Policy Documents

CBO: Getting Rid of Individual Mandate Saves Taxpayers Billions

Benjamin Domenech –

It's important to keep in mind that the individual mandate's removal from Obamacare, while making the whole thing more palatable for the business community and individuals to accept, also has the added bonus of billions of dollars in taxpayer savings -- at least according to the Congressional Budget Office in their analysis in June.

Attached is a PDF of CBO's projections from June predicting what would happen if the mandate was repealed, but the rest of the bill left intact (emphasis mine):

CBO and JCT estimate that, relative to current law, the elimination of the mandate would reduce insurance coverage among healthier people to a greater degree than it would reduce coverage among less healthy people. As a result, in the absence of a mandate, those who enroll would be less healthy, on average, than those enrolled with a mandate. This adverse selection would increase premiums for new non-group policies (purchased either in the exchanges or directly from insurers in the non-group market) by an estimated 15 to 20 percent relative to current law. Without the mandate, Medicaid enrollees would also have higher expected health spending, on average, than those enrolled under current law. Thus, the budgetary savings from removing the mandate would be less than proportional to the reduction in insurance coverage.

Under the proposal, the loss of revenues from the individual mandate penalties would increase the deficit by about $17 billion over the 2010-2019 period, but the savings from reduced subsidies and other sources would be greater. Of the $219 billion in offsetting savings over the 2010-2019 period, most (about $113 billion) would come from lower Medicaid enrollment. Exchange subsidies would be about $39 billion lower. Primarily because of the indirect effects of reductions in employer coverage, the removal of the mandate would increase tax revenues by about $60 billion. The remainder of the budgetary effect would come from a modest increase in employer penalties (about $5 billion) and a modest reduction in small business tax credits (about $2 billion). The net savings would thus total $202 billion through 2019.

The reason for this is obviously a lowering of outlays for those millions of people who are trapped in Medicaid by the current plan. But this CBO analysis, of course, says nothing about the ramifications for the market of private insurers, which most experts agree would collapse rapidly in the absence of an individual mandate thanks to the raft of anti-market decisions the federal government is forcing upon them under President Obama's law.

Benjamin Domenech (bdomenech@heartland.org) is managing editor of Health Care News.