CBO Weighs In: Insurance Costs Up and Coverage Down Without Individual Mandate

Today’s Managing Health Care Costs Indicator is 16 milllion

The CBO put forward its estimates of the impact of eliminating the individual mandate – the slides are at this URL

The CBO estimates that 16 million fewer people would have health care coverage in 2021 if the individual mandate is eliminated .  The deficit would be $282 billion lower over the decade (the net of $149 billion less Medicaid spending, business and exchange subsidies, loss of penalties, and higher tax revenue as there are fewer claiming health care deductions.

However, the cost of purchasing insurance in the nongroup pool would go up a whopping 15-20% - largely because those likely to opt out of health insurance are likely to be the healthiest.

Two observations.  Some have suggested that the cost of health care reform has gone up substantially (as much as doubled) since the last estimates.  Ezra KIein shows that this is false - the only increased cost is higher subsidies due to just how bad the Great Recession has been. Beware comparisons of different years, especially when the earlier estimate included pre-implementation years!

The second observation is that government expenditures of  $282 billion to have 16 million additional insured Americans at the end of 10 years is a good deal. (I’d like to calculate how much this is per person insured per year, but I can’t find the year-by-year information among the CBO publications.)  Some of those who will be insured under the mandate but would go “naked” absent the penalty will be healthy. But remember that health insurance is wealth transfer from the healthy to those with illnesses – so we NEED to get healthy people to participate in health insurance.   Health insurance cannot be affordable if only the sick participate.

The mandate is associated with very low opt-out rates in Massachusetts, despite a very small penalty.   Supreme Court has oral arguments in just a few days.