Monday, January 25, 2010

What about the Individual Mandate?

Of all the provisions in the proposed healthcare bill, none has aroused such hostility as th individual mandate. It is denounced on the right as forcing people to buy a service they don't want. Opponents on the left rather hypocritically denounce the individual mandate in similar terms, although their real objection is that payments have to go to a profit-seeking insurance company. And the thought of having such a requirement forced on them angers and offends most people.

The essential counter is that the individual mandate, however, unpopular, is necessary as a matter of risk pooling. If insurance companies are not allowed to deny coverage for a pre-existing condition, they will have greater expenses and need more revenue. Besides, people will be tempted not to buy insurance until they get sick, further increasing insurance costs while undermining revenue. Insurance is, in effect, a system whereby the (currently) healthy subsidize the sick.

As a matter of policy, I am not sure this is absolutely necessary. One might allow insurance companies to charge as much as necessary for premiums to sick people and just provide and adequate subsidy to make them affordable. But whatever the policy merits, the whole risk pool argument will never fly as a matter of politics. For one thing, people hate being told that they have to do something because it is their duty to society. But beyond that, if you are trying to sell the idea to Republicans/libertarians, you will never get anywhere pushing the idea of risk pool. The problem is not just that the idea is too complex and wonky for Republican/libertarians to understand. It is that they don't want to understand it or, perhaps, that they understand it perfectly well and are morally opposed.

The problem with risk pooling to a Republican/libertarian is that it is collectivist. The healthy are being asked to pay in to subsidize the sick. That is redistributionist and therefore violates their most basic moral principles. To be told that is your duty to pay into a pool while healthy so that the sick can have access to healthcare looks like a case of robbing Peter to pay Paul -- even if everyone can expect to become Paul some day.

But that leaves an alternative that might be a more acceptable way of looking at it. Healthy people are not being asked to buy insurance to subsidize the sick. They are being asked to pay their dues now, when they are healthy, so they can collect the benefits later when they are sick. When people develop a medical problem, their rates will go up, so they will almost certainly need a subsidy to buy insurance. People who try to cash in on the benefits when they're sick without paying their dues when they're well are a bunch of free riders the system should not support. (Of course, many people will need subsidies to pay for insurance even when well, but we'll sort of gloss over that). So, if instead of having an individual mandate, you simply make the rule that anyone who doesn't buy insurance now when they are healthy will not qualify for a subsidy later on if they get sick, that will be an approach highly agreeable to conservatives.

The problem, of course, is that it will not be acceptable to liberals. Liberals will ask what if someone is too ill-informed, short-sighted or just plain poor to buy health insurance. Are we to leave them to die in the gutter? So far as I can tell, the answer from a libertarian is that this is not a legitimate concern so far as public policy goes. If people don't pay their dues and run into trouble, there is always private charity. We conservatives pay much more to charity than you liberals. If you really cared, you would pay as much as we do. But how much to pay is strictly a private matter and not any business of the government. Not letting government rob Peter to pay Paul is a whole lot more important to a libertarian than what becomes of Paul if he can't pay his doctor bill.

Nonetheless, if anyone wants an individual mandate with any chance of getting past a Republican filibuster, this is the only possibility I could see.

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