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Tuesday, March 27, 2012

Why Aren't Those Upset About Government-Mandated Health Insurance Also Upset About the Government's Mandate We All Have Children?

The debate over the "individual mandate" in the Patient Protection and Affordable Care Act has been framed in terms of a requirement that all Americans buy health insurance. But is it really such a mandate? The law calls for an initial "penalty" of at least $95 but up to 1% of income. These dollar values increase over time to eventually 2.5% of income with a maximum of $2,085. But not everyone without insurance will have to pay these penalties. Other provisions of the law make it so that only those with the financial ability to do so are obligated to pay.

Would there still be this sort of outrage if the law had some minor rhetorical tweaks? What if the Affordable Care Act essentially imposed a proportional tax increase upon everyone in the nation but also established an offsetting tax credit to anyone who had health insurance? The net result is the exact same as the "penalty." A person ends up having up to $2,085 less if he has the means to purchase health insurance but choosse not to while those who purchase health insurance enjoy the benefits of the tax credit. 

If providing a financial benefit for certain conduct by way of a tax credit is a "government mandate" then many Americans will be surprised to learn that they have been mandated to do a lot of things. Far more personal and invasive than health insurance, the federal government has apparently mandated that we have children. Those who choose to ignore the government mandate and have no children are forced to pay the government-mandated penalty of up to $6,000 per year. The government has also mandated that we all buy homes. In America, there is apparently no right to rent and failure to comply with this mandate forces you to pay an $8,000 penalty. And it's hard to believe that Fox News isn't on the air with round-the-clock coverage of the government mandate that we all buy geothermal heat pumps, residential wind turbines, and solar energy systems

These are all matters for which the federal government provides a tax credit. The tax credit for each is obviously far more costly than that applicable in the health insurance context but like with the health insurance "penalty," the credits for the programs identified above cover only a small portion of an individual's actual cost. Yet inexplicably, there's no outrage or lawsuits condemning these programs and unconstitutional government overreach. 

This provision of the Affordable Care Act is referred to as a "penalty" and a "mandate" by both sides primarily for rhetorical rather than practical purposes. To those who oppose the law, it bolsters their claim that this is extraordinary government overreaching. To those who support the law, this choice of words is designed to convince people that obtaining insurance is necessary, which is essential to ensure the effectiveness of the insurance pool and to deter reluctant individuals from being guided by the raw economics of paying for health insurance versus paying the "penalty." 

In a practical sense, the individual mandate is absolutely nothing more than the government incentivising certain conduct through the tax code and thus far from revolutionary.

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