Obamacare is best understood as a collection of carrots and sticks designed to expand access to insurance coverage. But what happens to Obamacare if we get rid of the sticks? It looks like we’re about to find out.
During the Obamacare debate, many conservatives, myself included, warned that once the law was in place, the sticks would prove politically impossible to enforce, the carrots would have to get more and more generous to compensate, and the end result would be a fiscal calamity. We won’t know if this dire projection will be fully borne out for some time. What we do know is that at least one of the most important Obamacare sticks, the individual mandate, is already getting watered down, and it’s not crazy to imagine that it will at some point be abandoned. Before we get to the individual mandate, though, consider the carrots and sticks that apply to state governments and employers.
In the original legislation, states that agreed to expand Medicaid were promised new federal funds to help meet the cost of doing so (the carrot) while states that refused to expand Medicaid had to forsake federal Medicaid funds altogether (the stick). This combination of carrot and stick would have made refusing to expand Medicaid a very costly decision for state governments, virtually all of which are struggling to meet the high and rising cost of providing medical insurance to those who are already on Medicaid. Last summer, however, the Supreme Court ruled that the threat of removing all federal Medicaid funds from states that refused to play ball was unconstitutionally coercive, and so a large number of states have chosen not to expand Medicaid. Eventually, the holdout states might decide that the carrot of new federal money is too tempting to resist, particularly when neighboring states cash in. But for now, the all-carrot, no-stick approach has definitely held down the number of Medicaid enrollees.
Large employers, meanwhile, were supposed to be subject to an employer mandate, the requirement that all employers with 50 or more full-time-equivalent employees either had to provide health insurance benefits or pay a stiff penalty. This was a pretty big stick without much of a carrot attached. Yet the employer mandate was very important, as it was meant to hold down the costs of coverage expansion, as the federal government was expected to subsidize low- to moderate-income workers with employer-sponsored coverage less generously than similarly situated workers on the exchanges. In July, the Obama administration announced that it would delay enforcement of the employer mandate until 2015. And so, another stick was removed from the Obamacare arsenal.
The debates over Medicaid expansion and the employer mandate have been heated. But the individual mandate debate has been the most contentious of them all.