Will the “word” make a difference

When the Supreme Court declared the individual mandate constitutional as a tax it may have inadvertently decreased compliance.  It appears that people are more likely to comply if they know there is a penalty as opposed to a tax.

Penalties suggest that you have something to do and that failing to do so is wrong.  A tax on the other hand is perceived as optional.  So in the case of health care reform, the Supreme Court’s ruling may make the individual mandate be perceived as optional as opposed to mandatory.

The intent of the individual mandate is to encourage as many people as possible to buy health insurance.  Increasing the number of insured, both sick and healthy, increases the overall pool and spreads risk and in theory should reduce rates for everyone.  If the individual mandate is not perceived as mandatory many people may opt out and just pay the tax especially given the fact that the tax will cost significantly less than the cost of health insurance. 

A recent study of day care centers showed that parents were more likely to show up late for their kids once a lateness penalty was instituted than they were when the only penalty was guilt.  The penalty was viewed as an option “If I’m willing to pay a few extra dollars, my kid can stay at day care a few minutes longer”….

We all pay taxes and I doubt any of us view a tax as being imposed for doing something wrong, after all, the only guarantees in life are death and taxes.  Because the individual mandate is a tax and not a penalty, compliance may be more difficult to achieve.

About Craig Thompson

I am a young professional with two great sons, and I work in the healthcare setting. I am employed in hospital administration and serve as Chief Operating Officer at Golden Valley Memorial Healthcare in Clinton, Missouri. These are challenging and exciting times in healthcare and my blog will focus on healthcare, raising boys or being raised by boys, and living in mid America.
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