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Would Health Reform Work Without a Mandate?

The decision by District Judge Henry Hudson to declare the individual mandate in the health care reform bill unconstitutional was no great surprise.

With a lot of judge shopping going on in the multiple states challenging the law, it was very likely, if not inevitable, that at least one judge would rule that way (after two judges upheld the law and a number of others dismissed the challenges). Hudson’s background and political heritage made the ruling somewhat predictable (as did the backgrounds of the judges who ruled the other way). But interestingly, the ruling was not given stop-the-presses or cable’s breaking-news treatment (the latter is especially interesting because a hangnail suffered by the Senate Minority Leader would get breaking-news crawls on any of the three cable channels).

The main reason for the relative yawn given the story is, of course, that whatever Hudson’s ruling, the issue will be decided by the Supreme Court. And since Hudson severed the individual mandate from the rest of the reform bill and refused to stop the bill’s implementation pending appeal, the practical effect of his ruling is minimal.

But the ruling does raise a potentially huge challenge for the president and Democrats if the Supreme Court ultimately agrees (no doubt on a 5-4 vote) with Judge Hudson. And it raises some fascinating questions for Congressional Republicans as they prepare to take the reins of power in the House. What happens to health care coverage and delivery in the United States if the health care reform bill moves forward, but without an individual mandate? What happens in particular to the planned ban on insurance companies denying coverage based on pre-existing conditions?

We actually know the possible answers to these questions. The single most likely result is that premiums go up sharply for all of us. Without a mandate and without pre-existing conditions, many people will forgo insurance until they really need it — when cancer hits or when there are real signs of problems ahead. Companies have to adjust their risks, and with a different risk pool, they will have to push the costs onto the rest of the insured.

At the same time, many fewer people will be insured, putting much higher costs on hospitals. Once again, sick people will show up at emergency rooms in big numbers, including many who have minor ailments but know that absent other options, they cannot be turned away at the emergency room door.

Perhaps Republicans will be able to change the law to their preferred option, creating more high-risk pools to provide some option for those with pre-existing conditions who otherwise cannot get any insurance. But experience tells us that these will not work very well, with high costs (because they consist of the most ill and the most expensive recipients) leading  either to high public subsidies or levies that are utterly prohibitive for those who need the insurance.

These are among the reasons why so many conservatives had championed an individual mandate — until Obama and Democrats did so. The most efficient way to create a different, more robust and effective marketplace in health insurance, and ultimately in the delivery of health services, is to expand the risk pool by making it universal. 

The Republicans’ other favored option to manage costs is to allow people to buy insurance across state lines.

We have tried this approach before with credit cards. What happened, predictably, is that companies gravitated to the state with the most lax requirements, and the result was something I and millions of others experienced: Be a day late with your minimum payment and you are hit not just with a stiff penalty but huge interest rates on your balance, including not just the amount due with the bill but on a much larger amount from your charge history. The patent unfairness of these and other practices led to sweeping credit card reform in the 111th Congress.

This “race to the bottom” would just as predictably hit the insurance market, with companies going to the states with the easiest requirements and laxest regulations, and people discovering only after they have insurance that it doesn’t cover many things they were sure were required.

I was sorry that the exchanges included in the reform legislation, which Alice Rivlin has called the best chance to create a true private market in the health arena, did not include a national exchange, which would have been the best way to accomplish the Republicans’ expressed goal. It would be a good reform to pursue in the 112th Congress, and there are others.

It will serve no one’s interests to fight over dismantling reform, by killing it outright or crippling its implementation, instead of having a real conversation about achieving our goals of a strong and equitable health care system. And a voting public that reacted against Democrats because they turned their focus from jobs to health policy may well have the same response to Republicans.

Another set of events in recent days has made it clear that even if Republican leaders succeeded in their goal of erasing the health care reform act, there will be huge problems and turmoil ahead in the health arena — problems that have nothing to do with what they call Obamacare.

It turns out that Rep. Michele Bachmann (R-Minn.) was right when she said that if Obamacare passed, there would be death panels. But they are coming from Republican governors and state legislatures.

In Arizona and Indiana, these political figures are struggling with a sluggish economy, the loss of stimulus money, the slowdown in revenues, the need to balance their budgets and the inexorable growth in Medicaid costs. In Arizona, the rash decision to summarily cut off funding for organ transplants from dying patients has raised a ruckus. In Indiana, it was denying a 6-month-old a life-saving treatment that has worked in 96 percent of the cases tried, on the grounds that it was an “experimental” application.

Whether you admire the health care reform plan or not, there were compelling reasons to grapple with the entire complex system. We know costs will continue to grow sharply and that many more excruciating decisions — yes, rationing decisions — will be made by states, insurers, doctors, hospitals and others, with or without Obamacare. And without, the challenges and decisions might be even more difficult.

Norman Ornstein is a resident scholar at the American Enterprise Institute.

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