Individual mandates will not work
The American Prospect
2/12/03
One Dimensional
The notion of individual mandates for health insurance is untenable and shortsighted.
By Jonathan Oberlander
Mandatory self-insurance -- which would compel all Americans to purchase health insurance (much like all drivers are required to purchase auto insurance) with public subsidies going to those who cannot afford the cost -- has emerged as the flavor of the month in health reform. Ted Halstead, president of the New America Foundation, argued in a Jan. 31 New York Times op-ed piece that mandatory insurance is "the most promising solution to America's health care crisis." Sen. John Breaux (D-La.), a congressional leader on health policy, has offered a similar plan, praising mandatory self-insurance as a "bold and new idea."
Halstead's case for individual mandates is based on a misleading portrait of the uninsured. To Halstead, the uninsured are mostly "middle class" -- young, healthy Americans who can afford to purchase health insurance. If only they were compelled to buy insurance, Halstead argues, not only would we get universal coverage but these healthy newcomers to insurance pools would also drive down the cost of premiums.
In fact, the uninsured are not mostly middle class: Nearly two-thirds (64 percent) of the uninsured earn less than 200 percent of the federal poverty level. As a result, if universal coverage is truly the goal, an individual mandate program would have to offer much higher subsidies to a much broader segment of the population than Halstead implies. And because the average premium for health insurance is $8,000 for families and $3,000 for individuals, Halstead seriously underestimates the federal price-tag for subsidizing individual mandates. That price would decline if the "basic" insurance that Halstead would require all to buy really means only catastrophic or bare-bones policies. But such plans would not provide adequate health security.
Moreover, individual mandate plans have no cost-control mechanisms. They instead rely on the vague hope that competition between private insurers will lower health-care costs. Yet the American experience with competition in medical care provides no basis for relying on a private insurance system -- the most expensive in the world, incidentally -- to slow health spending. Without government regulation and freed from the negotiating leverage that big companies now exert for premium discounts, there would be no constraints on private insurers who wanted to raise prices. Under an individual mandate program, health-care spending and insurance premiums would continue to escalate, necessitating sizable increases in public subsidies -- and likely generating political pressure to retreat from universal coverage.
The aspiration to universal coverage embodied by the new wave of individual mandate plans is a welcome improvement over the incrementalism that has dominated the health-care-reform debate for the last decade. Yet without generous subsidies, clear mechanisms to pool risk and effective cost control, an individual mandate that makes being uninsured illegal will no more solve the health-care crisis than a mandate that makes unemployment illegal would solve joblessness. If what we want is affordable and secure health insurance for all Americans, individual mandates simply won't get the job done.
http://www.prospect.org/webfeatures/2003/02/oberlander-j-02-12.html