Posted by: Jeff | March 24, 2010

Health Care Reaction Part Deux

President Obama signs Health Care Reform into law.

First reaction is here.

I received another email from a friend that posed a couple of good and under-reported criticisms of the bill.  Namely, that the individual mandate could pose a problem for those that can’t afford or can barely afford to purchase health insurance.  This becomes a problem because under the new legislation signed into law yesterday, individuals will be penalized for failing to purchase coverage.

As for some publicized panic about mandatory jail time, I don’t think there’s anything that severe in the bill.  There is an individual mandate, which means that there is some legal obligation for individuals and families financially capable of purchasing minimal insurance coverage to do so.  My understanding is that people under the poverty line would not be forced into coverage – just those that are currently “opting out”. The way the government will enforce the mandate is by adding a new question on tax forms about coverage – so those that are unemployed would not be compelled by the mandate.

The goal of the individual mandate is to put more focus on preventive care, which theoretically makes people healthier and puts less of a strain on critical sectors of the health care industry (particularly the Emergency Rooms). To enforce this, there is some “negative incentive” in the form of a financial penalty for failing to have insurance. The fee will be introduced in 2014, giving people plenty of time to purchase insurance (the premiums for minimal policies should be driven down substantially by then as well, as some of the cost controls and subsidies go into effect in 2011).

When introduced, the fee will be a maximum of $95, enforced by the IRS during tax filing. It’s pretty small really – but it does go up, to a maximum of around $700 (depending on income bracket) in 2016. The idea is that the penalty is basically the same as paying for insurance – might as well get something if you’re paying $700. And the health care system will be in better shape, etc.  Failure to pay the fine is basically the same as not paying taxes owed.  Jail time could be a possibility, but it always is when you don’t pay money you owe the government – and these calculations inherently take into account ability to pay.

The thinking with the timing of delaying the individual mandate is that the initial stress of a flood of newly-insured individuals on the health care system will mostly be over, so by waiting to force people into coverage the shock of so many new patients can be diffused somewhat.

The individual mandate will no doubt add a few problems to sort out, but keep in mind that policy costs will be coming down.  People will have greater choice in the government-regulated health insurance exchanges, and free and subsidized policies will be far more common.  It isn’t universally free, which is why progressives believed the individual mandate to be a necessary provision.

Republican Attorneys General in several states, most notably Virginia, are challenging the legality of the individual mandate, but even conservative constitutional scholars aren’t overly optimistic of a legal challenge’s chances.  There is legal precedent for compulsory coverage – many states require at least liability car insurance for all drivers.  There are some differences, yes, but none that will likely stand up to a constitutional challenge.  Regarding the larger issue of whether the federal government can regulate the industry over the objection of a few states – well, the interstate commerce clause implicitly empowers the federal government to do just that.

So while these legal challenges will take years to resolve, in the end they’re likely a bigger waste of taxpayer dollars than the health care reform bill ever could be.  A reminder that the Republican Party is the party of fiscal responsibility when it is politically expedient.

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