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Abstract
With conflicting rulings about the constitutionality of the individual
mandate in the Affordable Care Act (ACA), we are left to wonder: what
would the ACA look like if its individual mandate was dropped? A new
report using the Urban Institutefs Health Insurance Policy Simulation
Model (HIPSM) shows that the number of uninsured would be cut by more than
half with the mandate, but by only about 20 percent without the mandate.
Uncompensated care would decline by $42.4 billion under the ACA, but only
by $14.7 billion under reform without a mandate because of the large
number of people remaining uninsured.
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Summary
Few provisions of the Patient Protection and Affordable Care Act (ACA)
have been as controversial as the individual mandate. Opponents of the
mandate see it as a major cost to families who would rather spend their
income elsewhere and a significant threat to individual freedom.
Supporters view the mandate as essential to market based reform; without
it, many healthy people would remain without insurance coverage, premiums
for individuals and employers would escalate and insurance markets could
become unstable. When the uninsured who can afford premiums do become ill,
unaffordable health care costs often get shifted onto the rest of society.
In this brief, we compare estimates of what costs and coverage for the
nonelderly population would be under the ACA to a scenario in which the
individual mandate is eliminated, but all other provisions of the ACA
remain unchanged. This is what could happen, for example, if the legal
challenges to the mandate were to succeed. For ease of comparison, these
scenarios are simulated as if they were fully implemented in 2010.
In our simulation
results, we find that:
- The ACA would leave 8.3 percent of nonelderly persons without
insurance coverage. If the mandate were eliminated, 14.9 percent would
be uninsured. Currently, without the main coverage reforms of the ACA
being implemented, an estimated 18.6 percent are uninsured. Thus, the
number of uninsured would be cut by more than half with the mandate but
by only about 20 percent without the mandate.
- Government spending on acute care for the nonelderly would increase
by $69 billion under the ACA but would still rise by $50 billion under
reform if the mandate were eliminated (multiyear provisions that offset
these cost increases, such as Medicare and Medicaid cost savings and
other cost-containment programs, were not simulated). This occurs
because the government is still covering the less healthy uninsured
without the mandate.
- Government funds used to reduce the number of uninsured would be
used far more efficiently with the mandate than without it. Government
spending per newly insured person would be $2,451 under the ACA, in
contrast to $4,795 without the individual mandate.
- Total health care spending by employers is largely unchanged under
the ACA from what it is today and decreases by 7.2 percent under a
reform with no mandate, but this is largely because fewer people would
have employer-sponsored coverage without the mandate.
- Individual spending would be somewhat higher under the ACA than with
no reform, almost all because so many more people gain coverage and
begin to make payments toward premiums. Some also pay individual mandate
penalties. Were the mandate to be dropped, individual spending would be
lower than it is without reform because fewer would be covered and there
would be no penalties, but also because many would save post-reform
because of lower premiums in the exchange.
- Uncompensated care would decline by $42.4 billion under the ACA, but
by $14.7 billion under reform without a mandate because of the large
number of people remaining uninsured. Reductions in uncompensated care
would allow the federal and state governments to reduce spending on
programs that now support the uninsured (not included in the government
spending item included above) and could also result in lower private
premiums and higher provider revenue.
- We estimate that overall health system spending would increase by
$53.1 billion, or 4.5 percent, under the ACA and would decrease by $10.2
billion or 0.9 percent, if the mandate were dropped. Note that our
health care spending results are single-year estimates based on 2010
costs. Multiyear provisions that would offset these costs, such as
Medicare and Medicaid savings and cost-containment, were not
simulated.
The bottom line is that the individual mandate is an essential
component of the overall package, working with the Medicaid expansion,
exchanges, premium subsidies, and market reforms to achieve the goal of
greatly reducing the number of uninsured. There would be 17.8 million more
people left uninsured after reform if the individual mandate were
eliminated, with relatively little reduction in government spending. By
requiring individuals who can afford it to contribute to the cost of the
health care services they consume, the individual mandate uses government
funds for reducing the number of uninsured more efficiently. The finding
that uncompensated care costs are much higher without the mandate suggests
that populations that would be uninsured without the mandate are
essentially free riders shifting the costs of of care they inevitably need
onto the rest of society.
End of excerpt. The entire brief
is available in PDF format.