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Tax reform might tell us whether the individual mandate really works
Few elements of the Affordable Care Act (ACA) inspire as much controversy as the individual mandate—the requirement that all individuals buy health insurance or face a government-imposed penalty. Despite its central role in ongoing policy debates, a stubborn fact has remained true: We don’t really know whether it did much to expand insurance coverage. For better or for worse, we may soon have that long-awaited answer.
Sold as a key leg of the proverbial “three-legged stool” of the ACA, the individual mandate was meant to aid the nascent individual market by ensuring all consumers enrolled—not just the sickest. The Obama administration sold this as a powerful complement to subsidies which lowered insurance prices for many. Importantly, the Congressional Budget Office (CBO) agreed. It estimated that removing this single feature would lead to 16 million fewer insured. Recently, the CBO revised this estimate down by nearly 20%, in part indicating some of the uncertainty involved in estimating the mandate’s effect.
This prediction has stood at the center of nearly constant argument over the past year of unified Republican government. Repealing the mandate was part of a campaign promise nearly a decade in the making, yet doing so would be met with a damning forecast by the CBO. So what to do?
For many the answer was easy. Effectively summarizing a view held by many Republican policymakers, Avik Roy criticized the CBO and its “faith in the individual mandate’s magical powers.” In short, the CBO was simply incorrect.
Unfortunately, adjudicating the conflict between the CBO and its detractors has been difficult. The mandate was one of many features enacted at the same time, meaning we couldn’t easily tell what effect it had in isolation. Our only other evidence comes from the relatively special case of “Romneycare” in Massachusetts. While instructive, extrapolating from the experience of a single wealthy state with a very low baseline uninsured rate can only get us so far.
There is good reason to think we will have a much clearer answer if current tax legislation is ultimately passed. Notably, as part of their tax overhaul, Republicans have included a repeal of the individual mandate. However, don’t expect the individual mandate to be gone for good just yet.
States that like the ACA have an immediate option available to them: They can simply establish their own mandate to purchase insurance. In places like California, where the ACA is relatively popular and successful, there is good reason to expect policymakers to consider this route. Indeed, the calls for such a policy response has already begun in some parts of the country (like Maryland).
With some states ditching the mandate and others likely imposing their own, we may finally have the natural experiment we need. One way or the other, the answer will surely shape health policy efforts in the coming years.