by Mitch Kokai
Senior Political Analyst, John Locke Foundation
It is not the case, as Democrats insist, that Republicans are simply repealing Obamacare without having given sufficient thought to what ought to replace it. Congressional Republicans finally seem to have learned that their prior strategy — simply insisting that a set of incoherent policies causing a great deal of stress and uncertainty constituted “the greatest health-care system in the world” and doing nothing more — was a mistake, a critical one.
But there is a problem.
There are two big, important pieces of the Affordable Care Act that will be of concern as Republicans go about replacing it. The first is the so-called individual mandate, which actually isn’t all that much of a mandate but which theoretically requires the great majority of American adults to purchase a federally defined minimum level of health insurance. The second is the rule requiring that insurance companies cover “preexisting conditions,” which mandates that U.S. insurance companies participate in the fantasy that we can insure against events that already have happened.
The preexisting-coverage rule defies economic reality (also space-time reality) and hence is the popular part of the law. The individual mandate is less popular, because people do not like being told what to do by the government, especially if it costs them money.
You can see the obvious problem here.
We have to have an individual mandate because we want a preexisting-coverage mandate. If insurers have to pick up the expenses for everyone who shows up at their door with lung cancer or HIV or severe diabetes, that has to be paid for. The only way to pay for it is a rule that requires everybody to have insurance; otherwise, economic self-interest ensures that most people have no reason to pay for insurance until they become sick, meaning that they pay no premiums until they have expenses that will far exceed them. An insurance market made up exclusively of sick people is financially unsustainable.