If you’re following the tax reform debate in Congress, you know that the Individual Mandate of ObamaCare is suddenly the talk of the town. The Senate has just added the elimination of the Individual Mandate to its tax reform bill.
I wrote about this in an earlier post (Killing ObamaCare Mandate Would Lower Taxes) after Senator Tom Cotton (R – AK) raised this possibility in earlier debate. Now the idea has gained traction with his fellow GOP senators – and with good reason.
Chris Pope, senior fellow at The Manhattan Institute, writes in The Wall Street Journal that he considers the Individual Mandate “the worst tax ever.” He gives the following argument for this strong opinion:
“If you were deliberately trying to design the most arbitrary, painful and pointless tax possible, how would you go about it? First, you would structure it to inflate the cost of an essential product. Then, you’d create exemptions so vast that only 5% of taxpayers were subject to it. You might even ensure that it hit people only when they were particularly vulnerable – like when they’d lost a job. Finally, you would use it to drive enrollment in entitlements, so that it increased the federal deficit by $338 billion. In short, you would design something that looks very much like the Affordable Care Act’s individual mandate.”
So eliminating this tax makes good sense for several reasons:
- It would lower the cost of an essential product – healthcare insurance
- It would eliminate an unfair tax that affects the poor disproportionately
- It would lower the federal deficit by $338 Billion
Why was the Individual Mandate created in the first place?
That’s a good question. In the presidential campaign of 2008, candidate Barack Obama opposed the idea and argued strenuously against it in the primary against Hillary Clinton. In fact, he said, “If a mandate was the solution, we could try that to solve homelessness by mandating everybody buy a house.”
Yet, when he became president, he was convinced by ObamaCare architect Jonathan Gruber that a mandate was necessary to force the young and healthy to purchase unnecessary health insurance to subsidize the cost of older and sicker Americans. Based on this premise, Obama promised all Americans their insurance premiums would go down an average of $2500 per year.
In reality, premiums have skyrocketed, increasing on average about $3500 per year by 2016. The average annual premium in 2016 was $5,712, while median healthcare spending was only $709 in 2014.
According to a Manhattan Institute Issue Brief recently released, the Individual Mandate is superfluous to the ACA’s core guarantee of affordable coverage for individuals with pre-existing conditions. They state it is subject to so many exemptions that recent studies have failed to discern any impact of the mandate on the proportion of Americans who are uninsured. They believe the ACA’s guarantee of affordable insurance to low-income individuals and those with pre-existing conditions is due entirely to the law’s subsidy provisions.
The failure of the Individual Mandate to positively influence the market can be attributed to the following:
- Insistence by the Obama administration that parents be able to claim their children on their own insurance plan up to age 26
- Low tax penalties for non-compliance
- Lax accountability for non-compliance.
Pope summarizes the impact of the Individual Mandate:
“The main effect of the mandate has been to concentrate the burden of subsidizing the chronically ill on those who lack employer-sponsored health insurance or eligibility for public entitlements. This is a very low-income group: 79% of households that had to pay the mandate tax had annual incomes of less than $50,000.”
No wonder Obama opposed the idea in the first place. Just another example of the “unintended consequences” of progressive programs that are supposed to help the poor. It’s time to get rid of this costly and unfair tax once and for all.