The Truth About Mandatory Health Insurance

Armen Hareyan's picture
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Hillary Clinton's supporters attacked Barack Obama [in January] for not proposing a federal mandate that every American buy health insurance. Mr. Obama's health insurance plan, they said, is a "Band-Aid" for the nation's gaping wound: 47 million people without health insurance. Mrs. Clinton would require all Americans to get coverage. Presidential candidate John Edwards and Christopher Dodd say they would, too. Not Mr. Obama.

Imposing a federal mandate is a hot issue on the campaign trail. It's also a burning issue in Congress, where Democratic Sen. Ron Wyden and Republican Sen. Bob Bennett are pushing the Healthy Americans Act, which would require everyone not in Medicaid or another government program to buy health insurance.

'Shared Responsibility'

But is mandatory health insurance really a good idea? Requiring catastrophic coverage (our parents called it major medical) probably is smart. This would ensure that a person who is hurt in a car accident or diagnosed with a costly illness can pay his own medical bills, instead of being a burden on society.

But catastrophic coverage is not what the mandate advocates want. They would require that everyone have comprehensive health insurance, covering preventive and routine care.

The rationale for this mandate is not personal responsibility but "shared responsibility," a polite way of saying shared costs. Requiring comprehensive coverage, the argument goes, will make it affordable for the sick, by pulling the young and the healthy--neither of whom use these health services very much--into the insurance pool. Advocates also argue that requiring this type of coverage will cure overcrowded emergency rooms and help tame skyrocketing health costs.

Health Insurance Price Breaks

These arguments are based on myths, not facts.

The first myth is that it's fair to make everyone pay the same price for health insurance. It is not: For young people who rarely use health services, this is a rip-off. If people in their twenties paid attention to politics and voted, politicians wouldn't dare try this.

According to the latest Census data, 56 percent of the uninsured are adults aged 18-34. True enough, forcing them to be a part of a same-price-for-everyone insurance pool will likely bring down premiums. These young people generally need minimal health care ($1,500 a year, on average, according to a Commonwealth Fund study).

In most states, (but not New York and Vermont), young adults who buy health insurance are charged premiums that reflect their low medical needs. A 25-year-old man can buy a $1,000 deductible policy for a quarter to a third of what a 55-year-old man has to pay. (In Manchester, New Hampshire, a 25-year-old man pays $156 per month, while a 55-year-old pays $542 for the same policy, according to ehealthinsurance.com).

Both the Clinton proposal and the bipartisan congressional proposal prohibit insurers from giving such price breaks to the young. Their mandates would force the young to subsidize the health tab for the middle-aged generation. This subsidy would come on top of the payroll tax younger people already pay to support today's Medicare recipients.

This is contrary to a fundamental American principle. This nation has always believed in making life better for its children, not exploiting them.

Pricing insurance fairly for the young doesn't mean that those middle-aged who cannot afford higher premiums should be left to sink or swim. But providing targeted subsidies out of general tax revenues is fairer than artificially lowering premiums for all middle-aged people by compelling the young to pay more.

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Health Insurance and Emergency Room Use

The second myth behind federal mandate proposals is this: Lack of insurance forces people into the emergency room for routine health care. "It's a hidden tax, the high cost of emergency room visits that could have been prevented by a much less expensive doctor's appointment," Mrs. Clinton said recently. The truth is that the uninsured do not use emergency rooms more than other people.

Federal data (the Medical Expenditure Panel Survey provided by the Agency for Healthcare Research and Quality) show that the elderly are most inclined to go to the emergency room, though they are universally covered by Medicare.

Other repeat users, according to an Institute of Medicine study, are the "frequent flyers" who are in the ER repeatedly because of mental illness or substance abuse. Enacting a mandate isn't going to eradicate the behavioral problems that land them in the ER.

Immigration Impact

The third myth, in the words of Mr. Edwards, is that a "system that leaves 47 million Americans without health care is a moral disgrace." The remedy he has in mind is a mandate.

The rise in the number of uninsured people (up from 42 million in 2002) is not due to a sudden moral failure of the country or a broken health system. Instead, a major cause is immigration and cultural differences that make recent arrivals especially likely to be uninsured.

Immigration over the past seven years has been the largest for any seven-year period in American history. More than 10 million immigrants entered the country, more than half of them illegally, according to a report by the Center for Immigration Studies in Washington, DC. Nearly 75 percent of the increase in the number of uninsured people since 1990 consists of newcomers and their U.S. born children, according to the study.

In the most recent Census report, the lion's share of the increase in the uninsured occurred in five border states: Arizona, California, Florida, New Mexico, and Texas. In San Francisco, public health authorities estimate that 61 percent of the city's uninsured are not citizens.

Despite national findings about who is in the emergency room, uninsured immigrants and their children are putting stress on emergency rooms in the border states. Newly arrived immigrants without coverage are less apt to use the emergency room than U.S. citizens, according to a Rand study published two years ago by Health Affairs. However, the sheer number of Hispanic newcomers who seek care and are unable to pay is overwhelming many hospitals.

Not only are newcomers from Central and South America uninsured when they enter the U.S., but a cultural unfamiliarity with health insurance means that many continue to go without coverage even when they can afford to buy it. One-third of all people who identify themselves as Hispanic on the 2006 Census are uninsured, including Hispanics with high incomes.

Sound Alternatives For Health Insurance

These facts should point the presidential candidates and Congress toward a sounder policy on health insurance.

According to the Census Bureau, of the 47 million uninsured, nearly 10 million have household incomes of at least $75,000. They probably can afford coverage but have chosen not to buy it. Another 14 million of the uninsured are already eligible for government programs such as Medicaid (for low-income adults) and the State Children's Health Insurance Program (for children) and simply need to sign up.

That leaves about 23.7 million people--some citizens, others newcomers--who cannot afford coverage. It's up to the nation to decide what to do about that. One thing is clear: Mandating that everyone, including young adults, buy insurance, and then hiding a hefty, cost-sharing tax inside their premium, is an unfair solution.

Dr. Betsy McCaughey, a former lieutenant governor of New York, is an adjunct senior fellow at the Hudson Institute. This article first appeared in The Wall Street Journal on January 4, 2008 and is reprinted with permission.

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