Fact check: The individual mandate isn't a 'primary source of funding' for the ACA

Document titled, Affordable Care Act
The individual mandate indirectly made the ACA more affordable by bringing the healthiest individuals into the risk pool, but it isn't a main funding source for the law. (Getty/Designer491)

Not only is President Donald Trump incorrect in his claim that Republicans have repealed the Affordable Care Act, experts say the logic he used to justify that claim doesn’t stand up to scrutiny. 

“When the individual mandate is being repealed, that means Obamacare is being repealed, because they get their money from the individual mandate,” Trump said at a Cabinet meeting on Wednesday. 

Similarly, during an event to celebrate the passage of Republicans’ tax overhaul, Trump said the individual mandate “was a primary source of funding of Obamacare.” 

RELATED: Trump claims he repealed the ACA. Here's why he's wrong

The individual mandate—which imposes a tax penalty on those who don’t maintain health coverage—indirectly made the ACA more affordable by bringing the healthiest individuals into the risk pool, according to MIT economist Jonathan Gruber, who helped design the law.

However, “the individual mandate was not technically a funding source for the law,” he said in an email. Rather, the main funding sources are other taxes, a Medicare tax on high-earners, reduced payments to Medicare Advantage insurers and a reduced growth rate in Medicare reimbursement to hospitals.

Health law expert and Washington and Lee University professor emeritus Timothy Jost had a similar take. “The president is, as is often the case, confused or ill-informed,” Jost said in an email. 

He pointed to a recent Congressional Budget Office analysis, which projected (PDF) that repealing the individual mandate would reduce tax revenues by $43 million over 10 years. By comparison, the CBO has estimated (PDF) that eliminating some of the other taxes and tax limitations imposed by the ACA could reduce revenues by about $560 billion. 

“It was always clear that the purpose of the individual mandate was not to raise revenue, but rather to encourage Americans to get covered, thus reducing unpaid medical bills—which are passed on to all of us—and stabilizing health insurance risk pools,” Jost added.

Indeed, the American Academy of Actuaries and multiple healthcare industry groups had urged Congress to keep the mandate intact, warning that a repeal would leave millions more insured, raise premiums and potentially cause insurers to exit the marketplaces. The Congressional Budget Office has estimated that repealing the mandate will increase the number of uninsured people by 13 million, increase premiums by 10% and reduce the federal deficit by $338 billion over the next 10 years.

However, Robert Graboyes, a senior fellow with the Mercatus Center at George Mason University, told FierceHealthcare that he isn’t convinced that the individual mandate was ever strong enough in the first place. 

When the ACA was being drafted, the provision ended up being watered down because it was “politically problematic.” As a result, not only does the government have few means to enforce it, there are also numerous exemptions. 

“The individual mandate was meant as a sort of a glue to hold the rest of the law together, but instead it’s had roughly the strength of a post-it’s adhesive—not very strong at all,” Graboyes said.

He added that repealing the individual mandate will probably not save as much money as some might think. 

“My guess is the financial numbers, like the coverage numbers, would be smaller” than the CBO has estimated, Graboyes said.