- Without the individual mandate, healthy people could stay uninsured until they become sick
- In the 1990s, Republicans supported a health plan with an individual mandate
- If more prospective entrepreneurs can get insurance on their own, they will be more likely to take the risk of starting a business
I guess I haven’t been receiving enough hate mail recently. There’s no other logical reason why I’d write about the Affordable Care Act. So, let me start by disclosing my bias. I recently spent some time studying the ACA (primarily reading some papers on both sides of the issues). Ultimately, I’m in favor of the ACA.
I’m not writing in an attempt to convince you to support the ACA. I believe that most of us have political or personal beliefs that result in us supporting or opposing this law. (If you don’t believe this, ask why the Supreme Court justices could have different opinions on these issues.) I think that my support for the ACA comes down to my 12 years of Catholic school that led me to judge issues by how they affect the weak and the poor. These are my personal beliefs that affect my political beliefs. I understand that many of you have personal and political beliefs that may lead you to oppose this law.
I want to give you some basic thoughts and I want to tell you some of the good and bad about the law. Realize that this is a short piece — it is not intended to be a treatise that covers all of the issues.
The Basics of the ACA
The ACA is premised on three key ideas:
- Insurers cannot turn anyone down or exclude people with pre-existing conditions.
- Everyone must have health insurance (“the individual mandate”).
- The government will subsidize health insurance for people who will struggle to afford it. People who have income up to 400 percent of the poverty level will receive partial subsidies.
The Economic Reason for the Individual Mandate
Without the individual mandate, the ACA would likely fail. Since insurers are not allowed to turn anyone down, healthy people could stay uninsured until they become sick (if there is no individual mandate). Once they become sick, they would buy insurance (because they can’t be turned down).
If this is what happens, the pool of people who are being insured will be the “sick pool” and will not include the healthy people (who choose to stay uninsured until they actually need insurance). If an insurer is only selling insurance to the “sick”, the cost will be high. At that point, many people won’t be able to afford insurance and the system will fail.
The Individual Mandate Is a Republican Idea!
In the early-to-mid 1990s, the Republicans were opposed to the Clinton health plan. One alternative was proposed by a Republican Senator and a Democratic Senator. It included an individual mandate. It was supported by 19 Republican senators (including Bob Dole). If you don’t believe me about this, read this piece by PolitiFact. Obviously, the Massachusetts plan (signed by then-Governor Mitt Romney) also has an individual mandate.
The Single Best Thing About Universal Health Insurance
Regardless of whether you support or are opposed to the ACA, there’s one thing that we should all be able to agree on. The ability to obtain health insurance (without working for a large employer) will allow a larger number of people to take the risk of an entrepreneurial venture. In other words, if I can obtain health insurance on my own, I’m more likely to take the risk of starting a business. Hopefully, we can all agree that we want to support entrepreneurial activity. We can argue about the cost of this law, but this benefit is great.
Other Reasons That I Like the ACA
- We will insure approximately 32 million people who don’t currently have insurance.
- Many of the people who are currently uninsured are still receiving treatment. Unfortunately, much of this treatment is through emergency rooms — a very expensive way to get treatment. We’re all paying for this already. The hospitals and service providers ultimately pass these costs on to us. We need to find a way to treat these people in a cheaper way.
- The majority of people who will gain insurance are the working poor. In other words, these are people who are working in jobs that don’t offer insurance or they are people who have previously made the decision to not participate in insurance.
- A very similar plan has been successful in Massachusetts. The “uninsured” rate is 2.6 percent — the lowest in the nation — and they have kept costs low. This plan was developed under Governor Romney.
- The exchange (think of this as a simple, online market) will make it much easier to compare health plans. It will also mean that people who are not obtaining insurance through their employer will be able to get affordable insurance that is more than just “catastrophic” insurance.
Reasons to Be Concerned About the ACA
- Many of the cost assumptions are likely to be wrong. We assume that we’re going to reduce payments to Medicare providers, that a review board will allow us to reduce costs, that tax laws will remain in place forever, etc.
- In addition, we have already started collecting some of the ACA tax revenue even though most of the costs start in 2014. That leads to distrust about the ten-year estimates (to reduce the deficit). In other words, as an exaggeration, if we collect revenue for ten years, but offer services for one year, it’s hard to say that this is reducing our deficit. In the future, we’ll have ten years of revenue and ten years of costs. The flipside of this complaint is that estimates are that the second ten years will be more beneficial (to our budget) than the first ten years.
- Massachusetts is different than the U.S. They started with a much lower rate of uninsured people than the U.S. (8 percent vs. 15 percent), they have higher income than the U.S. (so more of the bill could be put on the citizens rather than the government), they had resources from a federal government plan that were used to fund their insurance law and, most importantly, their law had bipartisan support.
- This law does a little to “bend the cost curve,” but not a lot.
Again, my goal is not to convince anyone of anything, and this is not intended to be a treatise. This is a difficult issue and we have no idea of how the numbers will turn out. But, regardless of how you feel about it, the politics should bother you. The partisanship is absurd. We have a problem — we pay more for health care than all other developed countries, we have higher mortality rates than most developed countries, and we have less access to healthcare for a larger percentage of our citizens. The Democrats took a Republican solution and now the Republicans are being forced to argue against it. This is really “Romneycare,” not “Obamacare.” Maybe we can all get along and call it “Rombamacare.”
McCombs Senior Lecturer Sandy Leeds provides analysis of key market issues on his blog, Leeds on Finance, where this article originally appeared.