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The optimality of the national health insurance 'must purchase' mandate


The health care mandate was defended as a kind of technocratic marvel -- the only policy capable of preventing the complex machinery of reform from leaking smoke and spitting lug nuts.

But the mandate is actually a more political sort of marvel. In the negotiations over health care reform, it protected the Democratic bill on two fronts at once: buying off some of the most influential interest groups even as it hid the true cost of universal coverage.

The mandate offered the interest groups what all entrenched industries desire: a fresh and captive market for their products. For the insurance companies, it promised enough new business to offset the cost of covering Americans with pre-existing conditions. For the health care sector as a whole, it guaranteed that disposable income currently being spent on other goods and services would be spent on its instead.

This explains why the health care bill was ultimately backed by so many industry lobbying groups, from the Pharmaceutical Research and Manufacturers of America to the American Medical Association. It explains why the big insurers, while opposing the final legislation, never attacked it as vigorously as they did Bill Clinton's ill-fated reform effort.

At the same time, by requiring the private purchase of insurance, the mandate kept the true cost of the health care expansion off the government's books, and largely out of the Congressional debate. As the Cato Institute's Michael Cannon has noted, during the Clinton era the Congressional Budget Office scored an individual mandate as a form of government spending, which pushed the official cost of the Clinton bill into the trillions. But the Obama White House was savvier in its mandate design, and the C.B.O. was more compliant in its scoring. As a result, a bill that might require over $2 trillion in new health care spending -- private as well as public -- over its first decade was sold with a $900 billion price tag.

So the mandate was politically brilliant, in a sense.

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