Eliminating Individual Mandate Would Come With Strings

With Supreme Court challenges to the individual mandate filed, arguments scheduled to be heard March, and a final decision expected sometime this summer, it seems like a good time to step back and assess what the loss of the individual mandate could mean for health insurance premiums, coverage, and uncompensated care.

That's precisely the analysis applied in a January report from the nonpartisan Robert Wood Johnson Foundation. You may have seen some news stories about the report. The headlines have referenced how premiums could increase by 25% without the Patient Protection Affordable Care Act mandate.

That's certainly eye-catching, but it's only part of the story. A look at some of the other numbers included in the report helps put into perspective why there is so much opposition to healthcare reform and the individual mandate. Here's a hint: Government and employer spending will increase.

With the individual mandate in place, spending will increase because more people will have coverage. But if you're opposed to healthcare reform, you'll focus on the $98 billion increase in government and employer spending and gloss over the estimated 24 million formerly uninsured who will now have health insurance coverage.

Researchers at RWJF compared healthcare spending and enrollment under four ACA scenarios, one with the individual mandate and three without. Here's a look at some of the numbers:

1. The ACA as enacted (including the individual mandate). Compared with the era before healthcare reform, the number of people with private coverage increases by 7.4 million because the ACA significantly increases the demand for private insurance. Medicaid gains 16.4 million members. The number of uninsured is cut almost in half to 26.4 million and the cost of uncompensated care drops by 50% to $39 billion. As enrollment increases, spending is up across the board. Government spending increases by $87 billion to $340 billion. Employers and individuals each spend $11 billion more or $540 billion and $371 billion, respectively.

2. High interest in HIX and enrollment is strong. State-base health insurance exchanges, (HIX) where individuals and small businesses can purchase insurance coverage, are supposed to be up and running by 2014. Private coverage loses 3.6 million members as many shift to HIX; Medicaid posts smaller enrollment gains than with the individual mandate adding about 13.9 million members. Nearly 40 million remain uninsured; the cost of uncompensated care is $59 billion. Without the mandate and with lower enrollment, healthcare spending is down across the board. Government spending decreases by $10 billion. Employers slash spending by $34 billion, and individuals spend $29 billion less.

3. Low interest in HIX and low enrollment. This scenario looks at how a lack of publicity and low carrier participation could affect enrollment and spending. Without the individual mandate, private coverage loses an estimated 10.7 million enrollees; Medicaid loses 2.9 million members. The number of uninsured is 40 million and the cost of uncompensated care remains at $59 billion. The government spends $14 billion less on healthcare. Employers and individuals see their spending drop by $30 billion and $25 billion, respectively.

4. Low interest in HIX, low enrollment, and less subsidized coverage available. Private coverage and Medicaid lose 12.3 million and 3.5 million members, respectively. The number of uninsured grows to 42.2 million and the cost of uncompensated care increases to $61 billion. Without the individual mandate, government spends $26 billion less on healthcare. Employers and individuals see their spending drop by $26 billion and $30 billion, respectively.

If you're opposed to healthcare reform, these are some compelling numbers that appear to make the case to jettison the individual mandate. But here's the deal: it's complicated.

A case in point is the Medicaid Disproportionate Share Hospital payment. A reduction in the DSH payments in the ACA is based on a 45% reduction in the number of uninsured. According to the report, without the mandate, that condition might not be met "in which case there would be no Medicaid DSH savings to the federal government."

Sure my eyes glaze over when I look at all the tables and numbers in the nine-page report, but this is some of the crucial analysis that state governments and Congress need to consider—oops—make that should have considered.

The fate of the individual mandate now sits with nine Supreme Court justices.