ObamaCare Individual Mandate Shifts Costs To Others – Pacific Research Institute

ObamaCare Individual Mandate Shifts Costs To Others

The U.S. Supreme Court will hear oral arguments next week on the constitutionality of President Obama’s health reform law. One of the issues the high court will consider is whether Congress can require virtually every American to buy health insurance.

The law’s defenders claim that forcing the uninsured to buy insurance (the individual mandate) is needed to reduce the costs supposedly shifted to the insured by the uninsured who cannot pay the full amount.

The Pacific Research Institute, the Benjamin Rush Society, Docs 4 Patient Care, the Galen Institute, and Ms. Angel Raich filed a brief with the Court in which we demonstrated that the new law will actually increase the cost shifts — contrary to the claims of its defenders.

In other words, the individual mandate will make the problem worse, not better.

How is this possible? The government claims there are 50 million uninsured Americans, many of whom receive medical care that racks up $43 billion annually in uncompensated expenses.

The government further claims that doctors and hospitals recover these expenses by raising prices for patients with insurance, which causes insurers to raise their rates.

The individual mandate was included in the legislation to solve this problem. The government asserts that requiring everyone to have insurance will substantially reduce cost-shifting and lower premiums.

But the government’s own data show the opposite will happen. By 2019, roughly 16 million people out of the 50 million uninsured will be forced into coverage thanks to the individual mandate. Of those 16 million, some 6 million to 7 million will be covered for the first time by Medicaid and, to a lesser extent, the Children’s Health Insurance Program.

Medicaid, however, provides very low reimbursement rates to participating doctors and hospitals — only 58% of those normally paid by insurance companies. Medicaid often doesn’t pay enough to cover a provider’s costs.

Under the government’s logic, hospitals and doctors will be forced to raise prices for the insured to cover their costs, which will be passed along as higher premiums. The total cost shift under Medicaid is substantially greater than for the uninsured who fail to pay their bills.

Moreover, the increased cost-shifting phenomenon used by the government to justify the individual mandate will only grow worse as Medicaid enrollment expands due to the mandate.

Why? These 6 million to 7 million new Medicaid patients will consume significantly more care than they did when they were uninsured. Studies show that the insured use health care services at a higher rate than the uninsured. This is not surprising. After all, these newly-insured patients will have coverage that’s effectively free no matter how often they use it.

In total under the new law, an estimated $10 billion to $12.5 billion in annual unpaid cost will supposedly be shifted to the insured. This is roughly $3 billion more than is cost-shifted without the mandate.

So the individual mandate will fail to accomplish its express purpose — reducing the costs shifted from the uninsured to the insured.

The government claims that the Constitution’s Commerce Clause — which grants the federal government power to “regulate Commerce … among the several States” — empowered it to enact the individual mandate to fix this claimed cost-shifting problem. There is substantial doubt that the cost-shifting rationale justifies making the problem worse.

Equally troublesome, the government can formulate no rationale that would limit its authority to intervene in virtually any aspect of people’s daily lives.

Even if it lacks Commerce Clause authority to impose the individual mandate, the government asserts that the Constitution’s Necessary and Proper Clause provides it the authority to impose the mandate to fix the cost-shifting problem.

The government reasons that, because the new insurance rules it has adopted would destroy the insurance industry without the individual mandate, it is necessary and proper to clean up the mess Congress created.

However, the Necessary and Proper Clause is only the authority for the government to “carry into Execution” an enumerated power like the Commerce Clause.

Fixing self-inflicted wounds from foolish congressional action is not “carrying into Execution” an enumerated power. It is an attempt to use means not provided in the Constitution to reach a result Congress could not reach — and in fact undermined — through the exercise of its constitutionally authorized power.

Under the government’s interpretation, “necessary and proper” could justify government intervention into any part of the American economy notwithstanding the constitutional limits on its power.

The Supreme Court will soon have a historic opportunity to right a legislative wrong. The justices must seize it.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top