Mandated Coverage Isn't the Way

Ted Halstead and Laurie Rubiner, both of the New America Foundation, authored a column in the Washington Post (August 5, 2003) praising John Edward's proposal to mandate insurance coverage for children. They go even further and say, "All Americans should be required to purchase their own health insurance from among competing private providers?"

I expected more originality and thoughtfulness from the New America Foundation.

They hope mandating insurance will bring about "universal coverage." But true universal coverage is a fantasy. It will never be achieved, no matter what we do. There will always be some portion of the population - outlaws, the homeless, illegal immigrants, mentally disabled persons - who will be unwilling or unable to enroll in any kind of insurance program. "Near-universal" coverage, or "universal access" to coverage might be achievable goals, but "universal coverage" is a chimera and should be stricken from the lexicon.

They don't discuss how such a mandate would be enforced. I assume they would not imprison people who fail to comply. Would they fine them? How much? If the fine is less than the cost of coverage, some people may still opt to pay the fine and forego the insurance. Should we remove children from families who fail to provide coverage? Is our foster care system ready for that?

They also don't say what is it that will be mandated -- basic coverage, comprehensive coverage, catastrophic coverage? Will it be first-dollar HMO coverage, or PPO coverage with cost-sharing? Will chiropractors be covered? Naturopaths? Social workers? All drugs or just a few? Will Congress allow coverage of abortions, contraceptives, mental health care? Imagine the line of pleaders outside the Capitol begging for their particular service or cause to be included. Imagine the smiles on the faces of the politicians when they ask whether you have contributed to their campaign lately.

If people are required to buy something, the price they are required to pay will have to be controlled. How will premiums be set? If the premiums are based on cost-plus, who will ensure the costs aren't padded -- that the companies aren't gouging, not just on price but on management expenses? If the carriers are guaranteed customers because each person is required by law to purchase the product and pay a premium that exceeds cost, what happens to cost-containment? The incentive for the carriers will be to spend as much money as possible because their customers have no choice but to pay the bills.

It is true that many states mandate the purchase of auto insurance, but the comparison to health insurance fails for several reasons. What is mandated is not repair of one's own car, but the damage a driver might do to another car (and person). The auto coverage is usually tied to a privilege - registering a car. It isn't universal -- it applies only to those who would like to register a car. Even then, the mandate fails to achieve universal coverage even for car owners. Many people ignore the mandate, so we have uninsured motorists protection.

Once you have made a mandate possible - created the subsidies and guaranteed access that allow everyone to acquire the coverage - you have made the mandate unnecessary. Very few people absolutely, steadfastly refuse to have health insurance. If it is affordable and easy to access, almost everyone would be happy to have it. It wouldn't need to be mandated.

There may remain some free-riders who refuse to pay their fair share, and remain uninsured, confident that society will take care of their needs eventually. But, so what? Even today with 41 million uninsured, the cost of uncompensated care is a mere 3.5% of total health spending. This is a trivial amount by any standard. Certainly far less than the average department store loses to shoplifting. If we cut the uninsured in half, the cost would be even less.

There are far simpler ways to cut the rate of non-insurance. President Bush has proposed a refundable tax credit for people who don't get employer-based coverage and aren't eligible for public programs. He would give such families $3,000 a year to help them buy their own coverage, but they would only get the money if they actually bought coverage.

This $3,000 would go a long way toward making coverage more affordable for most of the uninsured. And the price tag is small compared to what the government spends to subsidize employer-based coverage today.

It may not be "universal," but it would actually get some people covered with a minimum of disruption.

Greg Scandlen is the director of the Center for Consumer Driven Health Care at the Galen Institute of Alexandria, VA.