Medicaid substantially. There are of course many liberals who want to cover everyone with Medicare.

(3) Expand private insurance coverage. Obviously the bill does this as well as expanding Medicaid by imposing an individual mandate and also substantially changes insurance by forbidding the use of pre-existing conditions, ending recission, etc. In one sense, this bill would make private insurance a bit like a utility...still private, but even more heavily regulated. There are nations that do health insurance this way more or less (Switzerland and Netherlands).

Changing insurance rules by ending or limiting the ability of private insurance to underwrite won't work without an individual mandate. If there is another way to force risk pooling I am open to it, but can't imagine it. An employer mandate won't work completely, because one of the instabilities of our current system is the breakdown of the link between employment and insurance and the inevitable fact that with an employer based system if you lose your job you also lose your health insurance. If anything, we need to move away from the job/insurance link.

Insurance market regulations that the public seems to like without an individual mandate will just end up with individual market death spiral. Even the main Republican alternative plan, the Patients' Choice Act has a soft individual mandate of sorts (auto enroll, letting people opt out). It won't work as well, but they obviously know it is a problem and want a way to have a mandate without using that word. In short, you have to get all folks in, or get very close or using private insurance won't work so well.

Sen. Hatch and others better be careful about what they ask for, because if they get what they say they want then they are going to render option (3) above less likely to work. I don't think there are so many that favor option (1), but if that is the argument they want to make then go for it. There is only one option left after that. As I wrote in my column on October 16, 2009,

...."the current direction of the debate is best understood as one last chance to see whether private health insurance can work for the good of the nation in covering all Americans and in a manner that is financially sustainable."

There are only so many things you can do if your goal is to expand insurance coverage toward universal levels using private insurance as the main non-elderly coverage vehicle and it is hard to see how you do this without an individual mandate or other form of forced risk pooling. None of the pat panacea replies about across state lines, deregulating, malpractice lowering costs changes this basic fact.

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