In 1991, economist Mark Pauly was the lead author of a Health Affairs paper attempting to persuade President George H.W. Bush and his administration to adopt a universal health-care proposal that would keep the government from eventually taking over the sector. “Our view is that excessive government intervention will make matters worse,” wrote Pauly and his co-authors. “Our strategy, therefore, is to design a scheme that limits governmental rules and incentives to the extent necessary to achieve the objectives.”
At the heart of that strategy was the individual mandate, which would go on to be promoted by congressional Republicans, the Heritage Foundation, and Massachusetts Gov. Mitt Romney before being adopted by Democrats and becoming a bete noire of conservatives. I spoke to Pauly earlier this afternoon, and an edited transcript of our conversation follows.
Tell me about your involvement in the development of the individual mandate.
I was involved in developing a plan for the George H.W. Bush administration. I wasn’t a member of the administration, but part of a team of academics who believe the administration needed good proposals to look at. We did it because we were concerned about the specter of single payer insurance, which isn’t market-oriented, and we didn’t think was a good idea. One feature was the individual mandate. The purpose of it was to round up the stragglers who wouldn’t be brought in by subsidies. We weren’t focused on bringing in high risks, which is what they’re focused on now. We published the plan in Health Affairs in 1991. The Heritage Foundation was working on something similar at the time.
What was the reaction like after you released it?
There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea [It did make it into a bill -- Ezra], but Democrats in Congress said it was “dead on arrival.” So that was the end of my 15 minutes.
Was the constitutionality of the provision a question, either in your deliberations or after it was released?
I don’t remember that being raised at all. The way it was viewed by the Congressional Budget Office in 1994 was, effectively, as a tax. You either paid the tax and got insurance that way or went and got it another way. So I’ve been surprised at that argument. But I’m not an expert on the Constitution. My fix would be to simply say raise everyone’s taxes by what a health insurance policy would cost — Congress definitely has the power to do that — and then tell people that if they obtain insurance, they’ll get a tax break of the same amount. So instead of a penalty, it’s a perfectly legal tax break. But this seems to me to angelic pinhead density arguments about whether it’s a payment to do something or not to do something.
That gets to one of the central questions in this argument, which is whether the individual mandate is a penalty for economic inactivity or whether it’s part of a broader system of regulations affecting a market for health care that we’re all participating in, whether we’re buying insurance that day or not.
I see it in the latter way. We thought it was a good idea to do everything possible to encourage people to get insurance. Subsidies will probably pick up the great bulk of the population. But the point of the mandate was that there are a few Evil Knievals who won’t buy it and this would bring them into the system. In our version, the penalty was effectively equal to the premium of a policy. You paid the penalty and you got the insurance. That’s one of my puzzlements here: In the new law, the actual level of the penalty is quite small compared to the price of a policy. It’s only about 20 percent of the cost of a policy.