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Friday, March 10, 2017

The AHCA’s Mandate Replacement Doesn’t Make Sense

Aaron Carroll:

The AHCA’s mandate replacement doesn’t make sense to me: ...The Republicans hate the individual mandate. I get that. I don’t necessarily understand their rationale, but I accept it. They also, however, understand the need for some sort of carrot/stick to get healthy people to buy insurance so that we don’t get adverse selection and see the private insurance market enter a death spiral. So they need to replace it.
We have discussed this before. There are many ways to solve this adverse selection problem without a mandate. ...
Moreover, the incentive is totally in the wrong direction. The individual mandate punishes those who don’t buy insurance – every year. As long as I remain uninsured, I will be penalized. I will be hit again and again, until I buy insurance. That’s a stick.
The new AHCA penalty works in the opposite direction. Once I’m out of the market, I’m left alone. It’s not until I re-enter that I’m hit with the penalty. The longer I stay out, the longer I avoid the pain. It’s an inducement to remain uninsured.
We know what needs to happen to reduce adverse selection. We need to make the carrots and/or sticks stronger. This seems to do the opposite. I don’t get it.

    Posted by on Friday, March 10, 2017 at 12:26 PM in Economics, Health Care | Permalink  Comments (68)


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