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February 01, 2013 10:45 AM Mountains, Molehills, and the Individual Mandate Penalty

By Austin Frakt

Tom Miller makes some worthwhile points about generalizing the Massachusetts experience with an individual mandate to the nation. And then he says some other things. I’m not going to repeat or dissect them, as they’re just one click away. I’ll just say this: I think he takes things a bit far, turning a molehill of a difference of opinion into a trumped up mountain of a charge of political bias. Silly. Very silly. Two could play at that game. Forever. What’s the point?

Well, my point was that based on the mandate size alone I’m not that worried about severe adverse selection into health insurance markets. Of course I could be wrong. It’s just my best guess. And of course the risk of destabilizing adverse selection would be lower if the penalty were larger. I have no problem with a larger penalty. As I recall, many who opposed the law (with an AEI affiliation or otherwise) did have a problem with the mandate penalty. It was unconstitutional, they said. Oops. Well, it was just their best guess. I forgive them.

Look, there are myriad ways the health insurance exchanges and markets could falter. One big way is through a self fulfilling prophesy of expectations of failure, repeated again and again by those with large megaphones. That is their right, don’t get me wrong. I do not demand that everyone like the law or muzzle their opinions. There are parts I don’t like myself. And I say so.

But failure on these grounds, which is where I’d look for it, is not a problem with the mandate penalty size per se. That’s a different problem. If the law receives the level of support it did in Massachusetts I think it’ll work as intended. If not, I’m less certain. Some places it will, some it may not. It’s a good question whether we should solve the effect of insufficient support with a larger penalty. Can anyone see a problem with that?

[Cross-posted at The Incidental Economist]

Austin Frakt is a health economist and an assistant professor at Boston University's School of Medicine and School of Public Health. He blogs at The Incidental Economist.