US Elections

Who's affected if the individual mandate falls?

By Luke Freedman in Sydney, Australia

28 June 2012

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In early February Mitt Romney stirred up a bit of controversy with his comment that “I’m not concerned about the very poor. We have a safety net there.” Romney caught a lot of flak for his remark, but the gaffe could become oddly descriptive of the American healthcare system if the individual mandate gets struck down but the rest of the law is upheld.

The Affordable Care Act requires insurers to offer a certain baseline package and prohibits them from discriminating against those with pre-existing conditions. However, this sort of regulation creates an adverse selection problem with sick people rushing to buy insurance and healthier individuals opting out of the system and driving up premiums. The goal of the mandate is to bring healthy people into the insurance market in order to bring down the costs of insurance. If the Court strikes down the mandate it’s unclear whether the system can still work, as many health experts believe that the cost of insurance would go through the roof. If that’s the case, many aspects of the law would need to be revised and the ambitions of the bill scaled down.

However, the ACA also extends coverage through an unrelated expansion of the Medicaid program. Previously, Medicaid was a means tested program available to select groups below the federal poverty level. Under the ACA, everyone up to 133 per cent of the FPL is now eligible.

There’s a possibility that this part of the law could get struck down as well. Medicaid is jointly funded at the state and federal level with states opting into the system under the agreement that they spend federal funds as directed. Under the ACA, the federal government is at first providing all of the funding to cover new Medicaid recipients and then will transition to a system where states pick up 10 per cent of the tab.

Some states have argued the system is unfairly coercive, claiming that they almost have to agree to the new terms given how much they stand to lose by dropping out of the Medicaid system. Still, I’d be pretty surprised if the Court accepted this argument. It’s hard to see how it’s unfairly coercive for a parent to offer to pay 90 per cent of their daughter’s college tuition provided she covers the rest. Tellingly, none of the lower courts have found the Medicaid expansion unconstitutional.*

So if the Court were to strike down the individual mandate but leave the rest of the law intact, where it would leave us? All individuals up to 133 per cent of the poverty line would be insured. Those over 65 would be insured through Medicare. Those who are rich will in most cases be able to get insurance regardless. Those left in limbo will be lower and middle class Americans.

I would never wish upon anyone the hardship and uncertainty that comes with living near the poverty line. These Americans face challenges that few can even begin to understand. It’s interesting though that this group may end up with more security when it comes to healthcare than many Americans who are more economically well off. The ACA will likely create a more comprehensive insurance program for poorer Americans, but in the end it could have much less to offer others facing the continued squeeze of rising healthcare costs.

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*Still, health policy expert Larry Gostin did say while at the US Studies Centre that conservative superlawyer Paul Clement told him that the Medicaid expansion could be the sleeper argument.

Tags: Affordable Care Act, Health Care, Patient Protection And Affordable Care Act, Supreme Court

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