Health Care for Undocumented Immigrants

Background:  Data from this year’s Census Bureau report on the uninsured indicate that more than one-fifth—over 9.7 million—of the uninsured are foreign-born residents of the United States lacking American citizenship.  This category—which includes both legal residents not yet citizens as well as undocumented aliens—contains the highest percentage of uninsured Americans (43.8%) of any age, race, income, or other cohort included in the Census survey.[1]

While the Census Bureau reports do not contain specific data on the uninsurance rate among illegal immigrants, a 2005 study using data from the Los Angeles area provides some insight regarding this population.[2]  Extrapolating the 68% uninsured rate for aliens found in the Los Angeles study to a nationwide undocumented population of 12 million would yield approximately eight million uninsured—about one-sixth of the total number of uninsured Americans—who are illegally present.

Impact on Federal Programs:  In general, provisions in Title IV of the 1996 welfare reform law (P.L. 104-193) prohibit the provision of health care or other services to aliens illegally present in the United States.[3]  However, federal health care programs address the issue of verifying identity and nationality as a condition of providing care in various ways, while other programs attempt indirectly to offset the impact of uncompensated care for illegal aliens on health care providers.  The most important of these include:

Medicare:  Under Title XVIII of the Social Security Act, Medicare benefits are available to eligible citizens, as well as to legal aliens continually resident in the United States for at least five years prior to application for benefits.[4]  The five-year residency requirement was challenged on due process grounds, and eventually upheld by the Supreme Court in June 1976; Justice John Paul Stevens, writing for a unanimous Court, stated “it is obvious that Congress has no constitutional duty to provide all aliens with the welfare benefits provided to citizens.”[5]

The Social Security Administration (SSA) determines eligibility for Medicare benefits, including the process of verifying an applicant’s identity and citizenship (or legal resident status).  The standards used by SSA are found in federal regulations, and include evidence of age (e.g. birth certificate or hospital record), identity (e.g. driver’s license, school record, or other documents identifying an individual), and citizenship (e.g. birth certificate, passport, or certificate of naturalization).[6]

Medicaid:  Under the provisions of the welfare reform law, states may only receive federal Medicaid matching funds for legal U.S. citizens or qualified aliens (subject to a five-year waiting period in most cases.[7]  However, while the Medicaid statute has required since 1986 that applicants declare their nationality under penalty of perjury, until recently most states relied on self-attestation to verify citizenship status.[8]  A 2005 report by the Department of Health and Human Services Inspector General found that 40 states (including the District of Columbia) allowed self-declaration, with an additional seven states sometimes permitting self-declaration of citizenship status; of these 47 states, 27 did not verify the accuracy of the citizenship attestation.[9]

As a result of this report, Congress in the Deficit Reduction Act (DRA, P.L. 109-171) eliminated the ability of state Medicaid programs to rely on self-declarations by beneficiaries as the sole means of citizenship verification.  Specifically, Section 6036 of the Act requires states receiving federal Medicaid funds to verify participants’ identity and citizenship on the basis of appropriate documentation (e.g. passport, birth certificate, etc.).  The verification provisions do not apply to dual eligible (i.e. enrolled in both Medicare and Medicaid) beneficiaries, or to Medicaid beneficiaries receiving SSI benefits, as the Social Security Administration verifies the identities of these beneficiaries, as outlined above.

Shortly after the DRA provisions took effect, the Centers for Medicare and Medicaid Services (CMS) issued an interim final rule on July 12, 2006, using discretionary authority included in the DRA to expand the list of eligible documents that could be used to verify citizenship and/or identity, in order to ease the transition to the new verification regime.[10]  In addition, the Tax Relief and Health Care Act of 2006 (P.L. 109-432) exempted children in foster care from the DRA documentation provisions.  While the verification requirements were sharply criticized by some organizations at the time of their enactment, many conservatives may note the relative lack of controversy surrounding Medicaid verification two years after the provisions took effect as proof that citizenship verification can be implemented in an effective manner that ensures aliens do not have access to federal benefits while preserving existing programs for eligible individuals.

SCHIP:  Because of the hybrid nature of the State Children’s Health Insurance Program (SCHIP), only some children undergo citizenship verification as part of the application process.  The Balanced Budget Act of 1997 (P.L. 105-33), which created SCHIP, gave states the option to use SCHIP funds to expand their Medicaid programs, create a new program for SCHIP beneficiaries, or some combination of the two approaches.  The eight states (and the District of Columbia) which chose Medicaid expansion programs—as well as Medicaid participants in the 24 states with combination programs—are subject to the citizenship verification requirements enacted as part of DRA.[11]  However, the 18 states with separate SCHIP programs currently have no requirement to verify the identity and nationality of individuals before enrolling beneficiaries.

EMTALA:  Enacted in 1986 as part of the Combined Omnibus Budget Reconciliation Act (P.L. 99-272), the Emergency Medical Treatment and Active Labor Act (EMTALA) imposes requirements on hospitals accepting Medicare payments to treat patients in emergency conditions.  The Act’s requirements apply to all patients, regardless of their Medicare eligibility status, ability to pay, or immigration status.[12]  The Act also includes significant penalties: violations of EMTALA can result in fines of up to $50,000 and exclusion from the Medicare program in repeated or egregious cases, as well as lawsuits by patients adversely harmed by an EMTALA violation.

In recognition of the rising costs to providers associated with the EMTALA unfunded mandate, particularly as it relates to care for illegal aliens, Section 1011 of the Medicare Modernization Act (P.L. 108-173) provided a total of $1 billion in grants directly to providers (though on the basis of state-based formulae) for uncompensated emergency care given to illegal aliens—$250 million for each of Fiscal Years 2005 through 2008.

Community Health Centers:  Under the Public Health Service Act, the federal government provides competitive grants to federally qualified health centers, including migrant health centers.  In 2007, health centers treated 16.3 million patients, while the health centers grant program received $2.065 billion in the Fiscal Year 2008 omnibus appropriations bill (P.L. 110-161).[13]  Subsequent legislation passed in the House (H.R. 1343) and Senate (S. 901) would increase health center authorization levels to $15 billion over the FY09-FY13 period.

The statute authorizing the health centers grant program requires that care not be denied to patients based on an inability to pay for services.[14]  In addition, the Congressional Research Service reports that grant recipients are not required to verify the citizenship status of their patients.  Given that the authorizing statute is silent with respect to enforcing the prohibition against federal benefits being provided to illegal immigrants, some conservatives therefore may be concerned that federal tax dollars are being used to provide aliens with health care services.

Disproportionate Share Hospital (DSH) Payments:  While not providing care to illegal aliens, the section of the Medicaid statute related to DSH payments implicitly recognizes the impact this population can have on providers.  In particular, the statute deems hospitals with a low-income utilization rate of 25% as qualifying for DSH payments, without limiting the low-income population to citizens normally eligible for federally-funded care.[15]  As a result, states may allocate portions of their Medicaid DSH payments—estimated to total $8.8 billion in Fiscal Year 2008—to offset care provided by hospitals to illegal aliens.[16]

Legislative Proposals:  Much of the debate surrounding health care for aliens during the 110th Congress has focused on SCHIP reauthorization.  While many Democrats have attempted to use reauthorization as a vehicle to limit or repeal the Medicaid citizenship verification provisions enacted in DRA, many conservatives believe that a reauthorized SCHIP program should incorporate the Medicaid documentation requirements to improve the integrity of the program.

More specifically, H.R. 3162, passed by the House in July 2007, would make Medicaid citizenship verification a state option for children under 21, retroactive to the July 2006 effective date of the DRA provisions.  In addition, Section 112 of the bill would also establish “Express Lane” agencies to enroll beneficiaries in Medicaid and SCHIP, without including citizenship verification or documentation requirements; Section 136 would require states to conduct audits on a sample caseload to ensure that federal Medicaid and SCHIP funds “are not unlawfully spent” on illegal aliens.  Some conservatives may be concerned that the removal of the mandatory Medicaid verification language for children, along with the “Express Lane” provisions, would effectively undermine the important reforms enacted as part of DRA, and that sample audits would not be sufficient to ensure compliance with provisions of the 1996 welfare law cited above stating that no illegal alien may receive federal health or welfare benefits.

H.R. 3963, vetoed by the President in October 2007, would extend citizenship verification requirements to both the SCHIP program has a whole and the “Express Lane” mechanism outlined in H.R. 3162 above.  However, the bill would provide an alternative verification process to the DRA provisions that would instead rely upon name and Social Security number validation—a process which, according to a September 2007 letter from Social Security Administration Commissioner Michael Astrue, would not keep an applicant from fraudulently receiving coverage under Medicaid or SCHIP (if they claimed they were someone they were not).  Some conservatives may therefore be concerned that this provision—coupled with the incentive to states provided by a greatly enhanced federal match to establish this more lenient verification system—would weaken the process put in place by the Deficit Reduction Act.

Conversely, several proposed Republican SCHIP alternatives (H.R. 3176, H.R. 3888, and S. 2193) would apply the Medicaid citizenship verification requirements, as created by the DRA, to the SCHIP program, with an enhanced federal match for administrative costs.  Some conservatives would support the extension of the reasonable Medicaid DRA provisions to the SCHIP program, along with an enhanced administrative match to reimburse states for any increase in overhead costs associated with citizenship verification.

More recently, press reports indicate that the Democratic “Tri-Caucus” of Hispanic, Black, and Asian Members have written to Speaker Pelosi asking her to include provisions repealing the five-year waiting period for qualified aliens to become eligible for Medicaid or SCHIP coverage as part of any SCHIP bill considered by the House this fall.[17]  This change would alter provisions in the 1996 welfare reform law—which also prohibited illegal aliens from receiving federal benefits—that limited access to benefits for most “qualified aliens” for five years.[18]  Some conservatives may be concerned that this provision would increase costs while encouraging would-be immigrants to file claims for asylum in order to obtain federal health care coverage.

Implications for Comprehensive Health Reform:  In light of reports suggesting that illegal immigrants represent a significant—and fast-growing—component of the uninsured in America, some conservatives may focus on two elements necessary to address this issue in any comprehensive health care bill that may be considered.  First, consistent with the debate surrounding SCHIP legislation during this Congress, many conservatives may believe that any reform package must include provisions similar to those in the DRA that impose verification requirements for all applicants to preserve the integrity of federal programs and avoid providing incentives for illegal immigration.  For instance, while the Healthy Americans Act (S. 334) by Sen. Ron Wyden (D-OR) excludes access to new state-based health plans for illegal immigrants, it contains no enforcement or verification provisions to implement this restriction.

Secondly, some conservatives may be concerned about the impact which uncompensated care given to illegal immigrants may impose on providers, particularly hospitals.  The unfunded mandate created by EMTALA has a significant impact on providers treating illegal immigrants, who are less likely to have the health insurance necessary to pay catastrophic expenses.  The combination of DSH payments and the $1 billion uncompensated care fund created by MMA, scheduled to sunset at the end of the fiscal year, only partially defer the uncompensated care cost paid by providers who treat illegal aliens.

Consistent with the conservative concerns about uncompensated care is the relatively new phenomenon of lawsuits against hospitals initiated by illegal immigrants.  The New York Times recently reported on a case from Florida where a hospital, having provided $1.5 million in uncompensated care to a Guatemalan alien, asked for and obtained a court order to return the immigrant to Guatemala; no nursing home in the United States would accept an alien patient without insurance and ineligible for Medicaid, while the hospital could not release a patient with brain injuries into the general population without arranging post-discharge care.[19]  In a case with potentially far-reaching implications, relatives for the alien had the Florida court order reversed after deportation—and subsequently filed suit against the hospital for false imprisonment.

Though tragic on multiple levels, the Florida case highlights a reality a growing number of providers may face—offer virtually unlimited care to illegal aliens, even when an inability to pay is glaringly apparent, or face legal action initiated by the aliens or their caretakers.  Therefore, some conservatives may support actions designed to ensure that providers offering reasonable emergency care to illegal aliens need not be subjected to additional and costly lawsuits.

Conclusion:  The Census data breaking down the uninsured by citizenship and national origin, while not widely publicized, illustrate one reason why the concept of universal health insurance coverage may prove ineffective.  Democrat proposals for an individual mandate to purchase coverage would prove ineffective for this population, who by their very presence have already violated United States law.  Although the uninsured population is not limited to undocumented aliens, many conservatives may believe that a truly comprehensive solution to this health care issue must address the significant demands on the health care system placed by illegal immigrants in a way that preserves the fiscal integrity of existing entitlement programs while protecting providers from liability imposed upon them by aliens illegally present.

 

[1] “Income, Poverty, and Health Insurance Coverage in the United States: 2007” (Washington, Census Bureau, August 2008), available online at http://www.census.gov/prod/2008pubs/p60-235.pdf (accessed August 26, 2008), Table 6, p. 30.

[2] Dana Goldman, James Smith, and Neeraj Sood, “Legal Status and Health Insurance among Immigrants,” Health Affairs 24:6 (November/December 2005), 1640-1653.

[3] Illegal aliens are eligible for emergency care (as defined by the EMTALA statute discussed below) provided under Medicaid, and for public health assistance with respect to immunization for, and treatment of, communicable diseases.  Some groups of qualified aliens—excluding those illegally present—are eligible for other federal benefits, as discussed below.

[4] Available at 42 U.S.C. 1395o.

[5] Mathews v. Diaz, 426 U.S. 82 (1976).

[6] Some examples of documentation can be found at 20 CFR 422.107.  In addition, SSA’s Program Operations Manual System (POMS) includes guidelines for workers in SSA field offices; the section of the manual relating to citizenship, alien status, and residency can be found online at https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0200303000 (accessed August 25, 2008).

[7] According to the Kaiser Family Foundation, 17 states provide benefits funded solely by state dollars to illegal aliens and/or aliens subject to the waiting period.  See “Health Insurance Coverage and Access to Care for Low-Income Non-Citizen Adults,” (Washington, Kaiser Policy Brief #7651, June 2007), available online at http://www.kff.org/uninsured/upload/7651.pdf (accessed August 26, 2008), p. 3.

[8] The requirement is in Section 1137 of the Social Security Act, available at 42 U.S.C. 1320b-7(d)(1)(A).

[9] Daniel Levinson, “Self-Declaration of U.S. Citizenship for Medicaid,” (Washington, DC, HHS Office of the Inspector General, Report OEI-02-03-00190, July 2005), available online at http://oig.hhs.gov/oei/reports/oei-02-03-00190.pdf (accessed August 20, 2008), pp. 16-18.

[10] A final rule incorporating comments to the July 12, 2006 interim final rule was published in the Federal Register on July 13, 2007 and can be found online at http://edocket.access.gpo.gov/2007/pdf/07-3291.pdf (accessed August 20, 2008).

[11] A state-by-state breakdown of SCHIP program status can be found in Congressional Research Service, The State Children’s Health Insurance Program (SCHIP): An Overview, Report RL 30473, available online at http://www.congress.gov/erp/rl/pdf/RL30473.pdf (accessed August 21, 2008), Table 1, Column 1, pp. 18-21.

[12] The full EMTALA statute can be found at 42 U.S.C. 1395dd.

[13] Fiscal Year 2009 HHS Budget in Brief, available online at http://www.hhs.gov/budget/09budget/2009BudgetInBrief.pdf (accessed August 20, 2008), pp. 21-25.

[14] The statutory language is available at 42 U.S.C. 254b(k)(3)(G)(iii)(I).

[15] The definitions of Medicaid DSH institutions can be found at 42 U.S.C. 1396r-4(b).

[16] March 2008 CBO Medicaid baseline, available online at http://www.cbo.gov/budget/factsheets/2008b/medicaidBaseline.pdf (accessed August 20, 2008).

[17] Mike Soraghan, “Minority Caucuses to Press for Two SCHIP Provisions,” The Hill August 13, 2008, available online at http://thehill.com/leading-the-news/minority-caucuses-to-press-for-two-schip-provisions-2008-08-12.html (accessed August 21, 2008).

[18] Title IV of P.L. 104-193 did contain some exceptions to the “qualified alien” waiting period—most notably for legal permanent residents with a substantial work history (i.e. 40 qualifying quarters of Social Security coverage) and for those with a military connection (i.e. veterans, active-duty servicemen, and their spouses and dependents).

[19] Deborah Sontag, “Immigrants Facing Deportation by U.S. Hospitals,” New York Times August 3, 2008, available online at http://www.nytimes.com/2008/08/03/us/03deport.html?_r=1&sq=jimenez&st=cse&adxnnl=1&oref=slogin&scp=10&adxnnlx=1219331895-evIAEOYXEq2SKfB7dLGcEg&pagewanted=print (accessed August 21, 2008).

Weekly Newsletter: June 9, 2008

Committees Continue to Spar over Tobacco Tax Legislation

Congress’ return last week brought no end to a simmering jurisdictional dispute that has delayed consideration of legislation (H.R. 1108) designed to regulate tobacco products under the auspices of the Food and Drug Administration (FDA). In April, House Ways and Means Committee Chairman Rangel wrote to Speaker Pelosi requesting a sequential referral of the bill, on the grounds that the “user fee” assessed on tobacco companies in the legislation exceeds the funds directed from that fee to tobacco enforcement activities at FDA, making the legislation a general revenue raising (i.e. tax) bill under Ways and Means’ jurisdiction.

Many conservatives will view Chairman Rangel’s letter as confirmation that, notwithstanding the statements of Energy and Commerce Committee Democrats and a finding within the bill text of H.R. 1108, the proposed “user fee” is in fact an excise tax on tobacco companies to offset the expected loss of revenue resulting from FDA regulation. Some conservatives may view this tax increase as one of several concerns associated with H.R. 1108, which would impose onerous regulatory restrictions—including those on tobacco companies’ free speech rights to market and advertise their products—in the interest of protecting the public health. Some conservatives may question the wisdom of legislation requiring the FDA to regulate tobacco, particularly given the concerns raised by Congressional Democrats themselves about the FDA’s inability properly to regulate products currently within the agency’s remit.

The RSC will weigh in with conservative concerns on the tax and other issues as the legislation moves forward.

Revised Wyden Bill a Perpetual Tax-Raising Machine

Last month, the Congressional Budget Office (CBO) released a letter that could have a significant impact on any potential discussion of health care reform in the 111th Congress. In it, CBO gave a preliminary opinion that comprehensive health legislation introduced by Sen. Ron Wyden (D-OR), the Healthy Americans Act (S. 334), could be scored as budget-neutral, subject to certain conditions. In general, the bill would replace the current system of employer-provided health insurance with a “managed competition” model, whereby insurance coverage meeting a series of regulatory standards is provided through state-based pools, with a mandate on all individuals to purchase coverage and subsidies for low-income individuals and families.

Many of the bill’s potential funding sources—including a tax on all employers to pay for their employees’ insurance costs—have been well-publicized. Less advertised however were the revised bill specifications which CBO took into account when scoring the Wyden proposals. Specifically, the bill proposed to mandate coverage at least as good as that currently provided in the Blue Cross Blue Shield Standard option in the Federal Employee Health Benefits Program (FEHBP)—a generous benefit package 15% higher than the average cost of all employer-sponsored plans—with the amount of the mandate rising in future years to reflect economic growth in the gross domestic product (GDP). However, the revised specifications also note that the tax subsidy for purchasing health insurance will be indexed in future years to growth in the Consumer Price Index (CPI). Thus, under the Wyden plan, if future economic growth exceeds inflation—as it has in every year since 1992—Americans would be forced to buy more insurance but would not receive an equivalent tax subsidy to purchase that richer benefit package, leading to tax increases that would spiral over time.

On top of the many existing problems with the Wyden bill—a mandatory tax on employers, an individual mandate to purchase coverage that could prove problematic to enforce, increased regulation on insurers, and the requirement that all carriers provide coverage for abortion procedures—some conservatives may find this new perpetual tax increase most objectionable of all. While many conservatives support measures designed to control the currently uncapped tax expenditure for employer-sponsored health care as a way to slow the growth of health care costs, many of these same conservatives may have concerns about the implications of an individual mandate to purchase insurance—particularly one that could lead to automatic tax increases in future years for millions of Americans.

An RSC Policy Brief on the implications of an individual mandate can be found here.

Articles of Note: Health Insurance in Massachusetts a Fine Thing

A study on the influential Massachusetts health plan released last week indicated that beneath the political harmony that yielded a statewide “universal coverage” law two years ago, fissures loom. While health insurance coverage has increased significantly, the biggest growth in new coverage has come from low-income individuals accepting free or heavily subsidized plans provided by the Commonwealth. On the other hand, nearly 100,000 individuals paid a fine on their 2007 taxes for lacking health insurance in spite of the new mandate to purchase coverage.

Many conservatives may not be surprised by the study’s findings, particularly given the unnecessarily high cost of health insurance premiums in Massachusetts due to over-regulation. Faced with a penalty for non-compliance of $219 in 2007 and an average monthly premiums in excess of that amount, some individuals may make a rational choice to pay a fine of several hundred dollars per year rather than purchase coverage costing several thousand dollars—particularly because Massachusetts state regulations allow individuals applying for insurance after contracting an illness to receive the same premiums as those who applied when healthy. Conservatives would view the Massachusetts data as symptomatic of the problems associated with both enforcing an individual mandate and the high cost of health insurance derived from over-regulating insurance markets.

In addition, some conservatives may be concerned by a quote in The Washington Post from the head of a group that advocated for passage of the Massachusetts law: “Nobody knew what this was going to cost in the beginning.” At a time when the federal government faces unfunded obligations of nearly $86 trillion associated with the Medicare program alone, many conservatives may consider it unwise for the federal government to follow Massachusetts’ lead in enacting another expansive government entitlement without solving the underlying problems associated with the growth of health care spending.

Read the articles here.

An Individual Mandate to Purchase Health Insurance

Background:  Proposals requiring all individuals to obtain health insurance coverage date to the debate surrounding President Clinton’s health reform package in the early 1990s.  Supporters of an individual mandate often utilize two linked arguments in favor of this approach to health care reform.  First, an individual mandate promotes personal responsibility, ending the “free rider” problem whereby individuals who choose to go without health insurance pass on their costs to various publicly-funded safety net programs in the event of a medical emergency.  Second, some advocates of insurance “reforms” such as guaranteed issue and community rating—which require health insurance carriers to disregard applicants’ health status when extending offers of insurance—accept that placing such restrictions on carriers in the absence of a mandate to purchase insurance would only encourage individuals to “game” the system by waiting until they become sick to submit an insurance application.

Recent Proposals:  An individual mandate regained national prominence when then-Gov. Mitt Romney (R-MA) signed into law a comprehensive health reform plan in April 2006.  The mandate formed one of the bill’s central planks, which, when coupled with expansions of Medicaid and various low-income subsidies, was designed to achieve universal coverage within the state.  Although Romney had initially proposed that individuals be permitted to post a bond in lieu of proof of insurance coverage, the Legislature excluded this alternative from the final package.

In the time since enactment of the Massachusetts plan, some states (most notably California) have also studied the creation of a health insurance mandate, as have several federal policy-makers.  In January 2007, Sen. Ron Wyden (D-OR) reintroduced the Healthy Americans Act (S. 334), co-sponsored by Sen. Robert Bennett (R-UT), and introduced in the House as H.R. 3163 by Rep. Brian Baird (D-WA).  Section 102(a) of the legislation requires all individuals to enroll in a Healthy Americans Private Insurance plan, unless the individual is covered under Medicare, other federal coverage for servicemen or veterans, or has a religious objection to purchasing health insurance.  The bill also defines a minimum benefit standard for insurance coverage, requiring all policies sold in compliance with the individual mandate to include health benefits actuarially equivalent to the benefit package offered in the Blue Cross Blue Shield Standard option in the Federal Employee Health Benefits Program (FEHBP) as of January 1, 2007.

The Democratic presidential candidates have both supported mandates to purchase health insurance, although the scope of their respective mandates has become a subject of widespread debate during the primary season.  Sen. Hillary Clinton’s platform will require all individuals “to get and keep insurance in a system where insurance is affordable and accessible,” consistent with “promoting shared responsibility.”[1]  By contrast, Sen. Barack Obama’s plan “will require that all children have health care coverage,” but does not advocate a mandate for all individuals—although he has indicated an openness to consider one in the future should large numbers of adults choose not to purchase insurance.[2]  Although Clinton and Obama have promised all individuals access to insurance plans that would be “at least as good as” and “similar to” FEHBP coverage, respectively, neither candidate has elaborated on whether individuals (or children) with employer-sponsored or other coverage would need to maintain a benefit package equivalent to FEHBP standards in order to comply with the federal mandate.

Scope of the Mandate:  Key to determining the effectiveness of any health reform plan incorporating an individual mandate is the minimum level of coverage required to comply with the mandate.  In Massachusetts, a Connector Board comprised of various stakeholders decided that minimum creditable coverage for purposes of the mandate would include a maximum deductible of $2,000 per individual; prescription drug coverage will be required for plans beginning in 2009.  However, this mandated benefit package was not without consequences: As many as 15-20% of the uninsured were exempted from the mandate due to affordability issues—a number projected to increase in coming years—while more than 160,000 insured individuals could lose their creditable coverage when the prescription drug component of the mandate takes effect next year.[3]

During the Democratic presidential primaries, neither Sens. Clinton nor Obama have offered a comparable level of detail about the intended scope of their mandates.  However, their frequent repetition of the mantra that all Americans deserve coverage equivalent to Members of Congress could result in a threshold similar to the Wyden-Bennett bill’s Blue Cross Blue Shield FEHBP Standard plan.  But unstated in their rhetoric is the fact that the $431 monthly premium charged for this plan during 2007 exceeds by more than 15% the average cost of group health insurance in the same year, according to the non-partisan Kaiser Family Foundation.[4]  Thus, despite the promises made in her health plan that families who like the coverage they have now can keep it, adopting the FEHBP standard as part of Sen. Clinton’s individual mandate could force many Americans to drop their existing coverage.

Apart from the costs associated with subsidizing an FEHBP-like benefit package for low-income families, some conservatives may have concerns about the implications of such coverage with regard to controlling health care costs.  Utilizing the low-deductible, high-cost plans common in FEHBP could prove antithetical to slowing the growth in health spending, as the third-party payment and first-dollar coverage in such plans tends to encourage beneficiaries to over-consume coverage, particularly for routine expenses.  Furthermore, Massachusetts Institute of Technology professor Jonathan Gruber, a key member of the Connector Board that defined Massachusetts’ mandate, notes that a mandate linked to the FEHBP standard would “rule out high-deductible plans…it would make it very difficult to design one that would qualify.”[5]  Conservatives may be concerned that the millions of individuals and businesses who have utilized Health Savings Accounts (HSAs) to build savings and reduce their premium costs could be forced to find new coverage, potentially increasing costs for business and creating additional disruption in insurance markets.

In addition to requiring an overall level of coverage, a federal mandate could include prescriptions on the types of benefits plans must offer and individuals must purchase.  Although economists such as Mark Pauly of the Wharton School of Business have advocated for an actuarial equivalence model—whereby individuals subject to the mandate would have to purchase benefits equal to a certain dollar level, but carriers could remain innovative in creating benefit packages as they see fit—previous experience from the federal and state levels suggests that such a “hands-off” scenario is unlikely to emerge.[6]  For instance, section 113(b)(3) of the Wyden-Bennett bill requires carriers to make coverage for abortion services available, troubling many conservatives.  Similarly, influence from disease and medical specialty groups in recent years has led to the enactment of nearly 2,000 various state benefit mandates—in 2007, the number of mandates grew at the rate of more than one per state.[7]  On the federal level, the nearly 700 clients registered to lobby on Medicare coverage and reimbursement issues for various constituencies provides some inkling of the way in which health care groups could attempt to influence the construction of a federal health insurance mandate.[8]

Enforcement:  Equally important in determining the effectiveness of an individual mandate are the penalties for non-compliance, and the enforcement mechanisms designed to ensure all individuals purchase and retain coverage.  Sen. Clinton recently suggested that enforcing her mandate might involve “going after people’s wages,” consistent with the Massachusetts health reform proposal that uses the tax code to implement and enforce the mandate.[9]  However, recent experience suggests that enforcing an individual mandate may be neither easy nor clear-cut.

Although the Massachusetts individual insurance mandate is too new to yield much data about its effectiveness, a recent Health Affairs article analyzed previous examples of state and federal mandates to examine their impact.  While the article cites Census data demonstrating that Hawaii—which has had a “pay-or-play” mandate requiring many employers to provide health insurance since the 1970s—has a comparatively low rate of uninsurance, nearly one in ten Hawaiians still lack coverage—and “employment appears to have shifted toward sectors that are not subject to the mandate.”[10]  In addition, state-by-state enforcement of automobile insurance mandates is spotty at best; despite a mandate to purchase automobile insurance, California has more uninsured motorists than uninsured individuals, while the two states lacking mandates have shown rates of uninsured motorists well below the national average.[11]

The practical details of creating a bureaucracy to implement and enforce an individual mandate for health insurance could yield similarly questionable results.  Data matching and coordination among dozens of insurance carriers large and small, tens of thousands of employers, state agencies providing public insurance coverage or pooling options for their citizens, the Internal Revenue Service (IRS), and a new federal agency charged with enforcing the mandate would likely require a level of efficiency heretofore unseen from the federal government.  The years of logistical difficulties for employers associated with the rollout of the “basic pilot” system of employee verification could provide some indication of what individuals subject to a health insurance mandate could face upon its introduction.

Conclusion:  Although some health policy-makers have come to view an individual mandate to purchase insurance as the key step in achieving universal coverage for all Americans, this “single bullet” solution could in practice prove largely unworkable.  No initiative featuring an individual mandate has proposed an enforcement mechanism covering the approximately 12 million illegal immigrants, as many as two-thirds of whom lack health insurance, for whom a federal mandate would likely be ineffective.[12]  Moreover, at a time when recent IRS estimates indicate that individuals underreport their taxes by nearly $200 billion annually, or more than 18% of all individual income taxes, the concept of enforcing a health insurance mandate through the tax code, as Sen. Clinton has suggested, appears a dubious proposition at best.[13]

Some conservatives may also be concerned about two policy “solutions” that have frequently been attached to an individual mandate—“pay-or-play” requirements on business and guaranteed issue and community rating provisions on insurance carriers.  Although Sen. Clinton’s plan claims to exempt small businesses from a requirement to provide health insurance or finance their employees’ coverage, her plan, like the Obama plan and the Wyden-Bennett bill, would impose new taxes on employers that could have a significant negative effect on economic growth.  In addition, all three proposals would require insurance carriers to accept all applicants, and charge all applicants the same premium for insurance coverage.  While the concept of ending “insurance company discrimination” against less healthy people sounds politically appealing, some conservatives might question whether and how charging smokers with lung cancer or other individuals with behaviorally-acquired diseases the same insurance premiums as their healthier counterparts comports with the concept of “personal responsibility” advanced by advocates of an individual mandate.

The broader concerns surrounding an individual mandate focus on its significant new intrusion by the state into the lives of all Americans.  In critiquing the proposals by Sens. Clinton and Obama, former Clinton Administration Secretary of Labor Robert Reich conceded as much, noting that a mandate is “to many Americans, the least attractive [aspect] because it conjures up a big government bullying people into doing what they’d rather not do.”[14]  Secretary Reich’s description of an individual mandate closely mirrors that of F. A. Hayek, who in his landmark work The Road to Serfdom discussed the inherently arbitrary nature of central government planning and the ways in which its growth tends to undermine personal liberty and freedom.  Some conservatives, reflecting anew upon Hayek’s warnings more than half a century ago, may believe that “bullying” the American people into purchasing health insurance, to the extent to which such a mandate would actually be effective, is inconsistent with a belief in individual liberty.

 

[1] “American Health Choices Plan,” available online at http://www.hillaryclinton.com/issues/healthcare/americanhealthchoicesplan.pdf (accessed March 14, 2008), p. 6.

[2] “Barack Obama’s Plan for a Healthy America,” available online at http://www.barackobama.com/issues/pdf/HealthCareFullPlan.pdf (accessed March 14, 2008), p. 5.

[3] Jonathan Gruber, “Massachusetts Health Care Reform: The View from One Year Out,” (Washington, DC: Paper Presented at the Cornell University Symposium on Health Care Reform, September 2007), available online at http://www.epionline.org/downloads/hc_symposium_Gruber.pdf (accessed March 16, 2008), pp. 14-17.  See also Laura Meckler, “How Ten People Reshaped Massachusetts Health Care,” The Wall Street Journal 30 May 2007, available online at http://www.allhealth.org/briefingmaterials/WSJ-MAConnector-941.pdf (accessed March 16, 2008).

[4] Kaiser Family Foundation, “Employer Health Benefits: 2007 Annual Survey,” available online at http://kff.org/insurance/7672/upload/76723.pdf (accessed March 15, 2008), p. 2.

[5] Quoted in Shawn Tully, “Why McCain Has the Best Health Care Plan,” Fortune 11 March 2008, available online at http://www.allhealth.org/briefingmaterials/Fortune-Tully-1122.pdf (accessed March 15, 2008).

[6] Mark Pauly, “Is Massachusetts a Model at Last?” AEI Health Policy Outlook No. 1 (January 2007), available online at http://www.aei.org/publications/pubID.25372,filter.all/pub_detail.asp (accessed March 16, 2008).

[7] Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2008” and “Health Insurance Mandates in the States 2007,” available online at http://www.cahi.org/cahi_contents/resources/pdf/HealthInsuranceMandates2008.pdf and http://www.cahi.org/cahi_contents/resources/pdf/MandatesInTheStates2007.pdf, respectively (accessed March 15, 2008).

[8] Heritage Foundation analysis of Lobbying Disclosure Act reports filed with the Senate Office of Public Records.

[9] Quoted in “The Wages of HillaryCare,” The Wall Street Journal 8 February 2008, available online at http://online.wsj.com/article_print/SB120243891249052861.html (accessed March 15, 2008).

[10] US Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2006,” available online at http://www.census.gov/prod/2007pubs/p60-233.pdf (accessed March 15, 2008), p. 24; Sherry Giled, Jacob Hartz, and Genessa Giorgi, “Consider It Done? The Likely Efficacy of Mandates for Health Insurance,” Health Affairs 26:6 (November/December 2007), available online at http://www.allhealth.org/briefingmaterials/HealthAff-Glied-1118.pdf (accessed March 15, 2008), p. 1614.

[11] Cited in Glen Whitman, “Hazards of the Individual Health Mandate,” Cato Policy Report 29:5 (September/October 2007), available online at http://www.cato.org/pubs/policy_report/v29n5/cpr29n5-1.pdf (accessed March 15, 2008), p. 10; Giled et al., “Consider it Done?” p. 1615.

[12] Dana Goldman, James Smith, and Neeraj Sood, “Legal Status and Health Insurance among Immigrants,” Health Affairs 24:6 (November/December 2005), pp. 1640-1653.

[13] Internal Revenue Service, “Tax Gap Update: February 2007,” available online at http://www.irs.gov/pub/irs-utl/tax_gap_update_070212.pdf (accessed March 16, 2008).

[14] Robert Reich, “The Road to Universal Coverage,” The Wall Street Journal 9 January 2008, available online at http://online.wsj.com/article_print/SB119984199293776549.html (accessed March 16, 2008).