With conflicting rulings about the constitutionality of the individual mandate in the Affordable Care Act (ACA), we are left to wonder: what would the ACA look like if its individual mandate was dropped? A new report using the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM) shows that the number of uninsured would be cut by more than half with the mandate, but by only about 20 percent without the mandate. Uncompensated care would decline by $42.4 billion under the ACA, but only by $14.7 billion under reform without a mandate because of the large number of people remaining uninsured.
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Few provisions of the Patient Protection and Affordable Care Act (ACA) have been as controversial as the individual mandate. Opponents of the mandate see it as a major cost to families who would rather spend their income elsewhere and a significant threat to individual freedom. Supporters view the mandate as essential to market based reform; without it, many healthy people would remain without insurance coverage, premiums for individuals and employers would escalate and insurance markets could become unstable. When the uninsured who can afford premiums do become ill, unaffordable health care costs often get shifted onto the rest of society. In this brief, we compare estimates of what costs and coverage for the nonelderly population would be under the ACA to a scenario in which the individual mandate is eliminated, but all other provisions of the ACA remain unchanged. This is what could happen, for example, if the legal challenges to the mandate were to succeed. For ease of comparison, these scenarios are simulated as if they were fully implemented in 2010.
In our simulation results, we find that:
The bottom line is that the individual mandate is an essential component of the overall package, working with the Medicaid expansion, exchanges, premium subsidies, and market reforms to achieve the goal of greatly reducing the number of uninsured. There would be 17.8 million more people left uninsured after reform if the individual mandate were eliminated, with relatively little reduction in government spending. By requiring individuals who can afford it to contribute to the cost of the health care services they consume, the individual mandate uses government funds for reducing the number of uninsured more efficiently. The finding that uncompensated care costs are much higher without the mandate suggests that populations that would be uninsured without the mandate are essentially free riders shifting the costs of of care they inevitably need onto the rest of society.
End of excerpt. The entire brief is available in PDF format.
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