The fight over the public option has obscured other parts of the bill. Right now the individual mandate is getting a lot of attention. Ezra Klein explains the purpose of the individual mandate and the consequences if it’s removed:
Right now, the insurer sets the rules. It collects background information on applicants and then varies the price and availability of insurance to discriminate against those who are likely to use it. Health-care reform is going to render those practices illegal. An insurer will have to offer insurance at the same price to a diabetic and a triathlete.
But if you remove the individual mandate, you’re caught in the reverse of our current problem: The triathlete doesn’t buy insurance. Fine, you might say. Let the insurer get gamed. They deserve it.
The insurers, however, are not the ones who will be gamed. The sick are. Imagine the triathlete’s expected medical cost for a year is $200 and the diabetic’s cost is $20,000. And imagine we have three more people who are normal risks, and their expected cost in $6,000. If they all purchase coverage, the cost of insurance is $7,640. Let the triathlete walk away and the cost is $9,500. Now, one of the younger folks at normal cost just can’t afford that. He drops out. Now the average cost is $10,600. This prices out the diabetic, so now she’s uninsured. Or maybe it prices out the next normal-cost person, so costs jump to $13,000.
This is called an insurance death spiral. If the people who think they’re healthy now decide to wait until they need insurance to purchase it, the cost increases, which means the next healthiest group leaves, which jacks up costs again, and so forth.
Jonathan Cohn on the argument for the individual mandate:
There’s a moral argument for the mandate: We want a system that includes everybody, and that means everybody paying what they can for coverage. There’s also a more practical rationale. Without a mandate, young and relatively healthy people might decide not to buy insurance, because they figure they’re unlikely to have high medical expenses. (Insurance only works when there’s a large number of people paying in, so there are enough contributions from the majority who are healthy to offset the costs of those who are sick.) Besides, even young and healthy people can end up with high medical expenses, from an accident or a serious disease. Forcing them to get insurance is actually in their own interest.
Cost control:
In theory, reform can reduce insurance premiums in a number of ways. It can wring out waste, by creating standard methods of billing and creating electronic medical records to reduce duplication of services. It can focus payment on treatments–and methods of care–that actually make people better. It can change the tax treatment of health insurance, a move most economists believe will encourage people to seek out more efficient policies. And it can leverage government pricing power, by setting hard caps on premiums or creating a public insurance plan that could help drive down prices.
Most of the bills in Congress take some of these steps. But they don’t take all of them. And even the cost-cutting reforms the bills do include could stand to be stronger. The Finance Committee, for example, cut a deal with both the drug industry and the hospitals under which the industries agreed to put up with relatively modest cuts in exchange for a promise to face no further reductions. Those industries, and other sectors of the health care system, could stand to give up a lot more. The House and Senate Health, Education, Labor and Pensions Committee bills both include a public insurance option. But even the House version–the stronger of the two–wouldn’t save as much money as possible. To be sure, there’s reason to think that the cost-cutting measures still in the bills will do at least some good. But it’s clear they could go a lot farther.
Kevin Drum has a good summary of what’s in the bill:
But if it passes, here’s what we get:
■Insurers have to take all comers. They can’t turn you down for a preexisting condition or cut you off after you get sick.
■Community rating. Within a few broad classes, everyone gets charged the same amount for insurance.
■Individual mandate. I know a lot of liberals hate this, but how is it different from a tax? And its purpose is sound: it keeps the insurance pool broad and insurance rates down.
■A significant expansion of Medicaid.
■Subsidies for low and middle income workers that keeps premium costs under 10% of income.
■Limits on ER charges to low-income uninsured emergency patients.
■Caps on out-of-pocket expenses.
■A broad range of cost-containment measures.
■A dedicated revenue stream to support all this.What’s more, for the first time we get a national commitment to providing healthcare coverage for everyone. It won’t be universal to start, unfortunately, but it’s going to be a lot easier to get there once the marker is laid down. That’s how every other country has done it, and that’s how we did it with Social Security and Medicare, both of which had big gaps in coverage when they were first passed.