The Single Word That Could Make or Break Obamacare

There's a simple question that could determine the success of the health care mandate -- but no one's asking the candidates.



Obamacare has been one of the yardsticks of Obama's term in office and one of the touchstones of the 2012 election. Last night's presidential debate was no exception, with health care reform mentioned at least half a dozen times. But an important piece of the discussion has been missing: is the health care law a tax or a penalty?

It turns out how Americans perceive the health care mandate could affect whether they end up purchasing health insurance at all, and therefore whether the law achieves what it was meant to do. During the next four years, the way the president chooses to frame the law will have a large impact on its policy future.

The health care law's individual mandate requires that Americans purchase health care insurance. The financial consequences of refusing will be the same whether we say that the mandate requires you to pay a tax or pay a penalty. The purely rational actor would not quibble over terminology, then.

Or so we would think, if it weren't for an entire field of research known as behavioral economics, which shows that our decisions are about more than just dollars and cents. In particular, the way we frame the options we have influences which option we choose. For instance, people will tend to spend money more if they think the money they are receiving is a $1,000 "bonus" payment rather than a thousand dollar "rebate" payment. The dollar amount might be the same, but the framing of it is different.

In other words, what we call things matters. And labels matter when it comes to the health care law as well. Much discussion was devoted to the political costs of framing the mandate a tax as opposed to a penalty, but much less discussion was given to the policy costs of this label. (Solicitor General Donald Verrilli raised this issue briefly during oral arguments before the Supreme Court.) With the mandate not due to go into effect until 2014, it is too early for us to have direct empirical data about how framing will matter for the health care law in particular, except the data showing that Americans still have "confusion" about what the law is. But there is extensive experience and research suggesting that framing it as a tax might reduce the number of people who comply.

First of all, it may be that the threat of moral judgment makes the command to buy health insurance sound more like a true mandate. Before the Court's decision, President Obama told ABC News that calling the mandate a penalty was purposeful, an attempt to communicate to people that they have a "responsibility" and that failing to live up to it would not be considered "fair." Massachusetts Governor Deval Patrick kept pushing the penalty framing even after the Court's decision because he felt that only the penalty language signaled an aggressive attempt to deal with problematic "freeloaders." Penalties suggest that you have to do something, and that failing to do it is wrong. Calling something a tax, on other hand, makes the matter appear more of a choice: buy health insurance or pay the government for failing to do so--we don't care.

It is precisely the type of moral judgment the penalty label brings that can be effective at getting people to do something we want them to do--even more than making them pay for not doing it. A study at several Israeli day care centers found that people were more likely to show up late for their kids after a lateness fine was instituted than when latecomers suffered only shame. It turns out that moral judgment was better at generating compliance than a fine.

On the flip side, tax labels are problematic because we dislike a government charge more when we slap a tax label on it. For example, calling a carbon offset program a carbon tax in one study led far fewer people inclined to pay the charge.

In the context of the health care mandate, this so-called tax aversion could lead more people to buy health insurance to avoid the disfavored tax. Given the negative feelings the tax label generates for associated programs, though, it is more likely that tax aversion weakens support for the mandate and lowers compliance--for either buying health insurance or making the alternative payment. But note that tax aversion may not cut equally across the board. In the study cited above, Democrats supported the carbon charge even with the tax label. So avoiding the tax label may be even more important for getting Republicans and Independents to pony up for health care.

Presented by

Naomi Schoenbaum is an associate professor of law at George Washington University Law School.

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