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The Health Care Mandate Really Was a Mistake

If Democrats had it to do all over again, would they really frame the individual health-insurance mandate in the 2010 health law in the way that they did? In “The Mandate Miscalculation,” a recent article I wrote for The New Republic, I argue that Congress and the president made three miscalculations in one—a miscalculation about the courts, another about the politics, and a third about the policy itself. But my good friend Jonathan Cohn will have none of it and insists that Democrats got the mandate right.

I understand the impulse to defend the Affordable Care Act when it is under unrelenting attack. But a mistake is a mistake, and supporters of the law—particularly Democratic candidates facing tough races in 2012—need to think through alternatives to the mandate in view of both the upcoming Supreme Court ruling and this fall’s election.

Whether the Court will overturn the mandate, we don’t know. But in drafting the Affordable Care Act, Democrats put at unnecessary risk their most significant domestic achievement of the past three years. Keeping the same policy, they could have framed the mandate so it fell unambiguously under the government’s taxing power. Even just labeling the penalties for failing to insure a “tax” would have strengthened the argument for upholding the law and greatly increased the odds that the Court would invoke the 1867 Anti-Injunction Act, deferring the case until 2015, when the penalties would first be imposed. And Democrats could have avoided any constitutional challenge by adopting the alternative that I proposed, which eliminated the mandate by providing for a long-term (five-year) opt out from both the law’s benefits and its penalties.

That the mandate was a political as well as a legal miscalculation should also now be clear. When Congress passed the Affordable Care Act, many observers expected that controversy would die down, and the law would soon be as widely accepted as Medicare is. That hasn’t happened. Why not?

The mandate is one reason why the law’s opponents have been able to sustain their cause. No other provision could have provided as effective a basis for both the legal challenges to the law and the political campaigns against it; voters in 14 states have passed amendments to their state constitutions prohibiting an individual mandate. Even though such amendments have no legal force, the campaigns and court cases have kept public opinion focused on the least popular aspect of the Affordable Care Act, dragging down overall support and maintaining the high-intensity opposition to the law on the right (in contrast to the tepid and ambivalent support for it on the left).

But did Democrats have to accept a backlash against the mandate because there was no other policy choice? That is the premise of the mandate mythology, and the heart of it is a fiction about the mandate itself.

The word “mandate” suggests to most people that a failure to comply will bring serious consequences. But the law explicitly bars the government from the means available to the IRS to collect taxes: the government cannot threaten to seize property, garnish wages, or levy any other source of income, much less impose criminal penalties for failing to insure. What can it do? Withhold a tax refund. In other words, the mandate is enforced only by a forfeiture—the forfeiture of a tax refund, if someone who fails to insure is due a refund.

Jonathan identifies my alternative as a “soft” mandate, but he has it backward; the current law has a soft mandate. My alternative is both more libertarian and more tough-minded. Someone who doesn’t insure would have two alternative: 1) taking the opt out and forfeiting five years of benefits under the law (likely to be worth more than one year’s tax refund); or 2) going year-to-year and paying substantially higher penalties than the law now calls for--penalties that would have the legal status of a tax and be collected by the IRS as it collects other tax obligations.

Evidence from studies in behavioral economics shows that people are very reluctant to take opt outs; I doubt that many would sign away their rights to five years of benefits under the law. But the year-to-year alternative would be more costly than under current law: increased penalties—possibly twice as high—fully backed by IRS collection procedures. It may seem counterintuitive, but combining the long-term opt out with higher, enforceable penalties should generate higher levels of insurance coverage than can be expected under the law’s weak mandate

Jonathan quotes the economist Jon Gruber as saying that “no alternative to the individual mandate can cover more than two-thirds as many uninsured as the Affordable Care Act does as passed by Congress and enacted into law.” Gruber’s estimates of the mandate’s effects, however, are higher than those of the Congressional Budget Office and far higher than those in a recent article in Health Affairs by John F. Shiels and Randall Haught. Gruber does not appear to have made any allowance for the lack of enforcement of the mandate. Moreover, he cannot possibly have evidence on all possible alternatives to the individual mandate, and in his one reference to my proposal, he has substantially misrepresented it.

Jonathan rests his case for the mandate on the economic simulations by the CBO and Gruber. But such models depend entirely on the assumptions, and there is no prior mandate with so little enforcement that provides a basis for making much more than guesstimates.

With the current non-mandatory mandate, the Democrats managed to get themselves the worst possible result: a law that enflames the opposition on the basis of overreaching federal power but may not work in practice because there is no real power behind it. Whether or not the Court strikes it down, the individual mandate has been one of the most serious political and policy mistakes of recent decades.

Paul Starr is a professor of sociology and public affairs at Princeton University and the author of Remedy and Reaction: The Peculiar American Struggle Over Health Care Reform.