What's wrong with individual health insurance mandates?
by Claudia Chaufan
San Francisco Bay Area Indymedia
Tuesday Feb 26th, 2008 5:01 PM
Individual health insurance mandates have lately been hailed as the solution to the health care crisis in America. Mandates to purchase 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 (http://www.lao.ca.gov/2008/Webcasts/hcr_1-23-08/flashversion/hcr_flash.aspx). 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 (http://www.hillaryclinton.com/feature/healthcareplan), has yet to be produced. But worst of all is the tendency, popular among many health care experts, including M.I.T. professors (http://www.nber.org/papers/w13758) 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 (http://content.nejm.org/cgi/content/full/358/6/549). 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” (http://www.youtube.com/watch?v=asgUP31Vf8o) 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” (http://www.democracynow.org/2008/2/8) 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 (http://www.democracynow.org/2008/2/8). 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” (http://www.democracynow.org/2008/2/8), assuming they haven’t yet been informed about the increasing public support for single payer among the electorate (http://abcnews.go.com/images/pdf/935a3HealthCare.pdf), including physicians (http://www.philly.com/philly/business/20071204_Doctors_endorse_single-payer.html).
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.