It is not surprising given Jonathan Gruber’s strong support for an individual mandate and his prominent role in both “Romneycare” and “Obamacare” that he is working hard to defend the idea with a new paper for the Center for American Progress attacking “alternatives” to his preferred policy. Overall, I find his case weak and extremely misleading on several levels. In the memo, Gruber only looks at the two of the many alternatives, automatic enrollment and late penalties.

Overstating the usefulness of the individual mandate

To begin with Gruber admits that he believes the impact on insurance of the individual mandate, and therefore the need for it, is dramatically larger than what the CBO has concluded. From the memo:

CBO estimates that removing the individual mandate from the new federal health law will cut the number of individuals newly insured in half (from 32 million to 16 million), while I estimate that it will cut the number of newly insured individuals by three quarters (from 32 million to 8 million).

The difference between 8 million and 16 million is huge. Gruber’s assumption that a much larger number of the uninsured need to be strongly coerced into buying insurance will obviously result in him concluding that the less coercive methods examined will not work as well.

Even Gruber admits automatic enrollment alone would be fairly effective

One of the mere two alternative Gruber looks at is a robust automatic enrollment, and he even admits that while not as good as his preferred choice of an individual mandate, it would be effective at significantly increasing insurance.

Thus, in the most generous case of full auto-enrollment (including those not offered employer-sponsored insurance), I estimate that:

  • Twenty-four million persons would gain insurance coverage, as opposed to the 32 million that would gain coverage with the mandate. Partly this is because the erosion of employer-sponsored insurance would double if there were no individual mandate in the new health reform law; that is, twice as many individuals would lose their employer coverage as would under the mandate.
  • Since young healthy individuals would opt out of coverage, premiums in the nongroup market would rise by about 11 percent.
  • Strikingly, though, I estimate that net government costs would not fall at all. This is because such a larger share of enrollment under this alternative comes through government-sponsored insurance. Under the Affordable Care Act with the individual mandate, about half of the net gain in coverage is in public insurance; under auto-enrollment 80 percent of the net gain in coverage comes through public insurance. That is, under this option, 8 in every 10 newly insured are gaining coverage through government-provided insurance.

Gruber believes automatic enrollment will result in an extra 16 million covered, which is a significant increase, although short of the extra 24 million expected with a mandate. Given his bias for the need to coerce and his admitted lack of good data to base his estimate on, I suspect different analysts could easily come to a different conclusion, finding it a slightly more effective alternative than Gruber.

I also find Gruber’s stated “problems” with automatic enrollment to be bizarre. He claims

[E]mployers should actively oppose auto-enrollment for health insurance: even if it encourages healthier employees to join, total employer spending rises.

A strange complaint given that the whole point of the individual mandate is to encourage this exact same behavior causing more employees to sign up for their employer insurance.

In addition, I find it very comical he is worried that

[C]harging individuals premiums for insurance for which they did consciously enroll will raise a host of very difficult political and potentially constitutional issues.

I fail to see how this raises any less political or constitutional issue than forcing people to buy insurance with a mandate. With automatic enrollment, they can opt-out at any time.

Late enrollment penalties work relatively well for Medicare Part D, but Gruber claims they wouldn’t work for the new health care law

Gruber admits that Medicare Part D used a late enrollment penalty instead of a mandate and saw a high level of sign-up, but claims it won’t work for the new health care law. His logic seems to be that Medicare Part D was a good deal, but this law is a pretty awful deal, so people need to be coerced into buy it.

Both Medicare Part D and Part B are heavily subsidized, with the government picking up approximately 75 percent of the insurance costs. For many individuals who would be targeted for late enrollment penalties outside of employer-sponsored insurance under the Affordable Care Act, subsidy rates will be much lower, if not zero.

Moreover, the seniors being assessed these penalties particularly value the insurance they are receiving and would likely enroll at high rates even absent penalties. This will not be true for many individuals of all ages (and their dependents) who don’t voluntarily choose to enroll under the Affordable Care Act without the individual mandate. This conclusion will be further enforced by the social dynamic around universal enrollment in Medicare at age 65.

Gruber claims a late penalty would still increase the number of insured, but by only 12 million instead of the 8 million with no mandate or penalty.

There are many other and better alternatives that Gruber ignored

There are many more and sometimes better alternatives that Gruber didn’t address. There is single payer, a stronger employer mandate, a larger expansion of Medicaid, more subsidies, or a default basic public insurance plan. Not only has the CBO previously modeled the effect of a strong employer mandate and found it would increase the number of people who get insurance, but the strong employer mandate in Hawaii is responsible for why they have one of the highest rates of people insured.

Important also, you don’t need to use this policies in isolation as Gruber does. You can replace the mandate with a combination of several alternatives that work together, like both an auto-enrollment and a late penalty. Gruber admits in isolation both increase the level of insured, so it is likely combined the net effect would at least be slightly greater than either alone. It is frankly weird that Gruber didn’t model the two policies used in tandem, since they aren’t mutually exclusive.

Gruber concludes his argument with an extreme distortion of reality

The main reason I simply can’t take Gruber’s argument seriously is that he concludes with a clear and provable falsehood:

First, no alternative to the individual mandate can cover more than two-thirds as many uninsured as the Affordable Care Act does as passed by Congress and enacted into law. Second, no alternative to the mandate saves much money—even removing the mandate altogether, which cuts the number of uninsured covered by 50 percent to 75 percent but only reduces government spending by 25 percent to 30 percent.

Unless he is playing a purposely deceptive game with semantics about what is an “alternative,” this is a provably false statement. Basically, every health care policy expert will admit that single payer–Medicare for all–would reduce the number of uninsured more effectively than an individual mandate. Just because an academic chooses to ignore other alternatives or combinations of alternatives doesn’t mean they cease to exist.

Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at http://pendinghorizon.com

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