What If the ObamaCare Mandate Goes Away?

Will we wind up with a backdoor mandate? Or a single payer system?

Kevin Drum figures that, in the unlikely case that the Supreme Court strikes down the ObamaCare* health insurance mandate,  we’ll eventually wind up with something like it through the back door.

Answer: insurance companies go ballistic. If they’re required to insure all comers at the same price but healthy people aren’t required to buy insurance, then prices spiral as sick people sign up for coverage and healthy people drop out. Eventually this death spiral will lead — as the name implies — to death for insurance companies, and at that point it becomes a staredown. Something has to be done, and either Democrats or Republicans will blink first. It may seem like a no-brainer that Democrats will be the ones to cave if this happens, but that’s not clear. All it takes is 41 holdouts to filibuster the GOP, and as the insurance industry gets ever more desperate they’ll start pushing hard on their Republican pals.

Obviously the outcome is unclear. But depending on where public opinion falls — and requiring insurance companies to insure everyone is pretty popular — Congress might end up reinstating the mandate in some form or another. It’s genuinely a crapshoot.

I actually think the more likely outcome is the institution of a single payer system with private insurance as and add-on for the well-heeled.

Even absent ObamaCare, our insurance-based system was likely to collapse in the medium term. It’s just unsustainably expensive. But ObamaCare exacerbates the problems, both by forcing insurance companies to raise rates to pay for allowing those with pre-existing conditions into the pool on the same basis as healthy people and by creating subsidized exchanges (starting in 2014) and thus giving businesses an ability to opt out of being the insurer of first resort.

Given how obvious the “unintended” consequences of its cumulative provisions are, I’ve always assumed that killing private insurance through stealth was the intent.**

___________

*I use this as–as does Drum–a non-pejorative shorthand for the bill. The bill’s given name, Patient Protection and Affordable Care Act, suffers from both being unwieldy and absurdly propagandistic. And PPACA doesn’t exactly roll off the tongue as either an acronym or initialism.

**Perhaps because I grew up with Army medical care, I’ve always diverged from the conservative mainstream on this issue. Healthcare just doesn’t work as a market given the inelasticity of demand on the part of consumers and the fact that providers have long existed as a cartel. My objections to ObamaCare were based on the fact that it did little to fix the flaws of the existing system and, indeed, exacerbates some of them. 

FILED UNDER: Economics and Business, Health
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Fog says:

    So, do smart conservatives now support Obamacare as a less socialist alternative to single-payer? And if they do, how would they clean up the mess created by the exploding heads in the Tea Party?

  2. Rob in CT says:

    I don’t know if that as the intent. I think the intent was: how do we get the big health insurers onboard with a reform that expands coverage?

    The answer: the mandate.

    I don’t much like the reform either, since I want a “single-payer” system, examples of which abound in other developed countries. The PPACA/Obamacare is a half-step that leaves most of our Rube Goldbergian system in place. So it gets a “meh” from me, but that’s easy for me to say because I already have decent coverage and I’m still relatively young and in ok health.

  3. EMRVentures says:

    @Fog: Smart conservatives once supported the mandate as policy. The idea was developed, in part, by the Heritage Foundation after all.

    It was only after we let a Kenyan into the White House that it became Socialist.

  4. James Joyner says:

    @Fog: I don’t know that there’s much of a consensus–or that most are even paying that much attention to the mess that our healthcare system is in, since most of us have decent coverage.

  5. James Joyner says:

    @EMRVentures: I don’t think we should confuse “conservatives” with a handful of conservative intellectuals. Especially when, as I understand it, the Heritage proposal was crafted as a counter to the Clinton healthcare package. That is, it was considered a more conservative approach than single payer even while most conservatives preferred what they (incorrectly) saw as a free market system.

  6. Vast Variety says:

    I sometimes wonder if employer subsidized health insurance isn’t part of the problem.

    Personally having experienced health care while in the Military I would much prefer a single payer system. A free market healthcare system just doesn’t seem to work, especially for those that have limited incomes.

  7. Eric says:

    @EMRVentures:

    It was only after we let a Kenyan into the White House that it became Socialist.

    I believe you meant to say, “after we let an American into the White House.” A Kenyan is not allowed to be President.

  8. sam says:

    “I actually think the more likely outcome is the institution of a single payer system with private insurance as and add-on for the well-heeled.”

    Orin Kerr has argued that the ACA may be the last stand against single-payer:

    [W]hy [is] the mandate is “unprecented.” If I understand the way in which mandate challengers use that term, the mandate isn’t unprecedented because the government has never been this statist. To the contrary, it is “unprecedented” because it is the first time that a major federal government benefit program rejected the 1960s Great Society model and instead tried to adopt a more market-oriented approach to benefits. That is, the mandate is unprecedented because it tries to create a federal government benefit program while maintaining the basic market dynamic of goods being bought and sold instead of a government monopoly dynamic of paying for benefits through taxes. As far as I know, it’s the first time a federal government program has tried to use that kind of hybrid government-market model.

    Why does this matter? I think it matters in part because it suggests that the arguments of the mandate challengers are libertarian only in the short run. In the short run, we know as between a 1960s Great Society model and an individual mandate model, that the individual mandate model was more politically popular — and that even it barely squeaked through Congress. As a result, if you can get the individual mandate struck down, then the effect is likely to keep away either kind of health care system as long as the current political picture stays roughly steady. That’s why the argument looks libertarian today, and presumably why so many libertarians embrace it: For the foreseeable future, it would have the libertarian result of leading to neither a government monopoly nor an individual mandate model of health care. The former would be ruled out by public opinion, and the latter by the courts.

    In the long term, however, the argument of the mandate opponents doesn’t strike me as a particularly libertarian. If the courts conclude that the mandate approach is unconstitutional, then the more market-oriented approach to benefits would be ruled out. Congress would have a choice: Don’t mandate benefits, or else mandate using a 1960s Great Society government monopoly model. Depending on what kinds of policies are popular in the future, the result may be to push future Congresses to embrace the government monopoly model more. If Congress had the determination to pass a benefits program but the more market-oriented approach were ruled out, then it would presumably proceed with a government monopoly program instead. Perhaps the Constitution requires that.

  9. grumpy realist says:

    I’ve had the experience of both Japanese and U.K. health care systems as well as the U.S. Based on my experience, the U.S. has managed to cobble together the disadvantages of both free market and socialized systems and the benefits of neither.

    It’s pretty bad when you discover yourself looking back to the Japanese yearly health checks (complete with barium cocktails) with nostalgia.

  10. Hey Norm says:

    I agree that the ACA didn’t go far enough…however it is better than what existed as the status quo. we do not know how much better because it has not been fully instituted.
    The over-riding fact is that private insurers have been signing up a lot of new customers…healthy customers. I can’t see them wanting to just give them up. We all agree that if the mandate is ruled unconstitutional then the ACA is fairly unworkable. The insurers will pressure their lap-dogs to fix it – to make it constitutional – reinstate it as Drum says. Certainly they do not want single-payer…no way these mega-companies settle for simply selling add-ons to a single-payer system. You can see the ads on TV for companies that sell add-ons to Medicare…they aren’t the big players.
    The ACA will survive and evolve…change is good.

  11. EMRVentures says:

    @Eric: Your sarcasm detector may need a little recalibrating.

  12. EMRVentures says:

    @James Joyner: True, but f the fact is the mandate was within the bounds of discussion among policy Republicans not too long ago. The move from being a policy that some Republicans supported and others did not recoil at (in my memory) to now being a socialist scheme that no Republican can touch except to denounce it, is significant in my mind, and typical of the reflexive “it’s bad if liberals like it” mentality that has governed the Republican party in recent years.

  13. Rob in CT says:

    The funny thing is that liberals don’t even really like it. They grudgingly accepted it, conceding that their preferred result was a bridge too far (for now, at least).

    But the Right now has to hate it.

    Frustrating.

  14. Eric Florack says:

    nswer: insurance companies go ballistic. If they’re required to insure all comers at the same price but healthy people aren’t required to buy insurance, then prices spiral as sick people sign up for coverage and healthy people drop out. Eventually this death spiral will lead — as the name implies — to death for insurance companies, and at that point it becomes a staredown. Something has to be done, and either Democrats or Republicans will blink first.

    Drum sounds like he’s in a celebratory mood.

    So, do smart conservatives now support Obamacare as a less socialist alternative to single-payer?

    No. What you describe makes about as much sense as being a little less pregnant.

  15. David M says:

    Honestly, I don’t think the anyone in the GOP has thought it through. They are just hoping the entire law goes away, and the issue can be ignored for a while. If the GOP wanted to, they could amend the law tomorrow and replace the mandate with something equivalent, but that would kill their favorite sound bites.

    Health care reform is complicated, just doing nothing hasn’t been an option for a while, and the free market has no real solutions. Ergo, the GOP don’t have any interest in it, as legislating and solving complicated issues isn’t what they do.

  16. steve says:

    There are a number of ways to get around not having an individual mandate. The PCA, the likely GOP replace program, uses soft mandates. You could also use a Medicare Part B strategy with increasing penalties for not signing up for insurance early.

    Steve

  17. Tano says:

    … and by creating subsidized exchanges (starting in 2014) and thus giving businesses an ability to opt out of being the insurer of first resort.

    Huh? How does this “give them” something that they do not already have?
    Businesses are under no obligation now to provide health care. They can opt out of being the insurer of first resort anytime they want to.

    If anything, Obamacare makes opting out more painful for business, because they will have to pay to do so, which they do not have to do now..

  18. James Joyner says:

    @Tano: Businesses that wish to hire non-commodity employees have little choice but to provide decent health insurance. They new have an opt-out: pay a small penalty (compared to the cost of providing) and push the employees off to the pool.

  19. Anderson says:

    @David M: The GOP has thought it through just fine. If you’re poor, you get sick, and you die.

    That’s how the free market works, and plainly, Man was made for the Market, not the Market for Man.

  20. mantis says:

    I don’t think we should confuse “conservatives” with a handful of conservative intellectuals. Especially when, as I understand it, the Heritage proposal was crafted as a counter to the Clinton healthcare package. That is, it was considered a more conservative approach than single payer even while most conservatives preferred what they (incorrectly) saw as a free market system.

    Translation: The Heritage Foundation isn’t conservative when it is countering liberal proposals, and the rest of conservatives don’t even understand our health care system.

    One wonders if James, finding himself surrounded, in his own estimation, by either frauds or idiots, ever stops to be embarrassed by the company he keeps.

  21. Jay says:

    I think the fear over the insurance “death spiral” is overrated. People have been talking about this for decades. It would have already happened if Drum’s logic was correct…we already have a competitive, community-rated insurance plan – medicare. Jersey has community rating…I don’t know much about it, but as far as I know, they aren’t seeing a change in their market. We’ll probably just continue to see a gradual drop in the rate of those with full insurance in favor of those with crappy insurance.

    The upshot is that Obamacare doesn’t challenge any of the main problems with our current system, so there’s no reason to expect that it will help.

    It just might box the insurance companies in enough that they will have to accept some sort of single payer system, which has been the Democrats’ goal from the beginning.

  22. grumpy realist says:

    @Jay: anyone intelligent would realize the only practical and efficient system is some form of single payer.

    Health care isn’t really like standard insurance, because we’re all going to need it at some point. What we need is find a way of providing the basics (check-ups, routine tests) cheaply and split off the rest into catastrophic.

    I’m enough of a bitch to say that we may need to go to needs-testing when it comes to government supported systems. I’d rather spend 30K on the health of 10 kids who have a good chance of growing up and becoming productive taxpayers, rather than extending the life of someone with Alzheimer’s in a nursing home. We really are going to have to start rationing at some point.