Senate doctors Tom Coburn and John Barrasso have released a new report on the first 100 days of ObamaCare. Those who are following the debate closely shouldn’t be too surpised by much of what is in there, but if you want many of the criticisms of the new law compiled in one place, you can check it out here.
One point that the report makes is that the penalty for non-compliance with the individual mandate is not set high enough, meaning that most people will choose to pay the fine instead. The problem with this is that those people are likely to be the healthiest, and so when they exit the insurance market, it will drive up premiums on everybody else -which will lead more people to exit the market, and even higher premiums. It’s a process known as the death spiral. In the absence of the mandate, healthy people have every incentive to wait until they get sick or injured to purchase insurance.
The report reads:
To see an example of what this will look like, one only need consider what is happening in Massachusetts – the only state with an individual mandate. According to reports, thousands are gaming the system by buying coverage to pay for expensive procedures then dropping coverage. The Massachusetts Division of Insurance recently released a report revealing that the number of people gaming the insurance system by buying coverage only when they are ill quadrupled from 2006 to 2008.
This practice drives up costs for all health care consumers. As the Boston Globe reported recently, ―thousands of consumers are gaming Massachusetts‘ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage—a practice that insurance executives say is driving up costs for other people and small businesses.
There is good reason to expect the system-gaming under the new federal health care law to be even worse than it is in Massachusetts. Under the Massachusetts law, the state has significant, stringent enforcement powers (including the powers of imprisonment) it can use to force citizens to buy insurance.
But as the CRS makes clear, such beefy enforcement powers are not available to the IRS. ―Section 5000A … limits the means the IRS may employ to collect the penalty established in the section. First, the taxpayer is protected from either criminal prosecution or penalty for failure to pay the penalty. Second, the IRS is prohibited from either filing a NFTL [notice of federal tax lien] or levying any property in an effort to collect the penalty.”
Of course, it’s probably best not to give the administration any ideas about increasing the power of the IRS.