Thursday, March 25, 2010

Mandating the American Dream at $1.90 per Day

The part of the new health care reform act signed by President Obama on Tuesday that seems to be generating the most controversy is the individual mandate to buy health insurance.

The idea is that if you do not have health insurance, you are a burden on the system. And you have to pay a penalty tax for $695 a year. And, by the way, since you don't have to pay the tax if buy health insurance, why don't you just do that?

Now $695 sounds like a lot of money, but it's only about $57.92 a month or $1.90 a day. Most people can afford that. Buying health insurance costs a lot more than that. But if you pay the $695 you still can have medical bills and still don't have health insurance, so are you getting the message yet? Go buy health insurance.

But the cost of health insurance, particularly for those without jobs, is high. It's also high for people with jobs, but often the employer picks up a big share of the tab which masks the total cost from the employee. One of the biggest shocks of being laid off is the sticker shock on the cost of maintaining one's health insurance.

Often there are few or no affordable choices, and the new health care reform act provides subsidies to help with that. But, still, it's the principle of the thing that has some people up in arms.

Is it Constitutional? Despite all the rhetoric that Americans are being forced to buy a product for the first time in our history, you don't have to buy health insurance. You can pay the tax instead. At least that's the legal argument. We'll see. The state of Massachusetts has an individual health insurance mandate already and that has not been held unconstitutional (but that's a state not the federal government).

Is it good policy? Maybe, if you are trying to fairly allocate the costs of health care across all segments of the populace which may call upon those services. It's better policy than turning away people without insurance at the door of the emergency room.

Is it good for the health care industry? Yes. If you sell health insurance you just got some new customers. If you are a hospital, you just got a broader source of revenue. If you are a doctor with uninsured patients, you are more likely to get paid. There are other provisions of the health care reform act different parts of the industry don't like, but this part it probably likes.

Is it good for people? If you make $250,000 a year, the $695 individual mandate is just another nuisance. You can make back that money in just 1.33 minutes a day, and you probably are exempt because you already have health insurance, the other taxes in the health care reform act are probably your real concern. If you are working a full time minimum wage job for $7.25 an hour, it will take you 23 minutes a day to work off the mandate, likely longer if you buy health insurance, but that may be less depending on how the subsidies work out.

Is it good politics? America doesn't like taxes, and doesn't like being told what to buy, but also doesn't like freeloaders.

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