CBO: Repealing Insurance Mandate Good for Budget, Bad for Us

The Congressional Budget Office released a one-stop buffet of deficit reduction ideas today, and something tells me conservatives will latch onto its acknowledgement that repealing the embattled health insurance mandate would reduce the deficit by almost $300 billion (scroll to page 300).

But read beyond the top line statistic and the picture gets more complicated.

Remember, the individual mandate is part of a three-legged stool that supports health care reform. The first leg is the mandate. The second leg are health care subsidies. The third is insurance reforms. Striking one leg makes the other two wobble. No mandate means fewer health care subsidies for low-income folks forced to buy insurance. But no mandate also means higher health care premiums for those who choose to buy insurance.

Here's how repealing the insurance mandate would impact the budget in two easy steps. First, most savings would come from lower Medicaid enrollment. Second, federal subsidies to help folks buy insurance through the exchanges would decline by $69 billion.

But a deficit hawk shouldn't necessarily embrace chucking the mandate for the sake of accounting. The CBO finds that repealing the mandate would increase the number of people without health insurance by 16 million people in 2021. From the CBO: "About 4 million fewer people would have employment-based coverage; about 6 million fewer people would obtain coverage in the individual market; and about 6 million fewer people would have coverage under Medicaid or CHIP."

CBO also estimates that striking the mandate would increase premiums for policies in the individual market by "15 percent to 20 percent." The logic: If you take out healthy young low-income people (who are more unlikely to buy insurance), the insurance pool gets less healthy, less young, and more risky.

The upshot is that repealing the health insurance mandate would trim our deficit at the cost of more uninsured people and higher health care premiums.