Avik Roy is president of the Foundation for Research on Equal Opportunity.
On Tuesday, the Senate voted to proceed with debate on a bill to replace Obamacare with market-oriented health reforms. The commencement of formal debate in the Senate is a critical milestone in the effort to make American health care more sustainable and affordable.
Many have focused — understandably — on where Senate Republicans disagree on health-care reform. But Republicans also agree on much, and bringing the Better Care Reconciliation Act to the floor allows those agreements to take legislative form.
One key area of agreement is repealing Obamacare’s individual mandate. Obamacare gave the federal government a heretofore unprecedented power: the power to force us to buy health insurance irrespective of our desire to do so. If Senate Republicans can’t get a full health-care bill passed, they should at least pass the so-called skinny bill repealing the individual mandate.
Republicans, for both moral and economic reasons, oppose this mandate. The framers of the Constitution never envisioned granting Congress the power to force people to buy a privately delivered financial service. The Constitution never would have been ratified had they tried.
But even if you’re the type to roll your eyes at constitutional arguments, there are important economic reasons to oppose Obamacare’s mandate. Gross premiums for individually purchased coverage have doubled over the past four years under Obamacare. But the authors of Obamacare don’t need to care about whether they’ve made coverage costlier, because they’re forcing you to buy it anyway.
Without a mandate, insurers would have to do what businesses have to do in every other sector of the economy: design products that you voluntarily want to buy because they represent a good value for you. Under Obamacare, they don’t have to.
All of the real-world evidence suggests that the individual mandate is having a minimal effect on Americans’ buying decisions. That’s in part because the mandate is weak, with numerous loopholes and exemptions for politically favored constituencies. In addition, Obamacare’s high premiums have made insurance so costly that millions are willing to pay a $695 fine rather than pay thousands for coverage that doesn’t serve their needs.
In effect, the “death spiral” that the individual mandate was supposed to prevent has already happened for those making more than two to three times the federal poverty level: the working poor and the lower middle class. Those closer to the poverty line get generous subsidies under Obamacare to offset rate shock, but the middle class doesn’t.
The Congressional Budget Office believes that in 2018, if Republicans repeal the mandate, 15 million people will immediately drop out of the health insurance market. Ultimately, that means about three-fourths of the CBO’s predicted 22-million-person coverage loss under GOP legislation by 2026 is driven by mandate repeal. Given that only 10 million people are even enrolled in Obamacare’s exchanges today, that is an absurdly high estimate. It’s driven by the CBO’s rosy view of future Obamacare enrollment and by the fact that the CBO believes millions will drop out of Medicaid even though the program is free to enrollees.
Some Republicans have suggested starting from scratch and writing an entirely new bill to get a better coverage score from the CBO. But too many of them have failed to appreciate that the CBO’s exaggerated coverage estimates flow from its faith in the individual mandate’s magical powers. Indeed, the CBO has scored three very different GOP bills — the House bill, the Senate bill and a third bill to fully repeal Obamacare and replace it with nothing — as having nearly identical effects on health coverage, simply because they all repeal the individual mandate.
By repealing Obamacare’s individual mandate through narrow legislation, conservatives would strike a blow for constitutional rigor and economic freedom. By resetting the CBO’s coverage baseline, mandate repeal would allow a future replace bill to be scored more fairly. After all, if you’re voluntarily choosing not to buy insurance in the absence of a fine, you haven’t been “kicked off” your insurance.
Ideally, Republicans would pair mandate repeal with legislation rolling back Obamacare’s costliest regulations, as the BCRA does. But Democrats are determined to block those changes through parliamentary points of order. The resulting policy effects would be the fault of Democrats, not Republicans.
The best course for Republicans is to continue improving the BCRA, a bill that would do much more than a skinny bill to put our health-care entitlements on a sustainable path.
Sen. Rob Portman (R-Ohio) has proposed allowing states to use their Medicaid dollars to help low-earners build health savings accounts that can fund deductibles and co-pays. This is a creative idea that could smooth the transition from single-payer Medicaid to higher-quality private coverage.
Portman’s idea — and many others — can improve the Senate’s health reform effort. Whatever Republicans do, they should ignore the CBO’s mandate fixation, and focus on enacting sound policy that secures coverage and expands freedom.