Wednesday, May 23, 2012

Ask whom the mandate tolls

Einer Elhauge, the legal scholar who dug up the health insurance mandates imposed on ship-owners, sailors and militiamen by U.S. Congresses and presidents in the 1790s, and economist Kevin Caves have placed the "individual mandate" in the Affordable Care Act in an arresting new frame:
Ronald Coase won the Nobel Prize in Economics for showing that social costs are symmetrical. In The Problem of Social Cost, Coase invoked the example of a farmer whose crops are trampled by the neighboring rancher's cattle. Before Coase, it would have been common to view the rancher as the culprit responsible for imposing costs on the blameless farmer. Coase pointed out that no matter which way the legal rights were allocated, one was imposing costs on the other. If the law forces the rancher to keep his cattle fenced in, the farming imposes fence-building costs on the rancher. If the law gives the rancher the right to let his cattle roam free, then the farmer bears the social cost....

the issue is not whether to have a mandate, but rather on whom the mandate should be imposed. If the Supreme Court strikes down Obamacare, we will simply return to the old mandate, which was imposed on the insured rather than on the uninsured. It is not clear why that mandate would be constitutionally preferable to a mandate that everyone pay his or her own way. It surely does not involve any less of an infringement on liberty. 
The economic analysis of the law, Elhauge illustrates, recasts many legal disputes as a question of who pays an inevitable cost, in place of a one-sided view of whether a given cost can be imposed on one party.  Substantively, the argument is often made on an intuitive basis, e.g., by Mitt Romney -- not only in 2005 but in this winter's debates:
"If you don't want to buy insurance, then you have to help pay for the cost of the state picking up your bill, because under federal law if someone doesn't have insurance, then we have to care for them in the hospitals, give them free care," said Romney. "So we said, no more, no more free riders. We are insisting on personal responsibility. Either get the insurance or help pay for your care."
Elhauge supplements this case -- that the mandate simply reallocates inevitable costs -- with an argument that I've been advancing since March 31 -- that the mandate is tailored not to impose costs exceeding what's necessary to create a viable health insurance market:
Opponents asserted in oral argument that the Obamacare mandate went beyond this problem, by requiring more than catastrophic coverage, but this assertion seems to be mistaken. According to the Kaiser Family Foundation, the standard minimum "bronze" plans required under Obamacare would have an "estimated deductible of $4,375 for a single individual and double that for a family... a level of coverage that most would consider catastrophic."

Obamacare also explicitly allows anyone who is either under 30 or can show financial hardship to buy even skimpier plans that are undisputedly catastrophic. In short, the Obamacare mandate targets expensive treatments that would likely be unaffordable without insurance. The real debate is (or should be) over whether the mandate to pay for these treatments should be shifted from society at large to those who receive them.
  And that's true too.

More on catastrophic coverage in the ACA and misrepresentation of the mandate in the Supreme Court
On the mandate more broadly
The individual mandate is a piece of Cake (4/25)
Verrilli's limiting principles (4/24)
If only Verrilli had said (A, B, C) (3/31)
Verrilli, slapped silly, recovers willy-nilly (3/28)
External links
Patient cost-sharing under the Affordable Care Act (Kaiser Family Foundation. 4/27)
Will the justices make a catastrophic error? (Jonathan Cohn, 4/19)
Policy ignorance at the Supreme Court (Steve Benen, Maddow blog, 4/16)
Supreme Court misunderstanding on health overhaul? (AP's Ricardo Alonso-Salvidar, 4/10)
The bounded, minimalist way to uphold the ACA (Marty Lederman at Balkinization, 4/2) 
Ragbatz on the catastrophic coverage options in the ACA - a healthcare attorney picks up the plaintiff's con in real time ( 3/28)

1 comment:

  1. for what it's worth, even if you're stuck with a high deductible, the out-of-pocket expense is at the insurance company's negotiated rate which will be considerably lower than would be charged to an uncovered person