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Would Health Reform Work Without a Mandate?

The decision by District Judge Henry Hudson to declare the individual mandate in the health care reform bill unconstitutional was no great surprise.

With a lot of judge shopping going on in the multiple states challenging the law, it was very likely, if not inevitable, that at least one judge would rule that way (after two judges upheld the law and a number of others dismissed the challenges). Hudsonís background and political heritage made the ruling somewhat predictable (as did the backgrounds of the judges who ruled the other way). But interestingly, the ruling was not given stop-the-presses or cableís breaking-news treatment (the latter is especially interesting because a hangnail suffered by the Senate Minority Leader would get breaking-news crawls on any of the three cable channels).

The main reason for the relative yawn given the story is, of course, that whatever Hudsonís ruling, the issue will be decided by the Supreme Court. And since Hudson severed the individual mandate from the rest of the reform bill and refused to stop the billís implementation pending appeal, the practical effect of his ruling is minimal.

But the ruling does raise a potentially huge challenge for the president and Democrats if the Supreme Court ultimately agrees (no doubt on a 5-4 vote) with Judge Hudson. And it raises some fascinating questions for Congressional Republicans as they prepare to take the reins of power in the House. What happens to health care coverage and delivery in the United States if the health care reform bill moves forward, but without an individual mandate? What happens in particular to the planned ban on insurance companies denying coverage based on pre-existing conditions?

We actually know the possible answers to these questions. The single most likely result is that premiums go up sharply for all of us. Without a mandate and without pre-existing conditions, many people will forgo insurance until they really need it ó when cancer hits or when there are real signs of problems ahead. Companies have to adjust their risks, and with a different risk pool, they will have to push the costs onto the rest of the insured.

At the same time, many fewer people will be insured, putting much higher costs on hospitals. Once again, sick people will show up at emergency rooms in big numbers, including many who have minor ailments but know that absent other options, they cannot be turned away at the emergency room door.

Perhaps Republicans will be able to change the law to their preferred option, creating more high-risk pools to provide some option for those with pre-existing conditions who otherwise cannot get any insurance. But experience tells us that these will not work very well, with high costs (because they consist of the most ill and the most expensive recipients) leading  either to high public subsidies or levies that are utterly prohibitive for those who need the insurance.

These are among the reasons why so many conservatives had championed an individual mandate ó until Obama and Democrats did so. The most efficient way to create a different, more robust and effective marketplace in health insurance, and ultimately in the delivery of health services, is to expand the risk pool by making it universal. 

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