Should Democrats Give Up on the Individual Health Insurance Mandate?

The most controversial part of the Affordable Care Act is its requirement that, starting in 2014, almost everyone in the country has to buy health insurance. The left calls it a sop to insurance companies, the right calls it unconstitutional, and polls show that the public opposes the requirement 2 to 1.

Could the "individual mandate" disappear? And would that unravel the whole health-care reform law?

House Republicans are poised this week to pass the "Repealing the Job-Killing Health Care Law Act," though perhaps in a more "thoughtful" mode than was contemplated before the Arizona shootings put politicians on notice to mind their rhetorical manners (the bill was named pre-Arizona). Plan B, given that Democrats still control the Senate and the White House, is chipping away at the law. And the mandate is top of mind for Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee.

Upton told the American Enterprise Institute he expects "a number of Democrats" who vote against repeal of the overall law to support repeal of the individual mandate. Asked about "critics" who say removing the mandate would make the law unworkable from an economic standpoint, Upton said he wouldn't call them critics because unraveling the law would be "a good thing."

The core concept of insurance is getting everybody in the pool to spread out costs. In automobile insurance, that means good drivers and bad, young drivers and old. With health insurance, it means young and old, strapping and sick. The question is whether the young, the healthy, the libertarian and those with modest incomes will buy insurance absent a requirement backed by a tax penalty (as the new law imposes).

As a candidate, President Barack Obama did not include a mandate in his health plan. He said people would purchase insurance for themselves and their families if there were subsidies to make it affordable. Insurance companies, which can't cherry-pick customers under the new law or abandon those who get sick, weren't so sure. They predicted skyrocketing rates without the requirement, as only those with health problems would sign up to buy policies.

The insurance companies prevailed, but more than 20 states are now challenging the constitutionality of the mandate in cases expected to land at the Supreme Court. They center largely on whether the mandate falls under federal authority to regulate interstate commerce.

Conservatives argue that Americans cannot be penalized for choosing not to buy a product. A liberal lawyer friend of mine counters that they are trying to preserve the right to make others pay for their medical care. He has a point. People with insurance subsidize care for the uninsured through higher taxes, higher medical costs and higher insurance costs – about $350 per person per year, according to a non-partisan 2008 study.

Federal judges are delivering mixed verdicts on the constitutionality of the mandate as the cases wend their way upward. In the meantime, conservatives have a potent political issue and Democrats are stuck defending the least popular part of the law.

A few have started hedging, raising questions about whether it must and should survive. Sen. Claire McCaskill of Missouri says she's open to alternatives. "There's other ways we can get people into the (insurance) pool -- I hope -- other than a mandate, and we need to look at that," she said this month on MSNBC's "Morning Joe." McCaskill is one of several centrist Democratic senators facing difficult re-election races next year in conservative states.

Former Vermont Gov. Howard Dean, a liberal, a medical doctor and the former chairman of the Democratic National Committee, says the mandate is "doomed" because "Americans can't stand being told what to do, no matter what party." Holding up the example of his state's program to insure all children up to age 18, Dean also says it's not needed. He says 96 percent of children in his state are covered, demonstrating that people will "do the right thing" without a mandate.

Dean bolsters his point by noting that the coverage level is about the same as in Massachusetts, which has a universal coverage law and a mandate to buy insurance. But the focus of the Vermont program is parents buying coverage for their children, so it's not a direct comparison. In addition, a new study of Massachusetts suggests the mandate is a major factor in why so many people have insurance.

Massachusetts started phasing in its mandate in 2007, giving people a year to buy coverage before penalties kicked in Dec. 31. The authors said people who signed up at the beginning of the year were more likely to be older and chronically ill. At year-end, with penalties imminent, "there was an enormous increase in the number of healthy enrollees," they wrote in The New England Journal of Medicine. They concluded that "the mandate had a causal role in improving risk selection."

And that was with Massachusetts subsidies, which are larger than the ones provided in the federal law. The authors say the mandate will play an even more pivotal role at the federal level in prodding people to buy policies, given the smaller subsidies.

What if the mandate disappeared? Could you get a broad enough pool to spread the risk, as McCaskill suggested? Some say there are ways to to make it happen. Here are three ideas:

-- Dean suggested a limited open enrollment period each year for people who don't have employer-provided insurance. They could buy individual policies on new health insurance exchanges, the competitive marketplaces that come on line in 2014, for that limited period. If they didn't, they'd have to pay out of pocket for any care they needed that year and risk financial ruin.

-- Princeton sociologist Paul Starr would let people opt out of buying insurance, but for a price. They'd have to sign a waiver on their tax return saying they would be ineligible for federal subsidies for a certain period of time, such as five years.

-- Gail Wilensky, who ran the Medicare and Medicaid programs in the George H.W. Bush administration, says people in Medicare's prescription program are charged more if they don't enroll when they first become eligible then decide to sign up later. A similar plan for health insurance – say three to five years of higher fees – would up the ante for people who don't buy insurance until they are sick, Wilensky told Kaiser Health News, and could be "more effective than a wimpy mandate."

Some of those ideas seem to me to raise the same points the lawsuits are challenging – that is, does the government have the right to penalize people for not buying a private product? The Medicare template is interesting, but it relates to a government program (which the government surely has a right to regulate). Also, like car insurance, which you can avoid buying if you don't have a car, it is voluntary -- people can buy Medicare prescription coverage, private coverage or none at all.

Beyond that, supporters of the mandate say the proposed alternatives don't solve basic problems. The insured would still be subsidizing the uninsured, and costs would continue to rise as healthy people stay out of the pool. MIT economist Jonathan Gruber, in a study for the liberal Center for American Progress, said insurance companies in five states are operating under patient protection requirements much like those in the federal law, but without a requirement that everyone buy insurance. He said "those five states are now among the most expensive states in which to buy non-group insurance."

Citing projections by the non-partisan Congressional Budget Office, Gruber said removing the federal mandate would mean only 10 million more people insured, compared with 32 million under the new law . He said the healthiest people wouldn't buy coverage, and premiums for individual policies on the insurance exchanges would be 40 percent higher.

Confession time: I started researching and writing this piece with the idea that Democrats would be smart to get behind a moderate alternative to the individual mandate. In fact, I even pre-wrote a conclusion. It would be, I said, a win-win. Republicans would look constructive and achieve a key goal. Democrats would look moderate and the issue would lose its political power, even if the court challenges continued.

But I've come to think hanging in is worth the political cost to Democrats. Studies show it's the most effective option. In the only real-life experiment we have, in Massachusetts, it apparently is working. And if another approach is tried first and fails, after this siege, it's hard to believe Congress would ever have the political will to reinstate a mandate.

There is always the chance the Supreme Court will strike down the mandate as unconstitutional. If the problem is making people buy a private product, it's easy to imagine Democrats mobilizing with unprecedented resolve to add a public insurance option -- maybe Medicare available for purchase by people of any age -- as a choice on the exchanges.

If courts dismantle the health law, it's also easy to imagine a new drive for a single-payer "Medicare for all" system. That would put everyone in the pool automatically, and we already know Medicare is constitutional. Perhaps conservatives ought to return to their one-time support for a mandate. It's a lot closer to their idea of a market-based America than where we could be headed minus a mandate.

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