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as as we all know the US Supreme Court
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has recently heard arguments both for
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and against President Obama's healthcare
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reform initiative known as the
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Affordable Care Act um I guess one of
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the provisions of this that's sort of
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gotten a lot of the attention
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particularly in the in the court case is
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the individual mandate which requires
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all adults to buy health insurance
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either through their employers or by
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buying it themselves so can you talk to
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me about I mean what are your feelings
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about the provision as it stands in this
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act and I mean are you in favor of it
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and why or why not see yeah well first
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of all in the spirit of division of
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labor I need to say that the the primary
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Arguments for and against the individual
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mandate or lawyer arguments not
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Economist arguments so I'm going to
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speak about it as an economist but the
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key issues that I think were debated
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before The Supreme Court like does is it
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constitutional to affirmatively make a
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person buy something or is it how far
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does the interstate commerce clause
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extend um I'm not an expert on that uh
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there are though two reasons two good
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reasons to have uh the individual
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mandate in any kind of um Health reform
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legislation uh the one which has gotten
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the most discussion recently is um is
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kind of as a um uh an important um
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whether it's necessary or not we could
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debate but an important adjunct of a
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provision of the legislation which
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essentially says uh insures um have to
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charge everybody the same premium uh no
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matter what the risk level and uh the
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problem with that of course is that if
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you're an average person and the a this
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is not some kind of reverse Lake wagon
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where we're all sicker than average
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average person is reasonably healthy if
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the premium is high enough to cover the
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cost of the uh people with chronic
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conditions it'll look like a bad deal to
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a lot of um of those people and uh so
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you you need uh in a way some muscle uh
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to tell them you have to buy the
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insurance anyway even though it doesn't
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sound like such a good deal to you uh so
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that's one reason the other reason which
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was actually more important when we
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first considered this 20 years ago
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essentially
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arises because even if you were an
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average risk person and the premiums
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were tailored to your risk well I don't
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know about you or me but we know that
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somewhere between three and 4% of people
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just don't get the idea that they ought
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to have insurance uh and we know that
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when they're offered a really good deal
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as part of their job they only have to
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pay a few hundred dollars a month there
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was still will be um uh 3 or 4% of
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workers who will turn it down and not
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get insurance any where uh and that U
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why are they doing that well one reason
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probably is um unlike me they don't get
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up every morning and think about health
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insurance they think they're healthy and
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uh why buy insurance if you're healthy
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and there's ALS also the view that well
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if I get really sick no there nobody's
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going to leave me bleeding in the street
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and in fact Federal Law requires you to
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be treated uh at an emergency room and
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stabilized regardless of your ability to
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pay and so uh people will rely on in a
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way on the charity of others uh to
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compensate for the fact that they don't
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have insurance it's still I tell people
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it's still a terribly bad idea to run
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around without health insurance no
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matter what you are and no matter how
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much you count on charity but the one
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good feature of Charity is at least it's
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cheap if you're the object of Charity so
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we actually uh we originally called our
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proposal a proposal for responsible
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national health insurance because we
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thought that it was important to have a
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mandate in a way to deal with
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irresponsible behavior on the part I
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have to say of a small minority of the
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population uh surprisingly not
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necessarily the poorest people uh just
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the people who don't have the idea that
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they need insurance uh they the they uh
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the non-poor uninsured tend to be people
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who don't buy other kinds of insurance
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they don't have life insurance either
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they don't have insurance on their cars
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they live from paycheck to paycheck
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they're maxed down on their credit cards
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even if they have a pretty decent in
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income and so and uh since the challenge
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at that time was to come up with a plan
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to get universal health insurance
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coverage we thought that it was
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important to have a mandate to kind of
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round up the stragglers now there's so
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much I mean there's so many other
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Provisions to this law besides the
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individual mandate I mean can you tell
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me I mean what is your opinion of this
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act overall and what do you think the
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impact would be I mean if the Supreme
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Court strikes down the individual
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mandate or if it strikes down the whole
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law what what is the impact on I'm
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really worried actually that um the good
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there's some really good parts to the
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law and um in some ways um the the uh
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features that that that are around the
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individual
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mandate uh because they were put in
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there run the risk of Bringing Down the
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whole edifice so the part that at least
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in my opinion is very desirable is a
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part that's actually not been very much
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discussed the law is going to provide
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hundreds of billions of dollars worth of
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subsidies to not just to poor people but
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to lower middle- income people to help
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them afford health insurance and I guess
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my view is as a as a human being and as
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a moral person uh I think it's um just
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um socially undesirable and morally
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undesirable for people to go without
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highly beneficial care when it exists
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and um and and the most of the heavy
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lifting in the in the law to get people
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insured comes not from the individual
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mandate really but from the fact that if
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you can't afford insurance Insurance the
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government's going to step in and and
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really give you major help to afford it
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uh the the as I said the the Mandate
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mostly just kind of rounds up the uh the
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people who aren't persuaded Enough by an
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enormous subsidy that they ought to go
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ahead and get insurance so uh that part
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uh in a way uh what I call paying higher
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taxes in order to have a clean
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conscience is in my view the most
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important part of legislation and it
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would be a real tragedy I think if all
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the other things that were added on to
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it for various reasons kind of brought
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down the main uh objective and now I
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mean if the I mean if the court strikes
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down part of the law or all of the law I
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mean what is the impact on businesses
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what is the impact on consumers and I
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mean is there a way that you see that
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Congress and the administration could
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kind of come together and come up with
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something that might be able to stick
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that everybody could agree on oh I I
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think my view is but I think I'm not the
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only person that there are a lot if if
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we could just fix some things uh we
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could have something that would make
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sense uh uh there's of course a
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political Choice whether you think the
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best way to fix it is to throw the whole
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thing out and start over I hope still
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retaining uh generous subsidies to the
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people who need help to buy health
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insurance or whether you think you could
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somehow uh adjust a bunch of the other
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provisions of the law in order to make
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it possible to do that that's kind of a
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political Choice um I think uh you know
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the if if the centerpiece of the law is
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the subsidies I think it's certainly
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possible to design the other parts of it
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to um do two things one is just be much
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simpler uh the problem was uh as you can
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imagine it's after all it's our elected
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representatives in Congress they hung
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all sorts of things in on the
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legislation that have little to do with
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the uninsured and a lot to do with uh
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various Crusades that they might be
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engaging in and uh and that complication
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I think is just been U very harmful to
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the uh to generating support for the law
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it's just gotten so
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complicated and then there there is one
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thing in the law that's related to the
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Mandate that I think could have been
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done a lot better and that kind of gets
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back to the point I was making a few
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minutes ago the purpose of the Mandate
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is to force people who are relatively
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low risk uh to to pay more for their
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insurance uh why do we want to do that
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well there is a good social reason to do
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it for people who are unusually high
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risk especially if they're not very well
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off um they can't afford to pay an
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insurance premium that would reflect
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their risk so we want to cross subsidize
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them uh the problem I think with the way
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it's in the legislation is it's what I
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call the dumbest possible way to do a
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good thing we're trying to make a
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transfer to people who need some help to
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buy insurance because they're high risk
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and the way we the legislation does it
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is in effect by taxing people who are
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low risk and then the people who are low
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risk don't want to pay the tax and uh
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the alternative which actually exists in
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the legislation is to create a pool for
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high risks where if you are a high-risk
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person you have diabetes say or some
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serious chronic condition you can go
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there and buy insurance at reasonable
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premiums and the subsidy comes not from
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making Insurance expensive to low risk
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it comes from raising taxes the way we
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usually raise taxes on people based on
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their ability to pay or at least based
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on their willingness to pay uh for uh to
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help out others so yeah so so the so the
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main part I think that that has been
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harmful here is the um the way that the
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the lawyers who drafted the legislation
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thought uh that they would help out high
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risks was by punishing low risks and I
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think that was unnecessary now I mean
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what would you say I mean there's a lot
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of talk about who is sort of the main
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culprits with the problems facing the
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Health Care System whether it's the
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insurance companies the hospitals the
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doctors the government the consumers I
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mean what do you what do you think what
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do you think theid of the problem well
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insurance companies certainly were the
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designated enemies right uh and uh and
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this the the sort of populist version
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even of the requirement that insurers
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cover high risks at the same premiums is
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well they'll how will insurers do that
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well they'll do that just by taking the
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money out of their profit profits will
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just make them do it but of course you
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can't make insurers really do anything
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uh they'll turn around and charge the
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rest of us more uh which is um what
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probably will happen when um the um if
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if if and when Community rating uh and
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the whether or not it has the individual
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mandate um comes into play uh so so it's
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it's really hard to kind of Stick it to
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insurers because uh as long as they have
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the ability to vary the premiums they
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charge and law is not going to take that
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away although it does have some
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Provisions that they can't charge
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unreasonable premiums but essentially
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the reason they charge a lot is when
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they have to pay out a lot I mean most
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of the money that goes to insurers comes
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back to us in the form of uh healthc
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care claims so uh you know it's
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certainly uh commonplace to quote the
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horrible figures on the rate of growth
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and insurance premiums outrunning every
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other economic aggregate although lately
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they've been slowing down a lot and
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people haven't been breaking out
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champagne all that much maybe they
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should but the reason why insurance
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premiums rise rapidly for the most part
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is not because they're pocketing a lot
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more money than they used to it's
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because they're paying out a lot more in
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claims why are they paying out a lot
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more in claims well it's because you and
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I are going to the doctor not so much
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more but to get more done at a higher
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price sometimes uh and um so yeah the
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main culprit for high Healthcare cost in
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the US it's they're easy it's easy to
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find that person uh find a mirror and
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look in it and that'll be one of the
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reasons why healthcare costs are high
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and now I mean tell me I mean what would
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you say would be the one thing that we
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should do to tackle Rising Healthcare
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cost I mean can you point and can you
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point to The Economist party line here
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is to say that the most serious um
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impediment to uh an economically
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efficient Health Care system is of
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course connected with health insurance
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and the most serious impediment there is
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uh there is a substantial tax break that
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goes to that that's generated if you get
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your insurance through your job like all
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of us do or almost all of us do Al but
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about 6% of the privately insured get
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insurance to their job and the beauty
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part of it is uh from the point of view
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of a of of an individual is um well so
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pen pays uh uh uh or is able to uh make
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payments toward my health insurance in
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such a way I figure to Shield about
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$18,000 worth of income for me from
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taxes uh my wife says we should send a
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Christmas card to the treasury thanking
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them for that tax break but the
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consequence of it is in part uh uh that
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uh that I'm less parsimonious than I
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might otherwise be in choosing insurance
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and in choosing health care because in
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effect the treasury is sharing the cost
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and this this tax break of course it's a
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middle class tax break so people who are
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mostly middle class don't see what's
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wrong with it uh but it has the
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consequence of uh of providing
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um a pretty strong incentive for
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ordinary Americans not to be as careful
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about health care costs as they should
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be and now very quickly I mean are there
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any initiatives going on anywhere that
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you could see that would that are in
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progress that would work well I mean a
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model that well so a little bit of uh uh
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it actually surprised me and pleased me
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there is in the legislation a provision
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not to take effect until 2018 but a
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provision to try to um uh take away the
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subsidy to employment-based health
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insurance for high very high cost
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employment-based health insurance a
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so-called Cadillac tax uh now they
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didn't do it the right way what they
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should have done was said if you have a
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health plan that's um costing more than
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$22,000 a year uh at least some part of
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that out be treated as part of your
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taxable income and that will make you
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want to be more careful instead partly
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for appearance's sake they imposed a tax
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on insurance companies but of course the
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insurance companies won't pay that tax
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they'll shift it back to the employers
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and the employers will probably shift it
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back to us in the form of lower raises
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than we would otherwise get so that was
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a good thing although it's pretty pretty
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small and pretty long delayed so if I
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were to rewrite things I'd say give that
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a lot more muscle uh make it a lot more
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rational and move it up in time and
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that's essentially what the two uh
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deficit reduction
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committees uh the uh proposed uh to the
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Congress and to the president as well to
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change the tax treatment of employment
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based health insurance so that that
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would be my main thing uh uh certainly
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uh if you can make this is sort of a
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necessary condition I think for people
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to really care about the cost of healthc
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care personally as opposed to being
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outraged about it generally but if
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people did care more about their own
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personal cost of health care then I
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think other things like better
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information about where can I get a
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reasonably good deal on Health Care
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would be something people would pay a
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lot more attention to than they do now
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