I was asked a couple of questions about the new Congressional Budget Office estimate of the impacts of repealing the individual mandate. I’ll walk through them as best I can:
■ Federal budget deficits would be reduced by about
$338 billion between 2018 and 2027 (see Table 1).
■ The number of people with health insurance would
decrease by 4 million in 2019 and 13 million in 2027
The 13 million people without insurance in 2027 are broken down as about 5 million fewer people with Medicaid, 5 million fewer people in the individual market and about 2 million people losing their insurance through work.
So what’s happening?
The deficit reduction is straightforward. As fewer people are covered, the federal government spends less on healthcare. It spends less on Medicaid, it spends less on advanced premium tax credits and it receives slightly higher income taxes as more compensation is being paid in cash instead of health insurance.
The CBO model thinks that the individual mandate pushes people to be more engaged with health insurance. It projects a reverse woodworker effect for Medicaid. People who don’t think that the are qualified for Medicaid won’t go to an Exchange and enter their information. If they went to the Exchange and entered their information, they would be directed to enroll in Medicaid. As time goes on and more people who are currently on Medicaid churn off, there won’t be normal in-flows. This is how Medicaid enrollment decreases.
The individual mandate has a “taste for compliance” . The existance of the mandate pushes relatively healthy people to sign up. As relatively healthy people don’t buy insurance, average claims costs increases which means premiums increase. Subsidized buyers are protected. Non-subsidized buyers are hit in the nose with the price increase. Some of them will be priced out of the market.
Finally, the drop in employer sponsored insurance (ESI) comes from some firms dropping coverage as they don’t need to make their compensation package as attractive.
Those are the trade-offs involved in the individual mandate.