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Frankenstein’s Monster: ObamaCare’s ‘Individual Mandate’

The full implications of requiring Americans to buy health insurance have not been sufficiently appreciated — or feared.

by
John Rosenberg

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October 7, 2009 - 12:59 am
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As the “public option” sinks slowly beneath the waves of public opposition, the “individual mandate” — a federal requirement that every American adult purchase health insurance, or pay a heavy “excise tax” (in the language of the Senate Finance Committee bill) for failing to do so — has become the linchpin of President Obama’s latest health care “plan.” Although this mandate has been heavily criticized on economic, political, and even moral grounds (in 1994 the Congressional Budget Office found it “an unprecedented form of federal action,” comparable only to the military draft, when proposed as a part of HillaryCare), the full implications of its underlying rationale have not been sufficiently appreciated — or feared.

The justification for requiring every American to buy health insurance approved and certified (and perhaps sold) by the federal government is that the uninsured — often referred to as “freeloaders” by defenders of the president’s “plan” — impose unfair costs on everyone else. As Shikha Dalmia wrote recently in Forbes, “Obama’s whole argument for the mandate is based on the idea that uninsured folks impose an unacceptable financial burden on the rest of us when they land in emergency rooms and get care they can’t pay for.”

President Obama has leaned heavily on this justification in virtually (maybe literally) all of his recent health care pontifications. In his speech to the joint session of Congress a few weeks ago, for example, he claimed that “those of us with health insurance are also paying a hidden and growing tax for those without it — about $1,000 per year that pays for somebody else’s emergency room and charitable care.”

This freeloader argument has been a constant refrain. Thus, on June 11 the president said in Green Bay, Wisconsin, that

the average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance. So you’re already subsidizing other folks; it’s just you’re subsidizing the most expensive care. You’d be better off subsidizing to make sure they were getting regular checkups. We’re already paying for it. It’s just it’s hidden in your premiums.

A few days later, in remarks to the American Medical Association in Chicago, he said the same thing:

Each time an uninsured American steps foot into an emergency room with no way to reimburse the hospital for care, the cost is handed over to every American family as a bill of about $1,000 that’s reflected in higher taxes, higher premiums, and higher health care costs. It’s a hidden tax, a hidden bill that will be cut as we insure all Americans.

Indeed, Obama’s proposed health care reform may qualify as the only example in history where spending an additional trillion dollars or so is portrayed with a straight face as a tax cut.

As I’ve mentioned, this freeloader argument has been severely criticized on various grounds, including that it is factually challenged. Shikha Dalmia, quoted above, notes that “uncompensated care costs only about $40 billion annually — or about 2% of the country’s $2.2 trillion health care spending. That’s less than what department stores lose to shoplifting every year.” Similarly, a study by the Urban Institute for the Kaiser Family Foundation found the president’s claims “unconvincing.” Quoting that same study, Jacob Sullom notes that “the true annual cost per family is more like $200, with uncompensated care accounting for ‘less than 1 percent of private health insurance costs.’” There are many other factual criticisms, such as that people without health insurance impose no costs on others if they pay for their own medical care.

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