The Senate tax bill may be taking a whack at the individual mandate for health insurance. There are two very different analysis of the impacts. The Congressional Budget Office (CBO) thinks that this is a big deal. They project a savings of $338 billion dollars over ten years and 13 million more people being uninsured. The savings is a direct function of lost enrollment. Standard and Poor does not think this is a big deal.
We estimate that repealing the penalty will increase the number of insured by about 3 million-5 million by 2027, and save the federal government about $60 billion-$80 billion over the next 10 years. Our impact analysis of this repeal is lower than the recent analysis published by the independent Congressional Budget Office (CBO; November 2017). The CBO has forecasted 13 million more uninsured in 2027 and $338 billion of reduced federal deficit over the next 10 years. The key difference between our estimate and the CBO forecast has to do with the Medicaid and Individual insured market segments. “Our estimates are lower because we believe that it is not the mandate penalty, but the intrinsic financial incentives available to most eligible enrollees that drive enrollment in these two markets,” said S&P Global Ratings credit analyst Deep Banerjee.
Fundamentally, the difference lies in how important the “taste for compliance matters” and how many people an analyst will assume will be a reverse Woodworker. In 2012, 2013, 2014, there was a lot of discussion about people who had always been eligible for Medicaid but were not signed up for Medicaid. Some of them would come out of the “woodwork” to sign up because health care and health insurance became far more salient. The analytical question is how many people who are currently signed up would not sign up absent the mandate.
One of the arguments made by many liberal health wonks is that the mandate is too damn weak. It is 2.5% of income or $695 per year per adult without coverage for the year. It is capped at the price of an average Bronze plan. There are also numerous exemptions. The biggest exemption is the affordability exemption. The IRS exempts individuals from the mandate if there is no Bronze plan that costs less than 8.05% of income.
On Healthcare.gov for 2018, this means the mandate exemption has wildly variant thresholds. Almost the entire country, a single 40 year old has to pay the mandate tax if they make more than $100,000. However, 566 counties on Healthcare.gov have a mandate exemption less than 400% FPL ($48,080 for a single individual). Here the calculation is whether total healthcare costs plus the mandate penalty are less than the total premiums even after receiving subsidies. Approximately another 1,000 counties have a mandate exemption ranging from 400% to 500% FPL ($60,100). This is well over half of the Healthcare.gov counties. Another 500 counties have a mandate exemption up to 600% FPL. The rest of the Healthcare.gov counties have exemptions at 600%-1,200% FPL for a single 40 year old.
If we only look at 21 year olds, the mandate has bite at lower incomes as premiums are geared at a 3:1 ratio. The mandate is almost toothless for 64 year olds because of the 3:1 premium gearing.
This is a behavioral economics problem more than a simple cost accounting problem as the mandate is fairly weak and where it is pervasive, there are significant subsidies available. I don’t know how much of an impact removing the mandate is on a psychological basis.
Raven Onthill
I think the real mandate if you’re 64 is the risk of serious illness and medical bankruptcy.
BTW, your “blockquote” tag didn’t take.
dr. bloor
I don’t know either, but I’m also not particularly interested in reading the arguments of a company that went balls-deep on giving shitty mortgage backed securities AAA ratings less than a decade ago.
Raven Onthill
See you got the “blockquote” tag, thanks. BTW, S&P editors, the past tense of “forecast” is “forecast.”
Kraw…
Another Scott
Late July there were stories that Price was not going to enforce the Individual Mandate via his discretion as HHS Secretary. (No links because they either go to autoplay videos (HuffPo) or to RWNJ sites.) It was in the news briefly, then seemed to disappear.
Your numbers seem to indicate it’s not much of a big deal, but wasn’t it going to happen anyway independent of any legislation? Couldn’t the HHS Secretary waive it anyway?
I worry about the death-of-1000-cuts thing, and we know that they will keep trying to kill it outright if they think they have a way to do it. We have to fight them every single day, but we have to be smart about it. Outrage fatigue is a real thing, and if the CBO numbers are overstated then we need to adjust our arguments accordingly.
Thanks.
Cheers,
Scott.
Weaselone
I have actually been thinking along the same lines as SP especially given the recent high level of enrollment despite the Trump Admin tossing as many wrenches into the process as possible. What if they eliminate the mandate and nobody gives a fuck?
p.a.
Psychologically, how many who can afford it without mandates, supplements etc. and who are in good health and expect to stay in good health will stay in part because their wetworks (as Ritholtz says) have come to terms with being insured? Behavioral economics, psychology, philosophy; quite an experiment: a 320,000,000 subject human study. Who says Republicans are anti-science?
Major Major Major Major
My untrained, nonexpert gut feeling is that the mandate has never been so persuasive that removing it would lead to 13 million people choosing to be uninsured, but what do I know.
Humdog
I never understood why CBO estimated so many would drop coverage when there was no mandate. The 13 million drop guess means that 65 percent of the 21 million in individual market plans never wanted insurance at all and were forced into it by a relatively minor penalty. I could not wrap my brain around the fact that what we all saw as a great opportunity for people who were left out of employer plans was actually something 65% were dragged into against their wills.
rikyrah
don’t trust Standard and Poors.
I trust the CBO.
schrodingers_cat
@Major Major Major Major: It has to do with information asymmetry, Market for Lemons, without the mandate only the sick will get insurance and the premiums will rise and eventually the market will collapse.
Major Major Major Major
@schrodingers_cat: ok, fine, I’m trained in the basics of economics, I knew that. I just don’t personally get the feeling that a weak mandate is the factor pushing 13 million people into the market.
This gut feeling is worth what you paid for it, since I’m a digital librarian and not a healthcare economist.
Sab
I remember a few years back when all the networks covered a case of some healthy young woman in Virginia who had decided for whatever reason to go with out health insurance. She went out to go on a hike and was bitten by a cotton mouth snake in the parking lot. Her leg swelled up to four times its normal size, she was hospitalized and was looking at medical bills over 50 thousand dollars (antivenom is expensive!)
I saw this as a case in point about why even healthy youngsters should have health insurance. All the media covered it relentlessly. Usual question is why is antivenom so expensive (because somebody is actually having to milk a snake’s poisonous fangs for its venom). No media except the UK Guardian asked the obvious to me question about why the fuck didn’t she have health insurance.
Young people get hurt and injured. Some get bitten by snakes. Some get in traffic accidents ( if you are driving your car in an accident, your car insurance doesn’t cover. Your health insurance does. So you had better have it).
I am so fucking tired of the media saying that young people don’t need health insurance. They do. Stuff happens. The insurance is cheap for them, but if stuff happens they face a life altering change in their credit ratings.
Another Scott
@Sab: Yup.
The wife of a friend at work had a sudden, horrible reaction to a flu vaccine and was basically disabled afterwards. It happened when she was in her 40s, IIRC.
Bad, unpredictable, far-end tail of the Gaussian, stuff happens. Everyone needs insurance.
Cheers,
Scott.
schrodingers_cat
@Major Major Major Major: You could be right too. Economics is full of untested sweeping generalizations, whatever it is it ain’t physics. I think the risk and uncertainty that repealing the mandate will bring is not worth it, unless your explicit goal is sabotage.
Major Major Major Major
@schrodingers_cat: well of course it’s not worth it! I figured that went without saying.
Sab
@Another Scott: @Another Scott: I am also so old that I remember that when I got out of high school in the seventies insurance companies did not have to and would not write insurance for single women.
Sab
@schrodingers_cat: @schrodingers_cat: -You are such a physics snob. Just because you are usually right is no reason to be so stuck up about it.
schrodingers_cat
@Sab: You mean always right, isn’t it.
-physics snob.
StringOnAStick
I know a woman who refuses to get insurance because she says the subsidy isn’t generous enough for her so she can’t afford it; she’s single, early 60’s and probably makes about $35,000/year in the expensive rent area of Denver. She also refuses to do any wellness visits because “what you don’t go looking for, you won’t find”. WTF you say? She has no family other than a rather lost 40 YO son and I think she’s realized that she can’t afford to live for very long after she can no longer work so she’s making sure “nature takes its course” I guess. Certainly not how it’s done in Germany, France, etc.
TenguPhule
@Major Major Major Major:
Herd effect.
If lots of people are getting signed up, it encourages more people to sign up too.
And you’d be surprised at how much effort people will go through just to avoid paying a tax penalty.
TenguPhule
@schrodingers_cat:
Maybe right if we invoke quantum physics.
Brachiator
For 2017, the affordability exemption is based on 8.16% of household income.
Note that household income is not the same thing as Adjusted Gross Income (AGI). See healthcare.gov for details
schrodingers_cat
@TenguPhule: Even quantum mechanics is always right. There is no maybe, about it. It works. When it doesn’t agree with experiment we go back to the drawing board, unlike e-con.
TenguPhule
@schrodingers_cat: I was just poking fun about quantum states.
schrodingers_cat
@TenguPhule: I know, but pedants got to be pedantic.
Clem
Guessing you aren’t using the free public version of tableau? With the free public version, is it still possible to share working tableau maps with others? Someone Doesn’t want to charge down the wrong path. Asking for a friend.