Why the individual mandate is helpful for society as it relates to healthcare

Introduction

Healthcare is currently one of the most contentious issues plaguing the developed world from both a financial and societal perspective. American civilization is reckoning with an aging population, higher healthcare costs, and rising social security pressures to service an aging population. In addition, as COVID-19 has illustrated, the current healthcare infrastructure is not nimble enough to handle a sudden and unexpected change in societal health. Healthcare emergencies, as we are currently witnessing, can have grave and often life-threatening implications for individuals. Without proper infrastrure, health insurance, and ability to quickly pivot to address “at-risk” populations, the overall economy suffers. These negative and life-threatening influences are now being evaluated behind a political backdrop that aims to provide universal healthcare to all American citizens, further convoluting the healthcare problem overall. One such provision within the universal healthcare proposal is that of individual mandates. An individual mandate is a requirement, by law, for everyone to have a basis level of healthcare. Individuals who do not comply with the mandate will be fined, and in extreme cases jailed for not adhering to the provision. The provided a very interesting dynamic of individual rights versus the collective security of society. Both sides of the argument have very valid reasons that underpin their overall stance towards individual mandates. In this proposal, we will look to identify the views regarding the individual mandate providing insights into their pros and cons. Next, the proposal discusses government intervention and its role of infringing on individual rights. Finally, the proposal concludes with a synopsis of the findings with remarks using a Christian worldview.

To begin, healthcare within America is very large portion of the overall economy. As of 2020, healthcare expenditures account for roughly 18% of the nation’s GDP. Even more alarming, is the percentage of the nations output related to GDP has been increasing over the past decade. At its current trajectory, nearly 1 out of every 5 dollars will be spent on healthcare by the year 2030. Chart 1 below shows the percentage of healthcare expenditures relative to GDP in the United States. As the chart indicates, the United States, by far, has the highest healthcare expenditures relative to GDP as compared to any other nations spending roughly $11k per person on healthcare

Chart 1 – Health Care Expenditures as a Percentage of GDP

Needless to say, this trajectory is very unsustainable and can have severe financial implications for society namely the solvency of the social security program. The baby boomer population is currently at or near retirement age. According to census data, all baby boomers will enter retirement age by the year 2030. Ultimately, this will mean roughly 73 million people will be retired and commanding some form of benefits or healthcare services in the future. Likewise, the overall population is now becoming older as women are electing not to have children and instead are joining the workforce. Fertility rates for women are now just 1.7 children versus the historical average of 2.1 children. This mismatch between younger and older individuals presents interesting dynamics as relates to healthcare costs and the individual mandates that requires healthcare insurance. As the population ages, those who will be utilizing healthcare services are likely to purchase insurance. These individuals, from a historical perspective are older and much more prone to requiring services. As noted above these services are becoming much more expensive on an annual basis and are now on track to account for nearly 1 out of every 5 dollars spent in the economy. Likewise, the older population is now living longer and thus have longer life expectancies after retirement. The average life expectancy for individuals 65 or older increased from 12 years in 1900 to 20 years in 2020. However, the younger, working population is shirking due in part to lower fertility rates relative to past generations. Younger individuals typically do not purchase health insurance and are likewise less likely to use healthcare services. Due to the less working age individuals tax revenues to support the older generations are being reduced relative to growth in the past. As a result, we have more retired individuals living longer, using healthcare services paid for by a shrinking younger population, with costs that increase every year. Chart 2 below shows the overall degree of rising healthcare costs relative to other countries around the world.

The rising costs of healthcare do not take into account social security deficiency as well. According to the Office of Retirement and Disability Policy, social security trust reserves allocated to social security payments are expected to be exhausted by 2037. According to the office, in order to afford future benefits for the next 75 years, the government will need to reduce benefits by 13%, increase the payroll tax from 12.4% to 14.4%, or combination of both. As such, America is facing a perfect storm of negative influences as it relates to healthcare. In one instance we have rising healthcare costs, an older population, and long-life expectancies. On the other hand, we have lower tax revenues, generated by a smaller amount of working age individuals to support the larger retired population, a shrinking pool of assets to support future social security payments, and healthcare costs that rise every year. The affordable care act and the individual mandate are designed to help mitigate these negative influences by making healthcare more affordable, lower costs, which in turn can assist older individuals who will be entering retirement age by the year 2030. The above background information is particularly helpful to provide context into the individual mandate and why it is necessary.

Now health insurance, like other kinds of insurance, works by creating "risk pools," which are groups of policyholders. In a typical risk pool, everyone pays insurance premiums, but only some will file claims. As noted above, the younger population who tends to be healthier would not file as many claims as the older population. If the health insurance risk pool is large enough and has enough healthy people paying premiums, then there will be enough money available to cover the costs of those who get sick. This will be particularly beneficial for the older population who will benefit from lower healthcare costs as well as the younger population who may be met with an unexpected healthcare expenditure. The rationale behind the individual mandate is that if everyone is required to have insurance—especially healthy people—the risk pools will be broad enough to lower premiums for everyone, even those with expensive medical conditions, thus lowering costs. The problem is that the mandate would essentially “force” younger individuals who would others not purchase health insurance to purchase it. This has many implications for society as we will detail in the next section.

The worldview bases for the “individual mandate”

America was founded on the principle of freedom and the ability of human beings to handle their own affairs. As a result, any policy designed to infringe on this core principle is viewed as a threat to civilization, and rightfully so. Society is fearful of individuals who exploit or use their power outside of their current scope. The current system in America is designed to help prevent exploitation of power through a serious of checks and balances. The individual mandate is viewed similarly to other legislation designs to “force,” “limit” or otherwise “obscure” an individuals right to certain freedoms. Health insurance is no different in this regard. The worldview in this instances falls into two segments of citizens.

The first segment views the mandate as an infringement on individual rights. A person should not be forced to purchase health insurance unless they elect to do so. This is similar to other health related activities such as elected surgeries, choice of doctor, and other programs. This segment believes that people should not be forced to acquire insurance that they do not want. Likewise, in the event of an emergency, the person who did not purchase insurance will also suffer the consequences. A market economy, according to this view functions through this series of cost and benefit analysis by millions of participants. If people elect to have health insurance, then they will do so, but the government should not intervene in the healthcare market through individual mandates.

In addition, this segment believes that government should not be involved in the personal affairs of its citizens. Many purists to this doctrine, believe that the government should only provide services that other citizens cannot provide for themselves. This includes military, law, and infrastructure. Other items should then be left to the citizens to determine their own best course of action. This worldview is shaped by the belief that individuals typically do what is in their best interest without the need for government. As a result, as individuals peruse their own self interests. The market will likewise determine what the best price is for health insurance. Those willing to pay will pay and those unwilling or unable will simply not do so.