Battlepanda: Mandate versus Penalties


Always trying to figure things out with the minimum of bullshit and the maximum of belligerence.

Tuesday, February 05, 2008

Mandate versus Penalties

[First up, before we get going, I just want to say that even though I prefer Clinton to Obama on the issue of healthcare, Obama still has the coveted Battlepanda endorsement (but not my vote since I can't be arsed to vote in the primary from abroad) because of other non-healthcare issues.]

The most persuasive defense of Barack Obama's healthcare policy is summed up by Mark Kleiman:
[T]wo plans, both with guaranteed availability of insurance regardless of health status, both with subsidies. One has a mandate with (as yet undefined) enforcement mechanisms. The other has no mandate but (as yet undefined) financial disincentives for free-riding. Until the two plans are better specified, there is no basis on which to estimate how many people will wind up not buying insurance under either plan, and therefore no basis for any firm estimate of costs to the taxpayer.
Mark (and Dean Baker) acknowledges that the adverse-selection problem have to be dealt with. Clinton does it with a mandate, Obama does it with penalties. Potayto, potahto? Hardly. We all know that young people are disgustingly healthy for the most part. Under a penalties based system, it might be decades until a healthcare catastrophe serious enough to make the now-not-so-young grasshopper wish to come back to the fold. Do you really see Obamacare setting the penalties high enough to recoup the lost premiums of all these years? The longer a person who opts out (and presumably rack up more penalties), the less incentive they have to get back in the system, unless they are really, really sick. Way to collect the sickest of the sick in the system while giving those who remain outside of the system and reasonably healthy growing incentive to stay out with every passing year.

As for pointing out that Hillary have not detailed how the mandate will be enforced, that's true as far as it goes but the problems with enforcing a mandate is hardly insurmountable. We have no problems enforcing that other mandate, social security. In contrast, I find it hard to think of penalty structure that will allow people in and out of the system without some seriously skewed incentives.

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