Insurers call them “young invincibles”: twentysomething hipsters who will spend $4 on a café latte or $80 on a monthly gym membership but won’t buy health insurance. “Health insurance wasn’t even an option,” 24-year-old aspiring designer Andrew Ondrejcak told the magazine New York in March 2007. “I was flying through my savings, trying to get a career started. . . . The last thing I’m going to do is spend $300 or whatever on insurance, you know?” Ondrejcak’s personal health plan: running, yoga, and vitamins. The cost: acute appendicitis and a $37,000 hospital bill. Ondrejcak and others like him are poster children for an individual insurance mandate, which would require all Americans to buy health insurance or pay a penalty. But mandates wouldn’t fix the nation’s health-care woes.
The debate over mandates makes for compelling political theater. It’s a bitter point of contention between the two Democratic presidential candidates: Hillary Clinton ridicules Barack Obama’s mandate-free health-care plan for leaving millions uninsured; Obama answers that mandates will force working-class Americans to buy policies that they can’t afford. But Republicans shouldn’t feel smug about the Democrats’ dustup, since mandates have become attractive to policymakers across partisan lines.
Liberal proponents think of mandates as social insurance. Many of the uninsured are younger and healthier, they note, so forcing them into insurance pools will result in lower average premiums. Some conservatives, meanwhile, argue that uninsured people use emergency rooms but often don’t pay, offloading their health costs onto the rest of us. It’s not simply about coverage, in other words; it’s also about personal responsibility. At a debate in Texas, Clinton made a similar argument, claiming that without mandates, “every one of us with insurance will pay the hidden tax of approximately $900 a year.” Conservatives like Duke University health expert Christopher Conover, former Massachusetts governor Mitt Romney, and former Republican National Committee chairman Ken Mehlman have all made some version of this claim.
But both the liberal and conservative arguments are less persuasive than they seem at first glance. Health-insurance companies pool risk in much more complicated ways than most people assume. Americans cannot be classified into one group for insurance purposes; every health-insurance company has numerous pools, dividing people by state, size of employer, and many other characteristics. Further, evidence shows that costs are influenced much less by mandates than by consumers’ ability to buy a broad range of competing health-insurance products. An insurance policy for a single male resident in mandate-enforced Boston, for example, costs five times more than a policy for his identical twin in mandate-free Tucson. This cost disparity is due in part to the Bay State’s many insurance regulations, which limit the types of policies that consumers can buy and drive up prices. As for the responsibility argument, uncompensated care costs federal and state governments roughly $40 billion a year—in a health economy that tops more than $2 trillion annually. That’s a very small percentage of the total expenditure and certainly doesn’t amount to a hidden tax of $900 per person.
Obama is right to oppose mandates. He’s right, too, in believing that one of the biggest obstacles to getting more Americans insured is the high cost of premiums. A third of uninsured Americans have family incomes greater than $50,000; 17 percent have incomes in excess of $75,000. They are opting not to buy coverage because they think that paying thousands annually, while perhaps not seeing a doctor for years on end, is a bad deal.
But Obama fails to live up to his own arguments when it comes to making the purchase of health insurance more attractive for individuals. He favors pouring additional federal funds into the health-care system, including subsidies for individuals and money to compensate employers for catastrophic health-insurance costs. Having Uncle Sam foot more of the bill is a nice gesture, but it doesn’t fundamentally change the way people obtain health care. Health costs are likely to keep rising.
Rather than handing out more government subsidies, we should inject more competition into markets by allowing people to buy health-insurance policies across state lines. This would give the uninsured a broader menu of affordable options and allow companies to market national plans. Hospitals and doctors could also be required to post their prices for common procedures, including rates that the uninsured will pay. Combined with medical malpractice reform and repeal of state regulations limiting the availability of inexpensive retail-care clinics, these reforms would help lower prices and give consumers greater access to basic and preventive care. An even bolder approach would be to end 60 years of bad tax policy and scrap the employer deduction for health benefits, replacing it with a tax credit for every individual and family. Notably, these are all ideas that John McCain, not known for his focus on domestic policy, has embraced.
Mandates offer the illusion of fixing our health-care problems by extending insurance to all. The truth is that there is no silver bullet for reform, and one national “fix” will probably make things worse. Rather than mandate participation in a broken system, Washington should concentrate on basic, sensible reforms and then let markets experiment. For our health-care ailments, competition is the best medicine.