Mark Pauly, Father of the Individual Mandate: “Either We Have To Have A Mandate Or Make Insurance Free For Everyone”
In 1991, economist Mark Pauly was the lead author of a Health Affairs paper attempting to persuade President George H.W. Bush and his administration to adopt a universal health-care proposal that would keep the government from eventually taking over the sector. “Our view is that excessive government intervention will make matters worse,” wrote Pauly and his co-authors. “Our strategy, therefore, is to design a scheme that limits governmental rules and incentives to the extent necessary to achieve the objectives.”At the heart of that strategy was the individual mandate, which would go on to be promoted by congressional Republicans, the Heritage Foundation, and Massachusetts Gov. Mitt Romney before being adopted by Democrats and becoming a bete noire of conservatives. I spoke to Pauly earlier this afternoon, and an edited transcript of our conversation follows.
Tell me about your involvement in the development of the individual mandate.
I was involved in developing a plan for the George H.W. Bush administration. I wasn’t a member of the administration, but part of a team of academics who believe the administration needed good proposals to look at. We did it because we were concerned about the specter of single payer insurance, which isn’t market-oriented, and we didn’t think was a good idea. One feature was the individual mandate. The purpose of it was to round up the stragglers who wouldn’t be brought in by subsidies. We weren’t focused on bringing in high risks, which is what they’re focused on now. We published the plan in Health Affairs in 1991. The Heritage Foundation was working on something similar at the time.
What was the reaction like after you released it?
There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea [It did make it into a bill — Ezra], but Democrats in Congress said it was “dead on arrival.” So that was the end of my 15 minutes.
Was the constitutionality of the provision a question, either in your deliberations or after it was released?
I don’t remember that being raised at all. The way it was viewed by the Congressional Budget Office in 1994 was, effectively, as a tax. You either paid the tax and got insurance that way or went and got it another way. So I’ve been surprised at that argument. But I’m not an expert on the Constitution. My fix would be to simply say raise everyone’s taxes by what a health insurance policy would cost — Congress definitely has the power to do that — and then tell people that if they obtain insurance, they’ll get a tax break of the same amount. So instead of a penalty, it’s a perfectly legal tax break. But this seems to me to angelic pinhead density arguments about whether it’s a payment to do something or not to do something.
That gets to one of the central questions in this argument, which is whether the individual mandate is a penalty for economic inactivity or whether it’s part of a broader system of regulations affecting a market for health care that we’re all participating in, whether we’re buying insurance that day or not.
I see it in the latter way. We thought it was a good idea to do everything possible to encourage people to get insurance. Subsidies will probably pick up the great bulk of the population. But the point of the mandate was that there are a few Evil Knievals who won’t buy it and this would bring them into the system. In our version, the penalty was effectively equal to the premium of a policy. You paid the penalty and you got the insurance. That’s one of my puzzlements here: In the new law, the actual level of the penalty is quite small compared to the price of a policy. It’s only about 20 percent of the cost of a policy.
Do you think the mandate is severable from the larger bill?
I think you could do that. I’d want to take some other things out of the bill, too. But the main part I favor and the part that deals with the uninsured are these subsidies for lower-middle-income people. The great bulk of them would take insurance with those breaks. That won’t go away. The mandate props up community rating, which I’m not a fan of. So I’d throw overboard both the mandate and the community rating. Then I’d add high-risk pools.
You say the mandate was developed as a way to avoid single-payer health care. As I see the evolution of this issue, Richard Nixon countered single-payer with an employer mandate, then Clinton co-opted the employer mandate and Republicans moved to an individual mandate, and then Obama co-opted the individual mandate. But there’s nowhere else to go, as far as I can tell. If the individual mandate dies, it seems to me that the eventual universal coverage solution will rely heavily on government programs — we’ll have single payer in fact even if we don’t have it in name.
I think there’s a slippery slope in that direction. I have mixed feelings about the mechanics of the current bill. Our idea was to have tax credits and very little additional government control over insurance markets, and the legislation has an awful lot of that. I believe you could achieve almost the same reduction of the uninsured with the subsidies and without the mandate. But CBO says that you leave about 40 percent of the uninsured population without coverage in that scenario. If we want to close that gap, then either we have to have a mandate or make insurance free for everyone and run by the government.
Interview By: Ezra Klein and posted in The Washington Post, February 1, 2011
Judge Vinson’s Health Care Smackdown: What’s A Tea Party Without Tea Leaves?
In his spare time, U.S. District Judge Roger Vinson, the author of Monday’s sweeping ruling gutting as “a bridge too far” the entirety of the Patient Protection and Affordable Care Act, apparently serves as the president of the board of directors of the American Camellia Society, an industrious group that evidently appreciates and nurtures a tiny, colorful corner of God’s Green Earth. The camellia is known around the world not just as a plant that produces beautiful flowers — it is the state flower of Alabama, for example — but also as a plant that produces tea leaves. And what’s a Tea Party, after all, without a healthy supply of tea leaves?
It cannot be a coincidence, then, that Judge Vinson, the Reagan appointee who has chosen reverence to the camellia as a hobby, would choose to compare (unfavorably, even) the Obama Administration’s complicated (and increasingly endangered) effort to bring health insurance to 30 million Americans with the efforts of King George III and the British East India Company to tax the tea the colonials quoffed.
“It is difficult to imagine,” Judge Vinson wrote in his 78-page ruling, “that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place.”
Tea Party analogy? Check. Head-scratching analysis? Check. Judge Vinson wrote:
“… the mere status of being without health insurance, in and of itself, has absolutely no impact whatsoever on interstate commerce (not ‘slight,’ ‘trivial,’ or ‘indirect,’ but no impact whatsoever) — at least not any more so than the status of being without any particular good or service. If impact on interstate commerce were to be expressed and calculated mathematically, the status of being uninsured would necessarily be represented by zero. Of course, any other figure multiplied by zero is also zero. Consequently, the impact must be zero, and of no effect on interstate commerce.
The uninsured can only be said to have a substantial effect on interstate commerce in the manner as described by the defendants: (i) if they get sick or injured; (ii) if they are still uninsured at that specific point in time; (iii) if they seek medical care for that sickness or injury; (iv) if they are unable to pay for the medical care received; and (v) if they are unable or unwilling to make payment arrangements directly with the health care provider, or with assistance of family, friends, and charitable groups, and the costs are thereafter shifted to others.”
Got that? The uninsured can only have a “substantial effect on interstate commerce” — and thus be regulated by Congress — if they are subject to the precise conditions which exist today all over the country, and which prompted the Act in the first place. The judge acknowledges this point, to his credit, saying that the Congress would of course have the power to regulate the millions of people who meet his five criteria above. But he then concludes: “But, to cast the net wide enough to reach everyone in the present, with the expectation that they will (or could) take those steps in the future, goes beyond the existing ‘outer limits’ of the Commerce Clause” (emphasis in original).
I suspect there will be a million words of legal and political analysis over the logic and viability of that conclusion.
Unsolicited and simplistic recommendations for the legislative branch? Also check. Judge Vinson wrote: “If Congress intends to implement health care reform — and there would appear to be widespread agreement across the political spectrum that reform is needed — it should do a comprehensive examination of the Act and make a legislative determination as to which of its hundreds of provisions and sections will work as intended without the individual mandate, and which will not.” In other words: Try again, Congress, and good luck with that!
Painfully half-hearted expression of regret for kicking the entire Affordable Care Act to the curb? Check. Judge Vinson wrote: “I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate. That is not to say, of course, that Congress is without power to address the problems and inequities in our health care system. The health care market is more than one sixth of the national economy, and without doubt Congress has the power to reform and regulate this market. That has not been disputed in this case. The principal dispute has been about how Congress chose to exercise that power here” (emphasis added).
I am sure that others, including some of my colleagues here at the Atlantic, will be spending time in the coming hours and days further parsing the ruling. For me, for now, it’s enough to say that Judge Vinson delivered for opponents of the Act precisely what he had promised them one month ago in open court in the motion hearing; a epic, hero-to-a-cause ruling that somehow makes U.S. District Judge Henry Hudson’s ruling last month in Virginia, which also struck down the “individual mandate,” seem like a relative exercise in judicial restraint. And that’s saying something.
Two federal trial judges (Democratic appointees both) have declared the law valid. Now two federal trial judges (Republican appointees both) have declared the law invalid. Ultimately, the United States Supreme Court — and by that I mean swing-voter Justice Anthony Kennedy, who also is a Reagan appointee — will decide. But no matter what happens from here on in, Judge Vinson, lover of flowers and tea-leaf-reader by choice, has just ensured himself at least one more day in the sun.
By: Andrew Cohen -The Atlantic-January 31, 2011: Andrew Cohen has served as chief legal analyst and legal editor for CBS News and won a Murrow Award as one of the nation’s leading legal analysts and commentators.
Republicans Say Everything the Dems Pass Is Unconstitutional — Even Policies They’ve Championed for Decades
That Republicans are relentlessly attacking the constitutionality of what had long been one of their signature ideas for reforming the health-care system — the individual mandate requiring people to buy insurance or pay a penalty – is a testament to just how far down the rabbit-hole our discourse has gone.
Late last year, when a federal judge ruled against the mandate (two other courts disagreed, and the Supreme Court will end up deciding the question), Senator Orrin Hatch, R-Utah, rejoiced. “Today is a great day for liberty,” he said. “Congress must obey the Constitution rather than make it up as we go along.” It was an odd testament to freedom, given that Hatch himself co-sponsored a health-care reform bill built around an individual mandate in the late 1990s.
Journalist Steve Benen noted that while “the record here may be inconvenient for the right … it’s also unambiguous: the mandate Republicans currently hate was their idea.”
It was championed by the Heritage Foundation… Nixon embraced it in the 1970s, and George H.W. Bush kept it going in the 1980s. For years, it was touted by the likes of John McCain, Mitt Romney, Scott Brown, Chuck Grassley, Bob Bennett, Tommy Thompson, Lamar Alexander, Lindsey Graham, John Thune, Judd Gregg, and many other … notable GOP officials.
According to NPR, the mandate was the Right’s response to progressive proposals to establish a single-payer system. Mark Pauly, the conservative economist widely credited with the idea, explained that “a group of economists and health policy people, market-oriented, sat down and said, ‘Let’s see if we can come up with a health reform proposal that would preserve a role for markets but would also achieve universal coverage.'”
That was then, this is now. Since it was a Democratic Congress that enacted the mandate, this conservative idea for creating a business-friendly model of universal health care has become something profoundly un-American, according to many of those very same Republicans who championed it. (Asked about the GOP’s retreat from the individual mandate it had long promoted, Pauly said, “That’s not something that makes me particularly happy.”)
And as is generally the case in these heady days of Tea Party conservatism, it’s not just that the individual mandate is bad – it’s also “un-Constitutional” (just like child labor laws, federal disaster assistance, food safety standards, etc.). As Gary Epps, a legal scholar at the University of Baltimore, put it, “Conservative lawmakers increasingly claim that the ‘original intent’ of the Constitution’s framers and the views of the right wing of the Republican Party are one and the same.”
A brief filed in support of Virginia’s challenge to the Affordable Care Act by the Landmark Legal Foundation – headed by noted wing-nut radio host Mark Levin, who believes that the Tea Partiers have been “tormented and abused far more than the colonists were by the King of England” – laid out the argument, calling the erstwhile Republican approach to universal health care “evidence of congressional power run amok.”
Congress can tax interstate commerce, it can regulate interstate commerce, it can even prohibit certain types of interstate commerce, but it cannot compel an individual to enter into a legally binding private contract against the individual’s will and interests. There is nothing in the history of this nation, let alone the history of the Constitution … that endorses such a radical departure from precedent, law, and logic.
Like most of the Right’s views of the Constitution – and the Founders’ intent – this is entirely wrong; it’s historical revisionism driven by ideology.
In 1792, none other than George Washington signed the Uniform Militia Act, a law requiring every white male citizen to purchase a whole basket of items – “a good musket or firelock, a sufficient bayonet and belt, two spare flints, and a knapsack, a pouch, with a box therein” – from private companies. Bradley Latino at Seton Hall law school’s Health Reform Watch added that “this was no small thing.”
Although anywhere from 40 to 79% of American households owned a firearm of some kind, the Militia Act specifically required a military-grade musket. That particular kind of gun was useful for traditional, line-up-and-shoot 18th-century warfare, but clumsy and inaccurate compared to the single-barrel shotguns and rifles Americans were using to hunt game. A new musket, alone, could cost anywhere from $250 to $500 in today’s money. Some congressmen estimated it would cost £20 to completely outfit a man for militia service — about $2,000 today.
Some on the Right have argued that this history is irrelevant as the law was passed under the auspices of the Constitution’s militia clauses, not the Commerce Clause. That’s true, but doesn’t change the fact that it disproves the claim that Congress has never compelled citizens to purchase goods or services from private firms – that’s patently false, regardless of how the measures differed in their details.
And despite the fact that there were a number of legislators serving in that Congress who had signed the Constitution five years earlier, “not one of militia reform’s many opponents thought to argue the mandate was a government taking of property for public use. Nor did anyone argue it to be contrary to States’ rights under the Tenth Amendment.” Those who opposed the bill simply argued that it would put too great a burden on the poor.
Of course, mandating that citizens buy a gun is different than requiring them to purchase health insurance. But as Rick Ungar, an attorney and writer, pointed out, Congress did in fact pass a mandate requiring health insurance…back in 1798.
The Act for Sick and Disabled Seamen created a government-operated hospital system – socialized medicine! – and mandated that all privately employed sailors purchase health insurance in order to sail.
It’s not an exact parallel. Nobody was forced to become a merchant seaman. But as Ungar noted, “this is no different than what we are looking at today. Each of us has the option to turn down employment that would require us to purchase private health insurance under the health care reform law.”
The Act also required sea captains to withhold 1 percent of sailors’ earnings to finance the program rather then mandate that they purchase a policy themselves – it was the first payroll tax. But as Ezra Klein noted in the Washington Post, “if conservatives really do prefer a system of payroll taxes that purchase you public insurance to the private system envisioned in the Affordable Care Act, I’m sure there are a lot of liberals who would vote for a bill that repealed the Affordable Care Act and replaced it with Medicare-for-all.”
It’s an important point – the liberal approach to universal health care is not only simpler and far more cost-effective, but unlike the Right’s individual mandate, it also falls unambiguously within the federal government’s enumerated powers.
Health care is also, in the words of the Congressional Research Service, “a unique market” in that one cannot opt out of it even if one wishes to do so. That’s because, by law, we don’t allow people to simply die in the streets, untreated. The uninsured without the means to pay nonetheless get (very costly) care in emergency rooms, and the rest of us pick up the tab.
And here, again, it’s worth noting that “the 5th Congress did not really need to struggle over the intentions of the drafters of the Constitutions in creating this Act as many of its members were the drafters of the Constitution.” The bill was signed into law by none other than John Adams, considered to be among the most influential of the “Founding Fathers.” Thomas Jefferson was the president of the Senate at the time, and Jonathan Dayton, the youngest man to sign the Constitution, served as Speaker of the House.
As the current legislation stands, even the American Enterprise Institute concedes that “the majority of constitutional experts are betting that the courts will uphold the mandate” – although they’re not happy about it. And that’s because the other Constitutional arguments against the reforms are just as dubious. Conservatives have come to use the Constitution as a crutch, avoiding debates on the merits of various proposals by asserting, with a broad wave of the hand, that whatever the policy in question may be, it’s all illegitimate.
The constitutionality of the health-care mandate will ultimately be decided by an activist majority on the Supreme Court. Nobody can predict how it will rule, but the Constitution gives the Congress power to “to lay and collect Taxes, Duties, Imposts and Excises … and provide for the common Defense and general Welfare of the United States,” a power the Congressional Research Service characterizes as ”one of the broadest powers in the Constitution,” and one that forms “the basis of government health programs in the Social Security Act, including Medicare, Medicaid, and the State Children’s Health Insurance Program.”
The Supreme Court has interpreted the Commerce Clause as giving the government the authority to regulate not only interstate commercial transactions in a limited sense, but also “those activities having a substantial relation to interstate commerce.” (Our health-care system is the costliest in the world, and eats up about 18 percent of our economic output, so it’s hard to see how one can argue that it doesn’t have a “substantial relation” to our national economy.)
Then there’s the common conservative argument that the Commerce Clause only covers economic activity, but not inactivity – a claim that is also factually incorrect, but was nonetheless accepted by Henry Hudson, the federal judge who ruled against the government in the Virginia suit. But even if it were true, it’s hard to see the relevance of the argument given the Constitution’s Necessary and Proper clause, which authorizes the government to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.”
So, to recap: Congress is expressly authorized to raise taxes and spend public funds to further the “general welfare” of the nation; it can regulate any area that has a “substantial relation” to interstate commerce, and it can pass any law that is “necessary and proper” to further those enumerated powers.
On its face, there’s nothing in the Constitution constraining the government from enacting its health-care scheme. But the heart of conservative rhetoric these days is that any legislation passed by Democrats is illegitimate and defies the will of the Founders, as channeled by the mystics who lead the Tea Party movement.
That’s apparently the case even when those policies are among those they’ve championed for years based on their own ideological preferences.
By: Joshua Holland, Editor and Senior Writer, AlterNet-January 28, 2011
Clearly Constitutional: A Primer on the Constitutionality of the Affordable Care Act
Nearly three dozen judges have now considered challenges to the landmark Affordable Care Act and the overwhelming majority of these cases have been dismissed. Nevertheless, a single outlier judge in Virginia has embraced the meritless arguments against the new health care law and another judge in Florida also appears poised to break with the overwhelming consensus of his colleagues.
With only a few exceptions, these lawsuits principally challenge the Affordable Care Act’s minimum coverage provision—the provision requiring most Americans to either carry health insurance or pay slightly more income taxes—falsely arguing that Congress lacks the constitutional authority to enact such a provision. It is true that Congress’s authority is limited to an itemized list of powers contained in the text of the Constitution itself, but while Congress’s powers are not unlimited, they are still quite sweeping. There is no doubt that the Affordable Care Act fits within these enumerated powers in three ways, as this issue brief will demonstrate.
Congress has broad power to regulate the national economy
A provision of the Constitution known as the “commerce clause” gives Congress power to “regulate commerce … among the several states.” And there is a long line of Supreme Court decisions holding that Congress has broad power to enact laws that substantially affect prices, marketplaces, or other economic transactions. Because health care comprises approximately 17 percent of the national economy, it is impossible to argue that a bill regulating the national health care market does not fit within Congress’s power to regulate commerce.
Nevertheless, opponents of the Affordable Care Act claim that a person who does not buy health insurance is not engaged in any economic “activity” and therefore cannot be compelled to perform an undesired act. Even if these opponents were correct that the uninsured are not active participants in the health care market— and they are active, of course, every time they become ill and seek medical care—nothing in the Constitution supports this novel theory. Indeed, this theory appears to have been invented solely for the purpose of this litigation. Congress has enacted countless laws which would be forbidden under this extra-constitutional theory:
- Guns: President George Washington signed a law that required much of the country to purchase a firearm, ammunition, and other equipment in case they needed to be called up for militia service. Many of the members of Congress who voted for this mandate were members of the Philadelphia Convention that wrote the Constitution.
- Civil rights: The Civil Rights Act of 1964 compelled business owners to engage in transactions they considered undesirable—hiring and otherwise doing business with African Americans.
- Insurance mandates: The Affordable Care Act is not even the only federal law requiring someone to carry insurance. The Price-Anderson Act of 1957 requires nuclear power plants to purchase liability insurance and the Flood Disaster Protection Act requires many homeowners to carry flood insurance.
- Other mandates: Other laws require individuals to perform jury service, file tax returns, and register for selective service.
The minimum coverage provision is the keystone that holds the Affordable Care Act together
The Constitution also gives Congress the power “[t]o make all laws which shall be necessary and proper for carrying into execution” its power to regulate interstate commerce. As Supreme Court Justice Antonin Scalia explains, this means that “where Congress has the authority to enact a regulation of interstate commerce, it possesses every power needed to make that regulation effective.”
The act eliminates one of the insurance industry’s most abusive practices—denying coverage to patients with pre-existing conditions. This ban cannot function if patients are free to enter and exit the insurance market at will. If patients can wait until they get sick to buy insurance, they will drain all the money out of an insurance plan that they have not previously paid into, leaving nothing left for the rest of the plan’s consumers.
Seven states enacted a pre-existing conditions law without also passing an insurance coverage requirement, and all seven states saw health insurance premiums spiral out of control. In some of these states, the individual insurance market collapsed.There is a way out of this trap, however. Massachusetts enacted a minimum coverage provision in 2006 to go along with its pre-existing conditions provision and the results were both striking and immediate. Massachusetts’ premiums rapidly dropped by 40 percent.
In other words, because the only way to make the pre-existing conditions law effective is to also require individuals to carry insurance, that requirement easily passes Scalia’s test.
The link between the minimum coverage provision and the Affordable Care Act’s insurance regulations also sets this law aside from other hypothetical laws requiring individuals to purchase other goods or services. The national market for vegetables will not collapse if Congress does not require people to purchase broccoli, nor will Americans cease to be able to obtain automobiles absent a law requiring the purchase of cars from General Motors. Accordingly, a court decision upholding the Affordable Care Act would not provide a precedent enabling Congress to compel all Americans to purchase broccoli or cars, despite the law’s opponents’ claims to the contrary.
Congress has broad leeway in how it raises money
Congress also has the authority to “lay and collect taxes” under the Constitution. This power to tax also supports the minimum coverage provision, which works by requiring individuals who do not carry health insurance to pay slightly more income taxes. Taxpayers who refuse insurance must pay more in taxes while those who do carry insurance are exempt from this new tax. For this reason, the law is no different than dozens of longstanding tax exemptions, including the mortgage interest tax deduction, which allows people who take out home mortgages to pay lower taxes than people who do not.
Opponents of the Affordable Care Act respond that the minimum coverage provision somehow ceases to be a tax because the new law does not use the word “tax” to describe it, but this distinction is utterly meaningless. Nothing in the Constitution requires Congress to use certain magic words to invoke its enumerated powers. And no precedent exists suggesting that a fully valid law somehow ceases to be constitutional because Congress gave it the wrong name.
By Ian Millhiser, Policy Analyst and Blogger for the Center for American Progress where his work focuses on the Constitution and the Judiciary-January 18, 2011
The Importance of the Individual Mandate — Evidence from Massachusetts
The most contentious aspect of the Patient Protection and Affordable Care Act (ACA) is the individual mandate requiring that most documented U.S. residents obtain health insurance or pay a tax penalty. Many experts have long advocated a mandate as a central pillar of private-sector–based health care reform. Others, however, have argued that a mandate is not necessary for successful reform.
Proponents of the mandate argue that it is necessary to reduce adverse selection in a reformed nongroup insurance market. Adverse selection occurs when a larger fraction of relatively unhealthy people than healthy people purchase health insurance. It is analogous to the purchase of car insurance only by high-risk drivers (or worse, only by drivers who have just had an accident). However, one of the most popular aspects of the ACA may encourage such adverse selection, since the law prohibits health insurers from discriminating against applicants on the basis of health, either by charging higher premiums for sick people or by excluding preexisting conditions from coverage. Absent other reforms, such regulations would theoretically increase premiums for healthy people and lead them to exit the nongroup insurance market, which would cause premiums to rise even more. Informal support for this hypothesis comes from the fact that the five U.S. states with such regulations (known as “community rating”) are among the states with the highest nongroup insurance premiums.1
Opponents of the mandate counter that community rating may work as long as there are large subsidies that attract healthier enrollees to the insurance pool. Such subsidies include the tax credits that the ACA authorizes for people with incomes between 133 and 400% of the federal poverty level. (The federal poverty level for a family of four is about $22,000 per year.) States with community rating do not generally offer such large subsidies, so we can’t use their experience to predict the effects of national reform minus the mandate. But understanding whether the mandate matters, even with large subsidies in place, is critical for assessing its role in reform.
The early experience with health care reform efforts in Massachusetts may offer some lessons. Massachusetts made heavily subsidized insurance available to residents with incomes below 300% of the federal poverty level for nearly a year before mandating insurance coverage. By examining the characteristics of the subsidized insurance pool before and after the mandate went into effect, we assessed how much of an additive effect the mandate had over that of simply offering subsidized, community-rated insurance.
As part of the Massachusetts reform, the Commonwealth Care program provided free insurance to people with incomes below the federal poverty level from October 2006 onward and for those with incomes below 150% of the federal poverty level from July 2007 onward. In both cases, the state automatically enrolled people who were eligible for free coverage; people in higher income groups could enroll but had to pay premiums. We therefore examined the behavior of Massachusetts residents with incomes between 150 and 300% of the poverty level, who were eligible for subsidies and had to pay insurance premiums that were meaningful but much smaller than those mandated by the ACA.
Using claims data from the Massachusetts Commonwealth Connector, we measured the health mix of the population enrolling in Commonwealth Care according to average age, average monthly health care expenditures, and the proportion of enrollees with a chronic illness. We identified enrollees as having a chronic illness if within the first 12 months after enrollment they had an office visit at which a diagnosis of hypertension, high cholesterol level, diabetes, asthma, arthritis, an affective disorder, or gastritis was recorded.2 Relying on only the first 12 months of claims ensured that our estimates of rates of chronic illness for earlier enrollees, whose claims data covered a longer period, were similar to estimates for later enrollees.
We examined these data for the period from March 2007 (the date of the first available reliable information on people with incomes in the relevant range) through June 2008 (the last month for which we could calculate our 12-month measure of chronic illness). In each month, we measured the health of the enrollees who joined the program.
We assessed the characteristics of these enrollees before, during, and after the phasing in of the mandate. Technically, the mandate went into effect on July 1, 2007. The Connector began a massive public outreach campaign in May 2007, and the number of hits on its Web site peaked around July 1. The penalty, however, was assessed on the basis of insurance coverage as of December 31, 2007. That is, people who purchased insurance in November that began in December did not have to pay the penalty, even if they had been uninsured beyond July 1. The penalty for 2007 was the loss of the individual state income tax exemption, a relatively modest $219. It increased to about $900 in 2008 and was prorated on the basis of the number of months of coverage during the year.
Characteristics of New Enrollees in Commonwealth Care, According to Enrollment Period
Number of Enrollees in Commonwealth Care, According to Chronic-Illness Status
It seems possible that even without the mandate, people with the highest health care costs would enroll first and healthier people would enroll over time. But data on the health status of new enrollees suggest that that was not the case (see graph). At the beginning of the mandate’s phase-in in mid-2007, there was a greater increase in the number of healthy enrollees than in the number of enrollees with chronic illness. When the mandate became fully effective at the end of 2007, there was an enormous increase in the number of healthy enrollees and a far smaller bump in the enrollment of people with chronic illness. The gap then shrank to premandate levels as the remaining uninsured residents complied with the mandate, but clearly the mandate brought many more healthy people than nonhealthy ones into the risk pool. The large jump in healthy enrollees that occurred when the program became fully effective suggests that enrollment by the healthy was not simply slower than enrollment by the unhealthy, but rather that the mandate had a causal role in improving risk selection.
Whether the Massachusetts experience can be generalized to the rest of the country depends in part on the relative sizes of the subsidies provided: the higher the subsidies, the smaller the role for an individual mandate. Under Commonwealth Care, adults with incomes between 150 and 200% of the poverty level were asked to contribute $35 per month. Under the ACA, their monthly contribution would be $51 to $107. At 200 to 250% of the poverty level, the monthly contributions are $70 in Massachusetts and $107 to $171 under the ACA; at 250 to 300% of the poverty level, the contributions are $105 in Massachusetts and $171 to $242 under the ACA. The larger subsidies in Massachusetts would be expected to have a greater effect in inducing healthy people to obtain insurance than the ACA’s smaller subsidies — which suggests that mandating coverage might well play an even larger role in encouraging the healthy to participate in health insurance markets nationally than it has in Massachusetts.
By: Amitabh Chandra, Ph.D., Jonathan Gruber, Ph.D., and Robin McKnight, Ph.D.-New England Journal of Medicine | This article (10.1056/NEJMp1013067) was published on January 12, 2011, at NEJM.org.
Source Information
From the John F. Kennedy School of Government, Harvard University (A.C.), and the Massachusetts Institute of Technology (J.G.) — both in Cambridge, MA; and Wellesley College, Wellesley, MA (R.M.).
References
- Rosenbaum S, Gruber J. Buying health care, the individual mandate, and the Constitution. N Engl J Med 2010;363:401-403Full Text | Web of Science | Medline
- Goldman DP, Joyce GF, Escarce JJ, et al. Pharmacy benefits and the use of drugs by the chronically ill. JAMA 2004;291:2344-2350CrossRef | Web of Science | Medline
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