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What’s wrong with individual health insurance mandates by Claudia Chaufan

Individual health insurance mandates have lately been hailed as the solution to the health care crisis in America. Mandates to buy health insurance have been included in legislative proposals at the state level – for instance, by Gov. Schwarzenegger and Speaker Nunez, in their “Health Care Security and Cost Reduction Act”, or at the federal level, by Hillary Clinton in her “American Health Choice Plan”. Can mandates achieve universal access to health care and control rising costs of medical care? This article explains why they can’t.

Lately, legislation including a universal mandate – a legal obligation that everybody purchase a health insurance policy – has been hailed as the solution to the health care crisis in America. At the state level, mandates have been included, for instance, in Gov. Schwarzenegger and Speaker Nunez’s “Health Care Security and Cost Reduction Act”, and at the federal level, by Hillary Clinton in her “American Health Choice Plan”. Yet many of us remain skeptical. Why? After all, if everybody is forced to buy a health insurance plan – maybe with a subsidy if you are “poor enough” – would this not resolve the problem of uninsurance? Maybe so. But the real question is: would mandating universal health insurance guarantee universal access to medical care? And the short answer is no. 

A longer answer would include that many health reform proposals
promising heaven on earth rely on fantasy numbers, not facts: for
instance, there is reason to believe that Swcharzenegger’s stillborn
legislation would have run out of money by the fifth year of operation.
Indeed, often these proposals offer no numbers at all, fantasy or
otherwise: a sound study estimating the capacity of “Hillary Care” to
guarantee that those who “like” their current health insurance “will be
able to keep it”, as Hillary promises, has yet to be
produced.  But worst of all is the tendency, popular among many health
care experts, including M.I.T. professors, to commit the capital sin in health policy: confusing universal health insurance with universal access to
comprehensive medical care.

Now, it could very well be that these experts are not confused, and
only hope that ordinary citizens won’t be smart enough to tell the
difference – that we will all be convinced if only they repeat
“universal” enough times. Whichever the case may be, as political
analyst Robert Kuttner recently pointed out, there is a fundamental
difference between “universal” social health insurance, such as
proposed by single payer health care reform, and a “universal” health
insurance mandate
.
And it is not merely semantic, because clearly in both approaches
“universal” means “everybody”. It is a difference of substance.

In a social health insurance system everybody gets insurance by virtue
of being a citizen or a resident, everybody contributes to the system
according to ability to pay, and everybody is guaranteed an amount and
type of services. This is possible because the system, whose ultimate
goal is to provide the most and best care to all participants with
whatever budget it has, counts on a predictable influx of money, has as
sole incentive finding the most efficient ways to spend it, is able to
estimate the needs of participants, and can utilize their collective
purchasing power to bargain for best prices of services and goods.
In contrast, in a system based on mandates, nobody “gets” anything,
really. Rather, everybody is compelled to buy a policy, by law. Hence
guaranteeing a decent amount of medical care to the population at
large, that many consider a social problem, is turned into a “problem”
of “every” individual or “every” family, who are forced to
comparative-shop for affordable policies, while second-guessing current
or future medical needs as they decide which is the best investment for
their resources – a more comprehensive health policy, rent, or food.

A key assumption underlying individual mandates is that forcing an
influx of “customers” into the health insurance marketplace, flooded
with private insurers’ “products” made to suit a range of personal
preferences will, through the powerful and reveered “invisible hand”,
improve the quality of medical goods and services and bring their
prices down, such that on average they will be affordable to everybody.
This of course would be true, if shopping for medical services were
functionally equivalent to shopping for designer shoes. Faced with an
offer, you are always free to take it or leave it, depending on how
good the deal is. If it is not good enough, you can always wait until
the next Christmas sale. Or you can decide that you are not so crazy
about those shoes after all, and shop for something else, until those
recalcitrant shoe sellers realize that if they want your dollars, they
have to behave reasonably, and offer the best they can at the least
possible price.

But of course nobody needs a doctoral degree to understand that the
need for medical care cannot be compared with the want for designer
shoes. Nor does one need a doctoral degree to understand that a mandate
to buy, for instance, drivers’ insurance, does not guarantee full
protection against the expenses incurred if one gets into a car
accident. While some policies might cover those expenses, they are
unlikely to be cheap. What the current mandate to buy drivers’
insurance “guarantees”, if the word makes sense at all, is that, given
the law, we won’t get in trouble with it if we are stopped by the
police. Which is why nobody claims we have “universal drivers’
insurance”. Likewise, whichever health insurance policies we may afford
to buy, if there is a mandate, it will only “guarantee”, aside from a
steady pool of clients for private insurers, that we are in compliance
with the law when we file our taxes (assuming this is how the mandate
is enforced). 

Under our current system, which relies heavily on private insurance,
paying for medical care is insurers’ greatest “cost”. Now, like any
other business, insurers’ ultimate goal is to control the costs of
running their business while maximizing profits. Hence the increasingly
bewildering range of “choices” of “insurance products” that make sure
that insurers will not have to pay more for medical care than they
collect in premiums and that there remains enough spare change to keep
CEOs and shareholders happy.
And because profit is the essence of business, however much “mandate”
fans boast they will force insurers to not turn people down on the
basis of “pre-existing conditions”, they will not – they cannot – force
them to sell policies that will not meet insurers’ profit maximizing
goals. So mandate supporters remain conveniently vague whenever asked
how much “consumers” will have to pay for policies offering more than
minimum coverage or even what will count as minimum coverage, hoping
that we won’t notice when they fail to compute out-of-pocket costs to
“consumers” – deductibles, co-pays, co-insurance – as “costs”.

Or worse, they hope that by repeating scare stories backed by fanciful
(and distorting) statistics Americans will end up believing that the
only alternative to the current mess is a mandate’s version of
“universal health coverage” and that a social insurance system will
inevitably cause an invasion of alien Reds, with long lines in cold
winter mornings in which everybody is given the same loaf of bread
(substitute “sees the same doctor” or “receives the same medicine”),
however far this scenario is from the daily reality of Canadians,
Brits, Germans, Spaniards, and so forth.

Now, the point is not to force business to do business at a loss. The
point is why, when it comes to health care, we should insist on a model
that confuses health care with designer shoes and that has failed to
deliver the goods. Because it is clear that choices that are
meaningful, not of health policies but of doctors and services when and
to the extent we need them are increasingly out of reach for ordinary
Americans.

Which is why only a system based on the principle of social insurance,
that spreads the risk over a large pool – all Californians, or even
better, all Americans – to which all participants contribute an
affordable proportion of their income, and where individuals are
guaranteed real choice, not of policies but of medical services,
constitutes meaningful universal health care reform. 
And sound legislation exists: it is the single-payer model proposed by
SB840, the California Universal Healthcare Act, vetoed by
Schwarzenegger, who appears to dislike “big government bureaucracies” but can live with the 30%
mark-up of the bureaucracy of private insurers. It is also HR676, the
expanded and improved Medicare for All Act, conveniently made invisible
every time the major media or policy thinktanks report on the health
care crisis, and disqualified by Hillary as “difficult to achieve” for reasons that we are never
given.

Now, will a social insurance system resolve all the problems in
American medicine? Of course not. “Financing” and “delivery and
organization” of medical care are different analytic categories, so
securing the first will not miraculously resolve, for instance, the
problems of over-reliance on expensive medical technologies, lack of
uniformity of medical records, or insufficient emphasis on preventive
care (or the never-settled question of whether Americans are as dutiful
as others when it comes to eating our veggies). Those are internal to
the system – to any health care system — and require separate
attention. But a sound financial structure is a prerequisite to making
improvements in the delivery and organization of a medical system
possible.

At any rate, as Kuttner said, the “debate” about whether or not to have
a mandate misses the point that the financial structure of the system,
built on false assumptions and perverse incentives, is sick. The real issue is whether or
not major presidential candidates are willing to “do it right” and use
their formidable political power, social prestige, and precious media
time to bring “public opinion around”, assuming they haven’t yet been
informed about the increasing public support for single payer among the
electorate,
including physicians.

As Kuttner, supporters of single payer wish our politicians and opinion
leaders “got it right” this time, stopped trying to reinvent the wheel,
and stood for the only type of reform that can bring affordable and
comprehensive health care to all Americans.

Claudia Chaufan teaches sociology of health and medicine and health
policy at the University of California at Santa Cruz.  She has written
extensively on social inequalities in the diabetes epidemic, for
general and specialized audiences, nationally and internationally. She
is the Vice President of California Physicians Alliance, the Californa
Chapter of Physicians for a National Health Program, an organization
that supports single-payer health care reform.

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protect protector cleaningGerald BoykinHealth OnlineSantiago LeonDonald E. L. Johnson Recent comment authors
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protect protector cleaning
Guest

Fastidious respond in return of this difficulty with real arguments and telling the whole thing regarding that.

Gerald Boykin
Guest

What we have is the government wanting to control every aspect of your lives. We as americans are really stupid so we need the government to take us by the hand and help us cross the street. We dont need health insurance as much as we need health assurance. We need to be able get healthy foods, alternatve medicines, healthful vitamins and minerals that big business won’t allow through the best government that money can buy. John McCain, if he has his way, you will not be able to get supplements in the doses that will be beneficial to you.… Read more »

Health Online
Guest

For everyone to stay healthy, its very important to read such reviews, fantastic work!
For reading more reviews on health care and health insurance do visit http://www.janetmhenderson.com.thanks!

Santiago Leon
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Santiago Leon

This is a very useful discussion. I live in Miami, and we are having a hard time getting any sort of discussion about health care alternatives going here. The strategy of making sure that the single payer option does not get discussed has worked well here. Moreover, those in the community who work in the system and see the need for radical reform are constrained by economic relationships from speaking out. I would appreciate any ideas any of you might have for promoting discussion. Now, as to the arguments, I would agree with the person who recommended the Reinhardt article… Read more »

Donald E. L. Johnson
Guest

Nice job, Walter. Claudia, I don’t think you understand economics, health care, consumers or human nature. And you show no comprehension of the importance politics or the geographies, demographics or political systems of the countries you’re discussing.

Claudia
Guest
Claudia

you’re welcome, my pleasure 🙂

Walter Boggs
Guest
Walter Boggs

I agree – this has gone on too long. I think you and I are the only ones left! Anyway, thanks for the discussion.

Claudia
Guest
Claudia

Walter, will all due respect, your arguments are very weak and fly in the face of so much of the world’s experience with providing health care to nations that it’s impossible to list all the reasons and evidence, especially in the brief postings that you prefer (I’ve tried, however, in good faith and to the best of my ability). Whatever it is that you propose to resolve the problem of accessing health care that an increasing number of Americans are suffering (if I understand you it is a “free” market of either health care or insurance, a “freedom” which, incidentally,… Read more »

Walter Boggs
Guest
Walter Boggs

Claudia, you have provided no case at all for the idea that healthcare is exempt from market forces. In fact, you’ve unwittingly made the opposite point. In a competitive market, firms cannot charge more simply because they want to “amortize”. If that is happening, then we should be looking at the reasons why the market is not functioning properly. An open and competitive market would be far better at deciding how many MRI machines are needed than any team of government planners could ever be. The planners could never have all of the information that exists in the market. I… Read more »

Claudia
Guest
Claudia

Sorry, Walter, I just noticed that you did acknowledge one point after all: that you had misunderstood about social insurance not being compulsory. Of course it is. But individuals are not obligated to buy a policy in a market, as if they were buying shoes: rather, they contribute to a system, whether through taxes or payroll, automatically and in accordance to income (true “shared responsibility”, one where the whole is more than the sum of the parts). Which is why the system is financially sustainable, can estimate needs, and work with budgets. My apologies if my article was unclear. This… Read more »

Claudia
Guest
Claudia

Peter, I have little to add to what your postings, including your recommendation about the brilliant paper “It’s the price, stupid”, by Princeton economist Uwe Reinhard, arguably the top health care economist in the country. It explains very nicely why we Americans pay at least twice as much for any service (sometimes hundreds of times more) than any other citizen of any other country. And it is not because we get better quality. Let me explain Walter why health care cannot be theorized as a “market good”, however convenient the fad of calling patients “consumers” might be. In ideal markets… Read more »

Walter Boggs
Guest
Walter Boggs

Oh – were we talking about Canada? Of course I know there are cost controls there – that’s why they have had problems with wait times and folks having to come here for treatment. It’s called rationing. Every scarce resource has to be rationed; no complaint there. Just different opinions about how it should be done. In Canada, I might pay $1000 into the system through taxes and then use $10,000 in services. You can see that I’m shielded from the actual cost of the services, right? I might also not use any services. Now I’m not shielded, I’m actually… Read more »

Peter
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Peter

“People absolutely do use more of a service when they are shielded from the actual cost.” Walter, you assume that in countries with single pay there is no cost control and the government provides all things to all people regardless of cost. If that were true in healthcare then their health costs per GDP would not be half of ours. If fact countries having a social insurance mindset for health payment and delivery do a far better job of cost control. But greater access does not entitle those citizens to unobstructed use. If you have not been lurking here long… Read more »

Walter Boggs
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Walter Boggs

Thank you for the article, Peter. I spend far too much time reading about this subject as it is, but your suggestion goes to the top of my list.

Walter Boggs
Guest
Walter Boggs

Claudia, I’m afraid you’re simply mistaken. People absolutely do use more of a service when they are shielded from the actual cost. This isn’t really a matter of general disagreement, regardless of one’s policy preferences, so I’m a bit surprised to see you challenging it so strongly. It’s not a matter of people developing an illness so they can go to the doctor. Rather, it’s a matter of consumers having absolutely no concern about prices or unnecessary treatments because they aren’t directly paying for care. In such conditions, they tend to consume more than they otherwise would. I take full… Read more »