Opinion

Reihan Salam

The death of the Obamacare individual mandate

Reihan Salam
Dec 20, 2013 19:56 UTC

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.

No matter who wins, there’s still a healthcare cost crisis

Reihan Salam
Oct 1, 2012 17:10 UTC

One of the strangest aspects of the 2012 presidential campaign is that President Obama has barely bothered to make the case for the Affordable Care Act (ACA) and Mitt Romney has only rarely summoned the will to make the case against it. This is despite the fact that ACA is arguably the most consequential domestic policy legislation since 1965, when President Johnson presided over the creation of Medicare and Medicaid.

The usual explanation for why we haven’t had a serious debate over ACA is that Democrats recognize that the law is not wildly popular and that Romney is boxed in by his continued support for the universal coverage law he backed as governor of Massachusetts. All of this may well be true. But the foundations of America’s patchwork health system are unraveling before our eyes, and conservatives need to make the case for a more cost-effective reform sooner rather than later.

It is commonly understood that the United States spends an incredibly large amount of money on personal healthcare – the number was $2.19 trillion in 2010 – and that health spending is increasing rapidly as a share of GDP. A high level of health spending isn’t necessarily a bad thing. It makes perfect sense that an affluent country will spend a great deal of money to keep its citizens healthy, and medical care is a complex service that demands a lot of skilled labor.

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