Don't Cover the Masses!

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Vexing ourselves over the differences between a "tax" and a "charge" may be an unnecessary distraction from the important debate surrounding health insurance reform. When President Barack Obama does raise taxes, the public may well show a little outrage. But they are unlikely to be too surprised. (He certainly won't be the first chief executive to contradict themselves on this issue.) And other issues are most certainly much more pressing, as YPNation contributor Alexander Hertel-Fernandez points out in his post on the merits of universal coverage.
 
This is hardly a new debate. Massachusetts started requiring health care coverage for nearly all of its residents in 2006. And both Mitt Romney, former governor of Massachusetts, and California Governor Arnold Schwarzenegger have claimed that mandating each individual to carry health insurance will ease the cost burden on consumers.
 
The argument for universal coverage, as Alexander points out, is that because some individuals decide not to buy insurance they hike up the premiums of everybody else when they have to use the emergency room to receive care. Estimates vary for how much this hikes up the cost of insurance premiums, but tend to be between one to eight percent. However, if controlling costs is the main priority, evidence would suggest that throwing everyone in the so-called "insurance pool" would be far from advisable.
 
If an individual mandate is introduced that charges consumers similar premiums irrespective of their health, tens of millions of Americans would witness a sudden hike in their existing plans to cover the cost of insuring the less healthy.
 
I am not saying we should discriminate against your average Joe because he has cancer, but the main health problems facing Americans are intrinsically linked with lifestyle. Do we really want to inflate costs just so we can put people who choose to live an unhealthy lifestyle on some sort of cost equilibrium with those who exercise and look after themselves? Do we really want to be in the business of subsidizing bad lifestyles?
 
If individual coverage was mandated by the government, then we would see an artificial influx of new consumers that would, inevitably, lead to price inflation. And then there's the issue of the mandate's contents. Not to play partisan politics, but for some reason I get the feeling that the current batch of politicians in Congress will eradicate what little choice already exists in what should be loosely termed "the American system."
 
According to Michael F. Cannon of the Cato Institute, "The necessity of specifying what satisfies the mandate gives politicians enormous power to dictate the content of every American's health plan — a power that health care providers inevitably capture and use to increase the required level of insurance." In Massachusetts, individual mandates have already seen the cost of health insurance spiral between "21 to 46 percent faster than the national average, in part because Massachusetts' individual mandate has effectively outlawed affordable health plans."
 
And then there's the public option.
 
We have been told repeatedly that individuals have nothing to fear, and that the private sector will get penalized if they decide to drop their health insurance coverage for employees so that the government has to pick up the tab. But given how much health insurance costs businesses nowadays, these fines are not really a deterrent, and the threat of people losing existing coverage because of a public option is very real. The government, in effect, would be offering businesses an ideal opportunity to reign in costs.
 
Let's next consider whether we should force people who can afford health insurance to buy it. The adage that people "with insurance are already paying an extra charge for the uninsured" is of course a valid point and a favorite of the "Governator." Some studies (pdf) have shown that "almost $29 billion worth of unpaid care received by the uninsured in 2005 and more than $43 billion in 2010 will be financed by higher premiums for privately insured patients."
 
But the so-called free riders may not be the problem. According to the Pacific Research Institute (pdf) the uninsured forego "the tax savings associated with private health insurance--and the figure could easily be much higher." Thus, because the uninsured use much less health services than the insured, "they pay the insured a “hidden subsidy” of as much as $66 billion annually--or $2,128 per insured family and $787 per individually insured." As a result, the bigger problem may not be the lack of insurance, but the 150 million overinsured (pdf), which wastes "one quarter to one third of health care" because "almost nobody has the right incentives to use it wisely."
 
Still yet another problem facing our emergency rooms is not the uninsured, but government programs such as Medicare and Medicaid. When individuals are enrolled in these programs, they are much more likely to use an emergency room than the uninsured. With private payers, hospitals receive $1.22 with each dollar of cost (pdf) whereas with Medicare and Medicaid they only receive $0.95, which leaves hospitals with vastly reduced margins. The cost is passed on, and someone else--the consumer--foots the bill, as inflated premiums have shown.
 
Calling a tax a charge is certainly a slick political maneuver. But finding a politically expedient sobriquet for cost inflation will be a completely new challenge altogether.
 
-Photo by Infrogmation
 
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