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Monday, April 16, 2012

The deception about the individual mandate

Tom Maguire links to this post by Randy Barnett about a central fallacy of the argument in favor of the individual mandate. It was never about covering the costs of health care for the uninsured because, if that were the case, the uninsured would be allowed to fulfill the mandate simply by buying what they really needed - catastrophic coverage.
Obamacare does not simply make people buy catastrophic coverage that would cover their own unaffordable risks at a price that reflects their actuarial risk; instead, as several of the Justices recognized, it makes them buy comprehensive policies for a wide range of services they don’t need in order to subsidize the law’s other costly requirements, at a price in excess of the actuarial risk that they pose to the system. Rather than being a scheme to insure against the risk posed by younger persons, the Affordable Care Act creates a system of a government-mandated privately-administered redistribution of wealth from the young and healthy to older baby boomers.
A great number of those who do not have health insurance are young workers willing to gamble on their health by saving money on buying a health insurance policy. What they really need is a catastrophic policy that would cover their costs if something terrible happened to them, but allow them to pay out-of-pocket for their normal office visits and health care needs. Think of what Obamacare is mandating that they are covered for compared to such a common-sense catastrophic policy.
As Chief Justice Roberts and Mike Carvin both correctly pointed out during oral argument, even a “bronze” plan must cover a wide array of costly “essential health benefits”—including contraceptives, maternity and newborn care, counseling, physical therapy, preventive services and pediatric oral and vision care—that drastically exceed the types of unpredictable and unaffordable costs covered by normal catastrophic plans (and which might potentially result in cost-shifting). As the [AP]article admits:
The health care law does impose a minimum set of “essential health benefits” for most insurance plans. Those benefits have yet to be specified, but are expected to reflect what a typical small-business plan now offers, with added preventive, mental health and other services.
That is precisely why premiums for bronze plans would cost between $4,500 and $5,000 per year under the Act (as estimated by the CBO), whereas true catastrophic plans are currently available for around $420 per year (as quoted online for a policy that covers a thirty-year-old nonsmoker, doesn’t cover preventative and other non-essential services, and carries a $10,000 deductible).

Thus, while the AP story emphasizes that “bronze” plans, compared to the other Obamacare plans, will have relatively high cost-sharing by the insured through deductibles, etc., that is utterly irrelevant: compared to the catastrophic plans banned by the ACA, “bronze” plans will still cost roughly 10 times more than what is needed for healthy young people to internalize their own “actuarial risk.”
And why does Obamacare mandate the uninsured by buy such polices that cover so much more than a basic catastrophic policy? It is because they need those health young people to buy more insurance than they need in order to pay for the requirements placed on insurance industries to cover people with pre-existing conditions as well as the other

We can have such a choice for our auto insurance, but not for health care. So which party now is the one about choice?

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