The Individual Mandate

The Individual Mandate – Unconstitutional Government Interference

Ever since I immigrated to the USA in 1980, I have been puzzled by the way that the dilemma of health care has been framed in this country – as one of access to ‘health insurance’ rather than to ‘health care’. Many of us European exiles who have a high suspicion of anything that smells of socialism accept that a nationalized system of health care, funded from general taxes, and supplemented by private insurance, is the only sensible model for providing universal access, constraining costs, and exerting sensible rationing. Yet in the US, outside a few government programs (such as those supporting military veterans, and the aged), health care insurance is provided by a commercial – though highly regulated – market. Such insurance is also something that is normally provided (i.e. negotiated, administered and primarily paid for) by the organization one works for, thus incidentally adding a crippling cost of doing business to US firms that affects their ability to compete world-wide. (As the economist Paul Krugman once wrote: “General Motors is a company in the benefits business which tries to sell cars to fund it.”) Moreover, it is very difficult for individuals without insurance to negotiate reasonable prices from health care providers, as preferred rates are agreed in advance between doctors and hospitals and the insurance companies, and the complexities of billing systems are not designed with individual payers in mind.

President Obama’s Affordable Care Act introduces two key provisions: it prevents insurance companies from rejecting applicants because of pre-existing conditions, and it requires citizens to acquire health insurance from a commercial provider – the ‘individual mandate’. Thus it is no longer an insurance program: it is an entitlement. When the Bill was passed I recall writing to a friend in the UK that I thought the dispute over this provision would go all the way to the Supreme Court. And I was right. The Supreme Court has agreed to hear arguments concerning it next year.

Why? Is it not fair to demand that everyone share in the cost of insurance, so that those who need more expensive treatment should be able to benefit from it? Almost universally, the media (especially journalists and commentators published in the New York Times) have presented those who objected to such a mandate as deadbeats, individuals who would ‘game the system’ by signing up for insurance only when they became ill and needed treatment. No longer could such candidates be turned down by insurance companies: commentators assumed that they would milk them for payment only when they needed care. But this argument completely misses the point about risk and individual liberty.

The individual mandate is immoral and unfair when applied to the purchase of commercial services. Insurance is about risk, and those who decline buying insurance for their own protection (whether it be against fire, theft, weather, or certain sicknesses or accidents) may choose to make that decision because they consider that they themselves can afford the costs that could arise, and that, over a given period, the probable costs of health care for them are less than the insurance premiums they would otherwise pay. It need not be because they plan to ‘beat the system’. (There should be no ‘system’ in an open and competitive market.)  It is not their obligation to subsidize those at higher risk by buying a commercial product. It is not analogous to the requirement to have driver’s insurance, where the risk being addressed is for third parties, not the driver him- or her-self. Such individuals’ insurance premiums would now be completely unconnected to their individual risk of needing medical treatment, instead tied solely to the projected costs of providing medical care to people from whom the whole concept of risk has been removed, and allocating the cost against a captive pool! Thus they are being force to purchase a commercial product in a non-competitive and highly regulated ‘market’, for services that are unrationed and in principle unlimited. The Act constitutes a highly intrusive case of government interference.

Most other countries offer a nationalized system of health care, where at least primary services are available to everyone.  People (including me) generally accept that payment of taxes towards a system of universal access is sensible and fair, and worthy of the risk of building a no doubt inefficient bureaucracy. How we get from here to there in the USA, with the challenge of partially dismantling the entrenched insurance businesses, and at a time when national budget deficits are being reduced, is extremely daunting. But implementing the Affordable Care Act, which is neither fish nor fowl, would be to compound the present problem. It pretends that an efficient and competitive market exists, but loads it in such a way that it undermines the whole principle of ‘insurance’. Costs will increase as more demands are laid upon the health care system, and intolerable restrictions on individual liberties will be imposed.


Tony Percy, November 2011

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