Senate Republicans have spent most of the past month looking for measures to offset the cost of their enormous tax giveaway to rich households and corporations. They plan to vote on the bill, which is supported by President Donald Trump, Friday.
A few weeks ago, they settled on repealing the individual mandate in the Affordable Care Act, more commonly known as Obamacare. This mandate imposes a monetary penalty on those who cannot prove that they had qualifying health insurance over the past year. If it is repealed, 13 million fewer Americans will have health insurance, according to the Congressional Budget Office (CBO). This provides an offset to tax cuts because many of these 13 million would have received subsidies through Medicaid or the ACA exchanges.
Earlier this year, attacks on key planks of Obamacare prompted a genuine storm of grassroots protest. And Republicans could not even pass a “skinny repeal” of the ACA, a small package of changes that had at its heart a repeal of this same individual mandate.
But fired-up grassroots opposition to House and Senate plans on taxes has been slower to build, even after the Senate adoption of the mandate repeal. This is likely because the mandate has always been the least popular part of Obamacare. It doesn’t directly provide insurance to anybody and strikes some as paternalistic.
But let’s be clear: Repealing the individual mandate would be a big deal. The mandate is a valuable device for stopping free riders. Obamacare mandated that insurance companies offer insurance to everybody who wants it, with only minimal price discrimination based on age and smoking status. But if a healthy person knows they can buy insurance whenever they want for a given price, they may well decide to only purchase it after they get sick and need coverage.
This would be a big problem for insurance markets, as the pool of covered beneficiaries would be an unhealthy and expensive group. That’s why, for example, the CBO forecasts that repealing the individual mandate would cause premiums in nongroup markets to rise significantly.
Additionally, the mandate provides a hard nudge to people on the fence about getting enrolled in health insurance, including those in nongroup markets but also those who have Medicaid or employer-sponsored insurance. The CBO estimates that of the 13 million people who would lose coverage if the mandate is repealed, seven million are dropping out of Medicaid and employer-sponsored plans. In short, the mandate is a very efficient tool for keeping premium increases in check and increasing enrollment in all types of coverage.
Finally, while the individual mandate repeal is the only plank of the tax bill that directly attacks the ACA, Republicans have made no secret of the fact that after this bill passes, they will point at the resulting deficits to justify cuts in Medicaid and Medicare. This is not idle speculation; the House and Senate passed a budget resolution last month with $1.8 trillion in cuts to both of these programs. The battle over health care won’t end with this tax bill—or anytime soon.
Josh Bivens is the director of research at the Economic Policy Institute.