Sunday, November 08, 2009

Will I go to jail if I don't buy health insurance? No.


The newest meme of opposition to the health insurance plan is that if you don't obey the individual mandate to purchase health insurance, you will go to jail.

This is false.

Section 501 of the House bill imposes a tax of 2.5 percent of adjusted gross income. You are exempted from the tax if you already have qualifying health insurance from your employer, if you receive benefits from Medicare or Medicaid, if you are a dependent, if you are overseas, and if you have religions objections. You also get subsidies in the form of tax credits and tax deductions if your income is below a certain level; and if you are in poverty you are already exempted because you participate in Medicaid.

If you are not exempted, and you don't purchase health insurance, you just pay a higher tax. You don't go to jail.

Now, if you refuse to pay your taxes, the government will fine you in the same way that it does whenever you refuse to pay your taxes. Prison is also a possibility for the most determined tax cheats, although generally speaking prison terms are reserved for the most egregious violations of the tax laws.

So if you have the following choices: If you are not exempted, you must buy qualifying health insurance. If you'd rather not, for whatever reasons, you can pay a higher tax. If you pay your taxes, nobody will come after you.

If you don't want to pay your taxes, the government will punish you, not because you object to buying health insurance, but because the government doesn't like it whenever you don't pay your taxes. It also doesn't like it when people don't pay their taxes because they object to the government's defense spending.

You might object: the individual mandate tax is different than general revenues going to defense spending. This is a tax directed at people if they don't do something. That is true, but in this case the tax is correlated to the costs that you impose on others by failing to join the risk pool for health insurance.

If lots of people (and especially young and mostly healthy people) don't buy health insurance, the cost of insurance goes up for everyone, and it is passed on to others in the form of higher premiums. In addition, people who don't buy health insurance tend to wait until their health problems are severe and then use emergency services; they may contract communicable diseases (which they may pass on to others) or they may become disabled. All of these costs get passed along to others--in the form of higher premiums and higher costs for hospitals and insurers--or they have to be absorbed by federal and state governments through programs for the poor or the disabled.

So if you don't buy health insurance, you are increasing costs for other people. The federal government is taxing you to recoup some of those costs. An analogy would be taxes on alcohol or tobacco, although these taxes are usually worked into the retail price of the goods so that people don't even have the opportunity to refuse to pay them. Another example would be taxes on an enterprise that is creating additional costs to the environment through pollution; the government taxes you if you don't purchase and install anti-pollution equipment. If people don't purchase the pollution-control equipment and won't pay the tax, the government will fine them too.

Again, you may object: isn't the argument that you are imposing costs on others really an argument that young and healthy people are subsidizing other people? Why should I be forced to pay taxes that benefit others more than they benefit me? The answer is that tax policy does this all the time. Progressive income taxes, for example. tax subsidize middle class and poor people at the expense of rich people. You can't get out of paying taxes just because your tax dollars subsidize people you'd rather not subsidize. This is as true of rich people who object to subsidizing the poor and middle class as it is of people who have ideological objections to government health care programs.

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