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The Supreme Court will rule on Monday about whether or not the federal government can require people to buy health insurance from private insurance companies. My own view is that, under the commerce clause, it can. But, I see the point of conservatives here. The mandate is probably the single biggest subsidy of a private, for profit, industry in history.
If the government had seen fit to offer a taxpayer funded alternative, administered by people who could be voted out of office for charging too much and offering too little, a mandate to purchase insurance might make sense. In that scenario, profiteers would have to compete for a huge pool of mass demand that, like the Pentagon or Wall Street banks, could always appeal to the Treasury or Federal Reserve to have its needs met. Absent that, the mandate is a law that will require people to buy from Aetna or United Health, whether or not that want to.
This is great, if you're an insurance company. It's akin to the government mandating that people buy Whoppers once a month, filling the coffers of Burger King. It more than makes up for the costs of insuring every customer who wants insurance, whether or not they're already sick.
The insurance company argument is that you must have this mandate if you want to require companies to cover people with existing health issues, or else the healthy will skip insurance and only sign up when they get sick and have medical needs so expensive that they dwarf health care costs.
But, Obama the candidate in 2008 was right. If health insurance is affordable and, from the point of view of consumers, worthwhile, people will buy it. Just like any other product. The insurance industry would have you believe that people would wait until the last minute and only by insurance on the way to the hospital, after being hit by a bus, or after a cancer diagnosis. They call this the "free rider problem." This is crazy talk.
We know this because, in the U.S., emergency rooms cannot deny treatment to people based on ability to pay. If there were a free rider problem, everybody would take advantage of this. They would only see emergency rooms and would say, after treatment, "bill me." Yet, very few people do this. In fact, the uninsured do this less often. The uninsured are more likely than the insured to just tough it out and go without medical treatments.
Candidate Obama was correct. If insurance is a good deal, people will take it. They prefer to take it. They do not need a law to compel them. The idea that there are free riders out there, mooching off of the insured, is a fiction. People without insurance, which is to say people for whom insurance is a bad deal, by in large use health services less frequently and they pay as they go. And, by in large, they do pay the bills they incur. As we all know, insured people, who are part of a large pool of consumers, pay lower bills than the uninsured,
Three years ago, I wrote about this in my column for Forbes and even interviewed a health care lobbyist who supported the individual mandate. This is what I found:
Last week I e-mailed with Janet Trautwein, head of the National Association of Underwriters and a big advocate for what she calls a "strong individual mandate" to buy health insurance that would have harsh penalties for scofflaws. She and her organization, who support the "strong individual mandate," are critical of mandates that require employers to provide coverage, and she has also argued for less generous government subsidies that will help people pay for the insurance that she wants the government to require them to buy.
I asked Trautwein to supply some evidence of the free-rider problem in health insurance. At first she said that the rationale was largely "intuitive," but when pressed she sent me the Harvard Pilgrim blog post. Then she made up a story about how somebody could skimp on health insurance, get into a skiing accident and stick it to the system for $100,000. Then she said that under previous regulations that have pretty much nothing to do with the environment that will follow health care reform, some companies went bankrupt offering "no questions asked" health care.
As best I can tell, the entire free rider problem is merely a myth perpetuated by the insurance industry, which has long coveted a law turning every American into a customer. The story makes sense, in a way. Why not wait to buy coverage until your ski accident? But, candidate Obama is right. People who can afford coverage and who don't count on their ability, with two broken legs in the back of an ambulance, to shop and negotiate for it, would rather just buy a fair and affordable plan in advance. To the extent that people don't buy it, it is a failure of the industry and no different than the fact that I will not buy a Big Mac tomorrow, because I believe that a Big Mac is, at best, poor bang for my buck as nutrition.
I could live with the mandate if there were a public option. If the government entered the market, with all of its force and power, to deliver cheaper and better care for all, that would make sense to me. But to leave the entire industry in the hands of Aetna, United Health and Cigna, while mandating that people do business with these rapacious corporations is not just indefensible, it's illiberal.