October 6, 2009

October 6, 2009 | Commentary on Health Care

At What Cost To Freedom?: Obama's Individual Mandate Is a Bad Idea

In his address to Congress, President Obama made clear that he and his allies know how to spend your health-care money better than you do. It's a matter, you see, of "shared responsibility": You share your dollars with the feds, and the feds are responsible for making your decisions. In the health-care bill currently before the House (H.R. 3200), there is even a "Health Choices Commissioner," to be appointed by the president, who will rigorously define your choices.

On "shared responsibility," the president brooks no dissent. "Unless everybody does their part, many of the insurance reforms we seek - especially requiring insurance companies to cover preexisting conditions - just can't be achieved," he said. "That's why under my plan, individuals will be required to carry basic health insurance." This requirement is known as the "individual mandate."

The president's proposal is historic - though not in a good way. Never before has Congress forced Americans to buy a private good or service. In fact, for those with a traditional understanding of the Constitution as a charter of liberty (as opposed to the "living" version), the list of Congress's powers in Article I, Section 8, grants it no authority to require any such thing.

The Obama administration, along with its allies in Congress and throughout health-policy wonkdom, would have you believe that, on the question of a mandate, everyone of sound reputation is in agreement. That's not true; there is no consensus on this issue, any more than there is a consensus on the "public option."

For one thing, mandates are meaningless without penalties for non-compliance, and polling data suggests that Americans might accept an individual mandate, but not the penalties. This became a problem for Hillary Clinton in the 2008 presidential primaries, when Obama strongly disagreed with her proposal to impose an individual mandate - saying, among other things, that it was unenforceable (he cited non-compliance with auto-insurance laws as evidence). Clinton responded by suggesting such measures as tax penalties and wage garnishments for health-insurance scofflaws, which Obama knew would be unpopular with voters.

Now that Obama is president, he no longer objects to such penalties. In the House bill, everyone would be required to have an "acceptable" health plan (as defined by law) or pay a penalty of 2.5 percent of his adjusted gross income. This penalty is expected to bring in $29 billion over a ten-year period. In the Senate Health, Education, labor, and Pensions Committee bill, the penalty is set at 50 percent of the price of the lowest-cost health plan participating in the bill's state-run health-insurance exchanges. That's expected to generate $36 billion over ten years.

Meanwhile, Sen. Max Baucus (D., Mont.) has unveiled a Senate Finance Committee draft that also has an individual mandate. It would levy a penalty of up to $3,800 on families for what the president calls "irresponsible behavior," by which he means health-care choices of which he disapproves. In Obama's usage, "personal responsibility" is selective; it doesn't extend to the question of taking responsibility for one's health care. That's the government's job. Of course, federal officials will have outside help in deciding for the rest of us. Powerful special-interest groups and health-industry lobbyists will do all they can to make sure that their favored medical treatments, procedures, drugs, and devices are part of the "bare minimum" that every plan must include.

Despite all this, the president is right on one key point: The current system makes those with health coverage pay for those without. And those who are without health coverage often get their care in the most expensive place possible: the hospital emergency room. The president correctly calls this a hidden tax. Under existing federal law, hospitals are required to provide treatment to everyone who comes to their emergency room, regardless of his ability to pay. There is no serious legislation under consideration that would change that.

About three-quarters of this uncompensated care, adding up to tens of billions of dollars annually, is financed, in some way, by the taxpayers. (Health-care providers absorb some of these costs by delivering charity care.) The extent and degree of this cost shifting varies from state to state. The challenge for conservatives is to address the situation in a practical way that does not reward personal irresponsibility - the free-rider problem - or curtail freedom. That means taking the principle of "personal responsibility" seriously by making sure that personal choices are clearly defined and consequential.

The experience of Massachusetts shows how hard it can be to pull off this balancing act. In 2005, as the state faced $1.3 billion per year in taxpayer-financed uncompensated health-care costs, Republican governor Mitt Romney came up with a plan. In sum, his position was that people should exercise their responsibility by choosing their own health insurance and paying their own health-care bills. The state would provide direct assistance to help low-income folks buy insurance, drawing heavily from existing government funding of health care.

Under the Romney proposal, those who did not wish to buy health insurance would be allowed to self-insure, but they would have to post a $10,000 bond to pay their health-care bills, such as hospital emergency care, instead of shifting them onto the taxpayer. Anyone who refused to do so would lose an exemption on his state income tax.

Romney's proposal, strictly speaking, was not a requirement to purchase health insurance; it was a requirement to pay one's health bills, through insurance or predetermined direct payment, thus reducing the burden on taxpayers. Nonetheless, it satisfied nobody. Critics on the right, especially libertarians, said it amounted to a health-insurance mandate, while those on the left said it was a weak and unnecessary substitute for the "real thing," which the Massachusetts legislature enacted in 2006: a straight mandate for individuals to buy health insurance or pay a fine.

That mandate fell short of universal coverage. Some 60,000 people, roughly 1 percent of the state's population, were initially exempted, as state officials - fearing a political backlash from labor officials, among others - refrained from imposing the mandate on some low-income people they believed would have trouble paying for insurance. So, while the state's liberal legislature allowed the government to set generous required benefit levels, politicians continued to steer money to favored hospitals, aggravating the state's health-care cost crisis. In other words, they deliberately weakened a key element of Romney's proposed reform, which was to redirect existing government funding from institutions to individuals and families. The Massachusetts experiment reminds us that in health-care policy, precision in drafting and careful implementation count as much as the broad outlines of legislation.

In Massachusetts or Washington, no individual mandate is going to achieve the goal of universal coverage. In the cases of similar mandates - auto insurance, income-tax filing, military draft registration - compliance has invariably fallen short of universal. The better course of action is to be serious about both personal freedom and personal responsibility. They go together; you cannot have one without the other. And under the House and Senate bills, we would have neither.

Requiring everyone to buy government-specified health insurance, whether they need it or not, is an unacceptable violation of personal liberty. It is a way of taxing healthy people without calling it a tax. Since that is an irresistible temptation to politicians, the list of required benefits would be certain to keep expanding.

The choice between freedom and responsibility, as the president and his congressional allies portray it, is a false choice. We can and should have both.

Robert E. Moffit, Ph.D., is Director of the Center for Health Policy Studies at The Heritage Foundation.

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

Related Issues: Health Care

First Appeared in the National Review