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January 09, 2007

Individual Mandates and Universal Health Insurance

I want to spend some more time digging into Schwarzenegger's health care plan before analyzing it in full, but a quick point on the early reactions: I'm hearing a lot of hating on the individual mandate* -- and I don't get it. Some are complaining that the mandate "criminalizes the uninsured," others are saying ""The uninsured shouldn’t have a financial penalty onto top of the health and financial consequences of being uninsured." So let me try and say this clearly: Single-payer health care is an individual mandate. The enforcement mechanism, in that case, is taxation. If you don't pay your taxes, you're breaking the law. If you decide to withhold the portion of your taxes that go towards health care, you're a criminal. In fact, there is absolutely no universal health care system that wouldn't include a mandate of some kind -- that's how you make it universal. Indeed, without a mandate, you can't have a decent health system: If the healthy can opt-out until they get sick, coverage will be unaffordable for everyone. For a risk pool to work, it needs members at low risk.

The question with an individual mandate is subsidization and affordability. If we pass a law levying an individual mandate and subsidizing premiums down to $50 a month, there'll be few complaints. A mandate with no subsidization, however, is an impossible burden on millions of families. When evaluating an individual mandate, that's where liberals need to focus: The generosity of the subsidies. The Wyden Plan, for instance, subsidizes up to 400 percent of the poverty line. The Massachusetts plan subsidizes up to 300 percent. The Schwarzenegger plan subsidizes up to 250 percent. That looks too low, and I'll talk more about it later today. But for now, folks need to keep in mind that you can't simultaneously demand universal health care and reject mandates. Universal health care is a coverage mandate -- whether the enforcement comes through tax receipts or proof of premium payment is not a relavent distinction. Either one can be an overwhelming burden on the poor or the foundation of a progressive, generous system. The focus, always, should be on telling the two apart.

*An individual mandate is a law forcing the purchase of some minimum level of health insurance.

--Also at Tapped

January 9, 2007 in California, Insurance | Permalink

Comments

The uninsured shouldn’t have a financial penalty onto top of the health and financial consequences of being uninsured."

Well, an individual mandate might place a "financial penalty" upon the poor, but they wouldn't be uninsured anymore, would they?

So at the most it's replacing one problem with another, and as you point out, every plan that has either been put into place or proposed has provisions for those who have a hard time paying the premiums.

Opponents of UHC either can't understand or refuse to admit what drives insurance costs. The more people who participate, the less it costs each individual. The savings benefit of including everyone far outweighs the cost of subsidizing a portion of them. And that's just for premiums, let alone secondary benefits to society, financial and otherwise.

Posted by: Stephen | Jan 9, 2007 9:39:22 AM

I'm told by people who know a lot more about this than I do that two-thirds of the currently uninsured earn less than 2X the federal poverty level (FPL), and 98% earn less than 4X the FPL. While the need for subsidies to help low income people acquire health insurance is clear, there are two key issues aside from how far up the income spectrum subsidies should be available.

They are:

1. What percentage of income should the individual be required to contribute toward the cost of health insurance? The Massachusetts plan requires no contribution below 1X the FPL and a sliding scale from 3X down to 1X the FPL. I note with interest that the IRS only allows deductions for out of pocket health care expenses to the extent that they exceed 7.5% of adjusted gross income. This implies that medical costs up to 7.5% of income are ordinary and not extraordinary.

2. How extensive should the benefits package be? In many states, expensive benefit mandates including in vitro fertilization, massage therapy, etc. can drive up the cost of insurance significantly. Governor Romney tried to get some of these benefit mandates stripped out of the basic package but was unsuccessful except for insurance covering people between 19 and 26 years old. If insurance does nothing else, it must cover the cost of catastrophic events.

My question about the California proposal relates to the impact on employers if they are given an option of paying 4% of Social Security wages into a state fund as an alternative to providing health insurance for their employees. Conceivably, many employers already providing insurance might find the 4% payment to the state fund a considerably cheaper alternative, and the state will experience costs that exceed the funds coming in from employers, doctors and hospitals. What then?

Posted by: BC | Jan 9, 2007 10:48:48 AM

One of my main issues with the mandate is that it mandates such crappy coverage--a $5,000 deductible and $10,000 maximum family cap? I guess that's good for catastrophe--a cancer diagnosis, a car accident--but I see it bankrupting low-income families who use the ER for primary care because there's not enough primary care for them to begin with.

Posted by: Graham | Jan 9, 2007 11:09:24 AM

In many states, expensive benefit mandates including in vitro fertilization, massage therapy, etc. can drive up the cost of insurance significantly.

What states provide any type of UHC? Massachussetts and Oregon, right? Perhaps in vitro and massage therapy are driving their plans to bankruptcy - though I doubt it, at least not yet - but this doesn't qualify as "many states."

Conceivably, many employers already providing insurance might find the 4% payment to the state fund a considerably cheaper alternative, and the state will experience costs that exceed the funds coming in from employers, doctors and hospitals. What then?

Just as conceivably, if employers in California all decide to make that 4% payment, the millions of people in the risk pool, as opposed to a few hundred or few thousand in a typical employer risk pool, will drive down the costs for individuals to such an extent that those 4% payments will cover the state's costs.

UHC is not some new, exotic idea. It's been around for quite a while, and hase been put into place with a wide variety of plans. UHC works, consistently providing populations with less costs, more care and better health outcomes than our system. UHC systems are not chronically underfunded, and healthcare costs in countries that have these plans have not been increasing at anywhere near the rate they have been here in the USA.

Opposition to these plans is based on assumptions, nothing more.

Posted by: Stephen | Jan 9, 2007 11:15:43 AM

Mandating that health insurance be obtained by everyone makes sense, but an important discussion about how to make this mechanism work in practice seems to be needed.

In the case of auto insurance, enforcement is loss of the driver's license if caught driving without insurance.

So what should/would happen if a very sick person arrives in the ER with no proof of insurance?

Surely progressives would say that treatment should be provided, at least up to the level of stabilizing the patient (the current requirement under the Medicaid law).

What then? How is the bill collected? What if the patient has no funds to pay? I'm missing something on this issue I think. No insurance is ever going to pay for expenses incurred before the policy is written, so that bill for the ER treatment still must be paid, somehow.

In the case of Medicare, a coverage card is issued to all at the start of the year, and the premiums are paid out of either deductions from the Social Security retirement check or after having been cleared for disability coverage. So, coverage for most people is automatic at the point of treatment. I don't see the comparable mechanism in non-retired mandatory coverage - is refusal to treat the enforcement for non-insurance?

Posted by: JimPortlandOR | Jan 9, 2007 11:20:38 AM

What irritates me is that it's an individual mandate to purchase PRIVATE health insurance. One of the positive aspects of real universal health insurance is that public health insurance is much more efficient than private health insurance, in part because Medicare and Medicaid don't have an incentive to try and fob off the bills on someone else.

To me, the downside to Romney-style health care is that it's essentially tying universal coverage to a bad system of provision. Employer mandates are ludicrous, at a time when we can't rely on giant corporations to provide health care - government provision is much more stable because it can spread the cost over the entire society instead of trying to fund it out of one business. Similarly, subsidizing private health insurance is a huge giveaway to the insurers - they might be mandated to do community rating and keep overhead down, but who trusts them to do anything more than follow the letter of the law when following the spirit costs them money? Moreover, who trusts them to keep their premiums at affordable levels?

Public provision has several advantages over the Romney system. First, it eliminates bureaucratic gridlock between employers, insurers, and the government by centralizing responsibility in one government agency. This reduces administrative costs enormously, as Medicare has shown. Second, it puts basic features of the program (enrollment, premiums, coverage of procedures, etc) directly under public control, eliminating the need for drawn out negotiation between government, insurers, and employers. Third, it allows us to avoid many of the negative features of existing health insurance in a simple fashion - don't like discimination against people who need care? write community rating into the program. ETC

Posted by: Vikingkingq | Jan 9, 2007 11:42:42 AM

One more thing I forgot to mention: public health care systems can be funded through progressive taxation, which places a much smaller burden on each individual. Mandating then subsidizing still places the fiscal burden on the un-insured up-front.

Posted by: Vikingkingq | Jan 9, 2007 11:45:25 AM

Okay, people need to keep clear on something here: An individual mandate is just a mechanism for dmeanding everyone has coverage. Now, an individual mandate can mandate bad coverage, or not offer sufficient subsidies, or do a number of other things wrong. That needs to be evaluated on a case-by-case basis. But the mandate itself isn't inherently evil.

Posted by: Ezra | Jan 9, 2007 12:05:49 PM

I dont know the critic to whom this is directed, but it strikes me that the post may be conflating two distinct criticisms of the individual mandate. The first is that it requires the individual to pay, and may be unaffordable for certain segments of the population. This criticism is well handled. The second, though, pertains to who has to undertake the purchase, an individual as opposed to a business, health insurance purchasing cooperative, or government agency. It is of course possible to structure an individual mandate in such a way as to minimize some of its more striking comparative disadvantages with respect to other purchasing systems, e.g. community rating, illegality of pre-existing condition limitations etc... But this does not mean that there aren't differences and reasonable arguments to be made against an individual payer system. As long as individuals are the relevant unit of coverage, it will be easier for insurance companies to seek a healthier segment of the population as their clientelle, even if they have to charge them the same rates. The requirement that every individual maintain a separate legal relationship to the insurer would also provide more openings for insurance companies to refuse payment or drop coverage once they are sick. In some ways, in fact, if the plan results in businesses or other group plans dumping coverage, it could be a step bakcwards.

Posted by: RW | Jan 9, 2007 12:11:53 PM

I agree the mandate isn't the issue. The issue is cost.

Posted by: akaison | Jan 9, 2007 12:23:49 PM

Akaison
Isnt there an issue associated with who actually pays. I dont mean who has to give over money, I mean who has the legal relationship with the insurer?

Posted by: RW | Jan 9, 2007 12:29:51 PM

Of course any system of universal health coverage could be described as an individual mandate. However, one problem with an individual mandate outside the framework of a single-payer system is that you are, in effect, forcing citizens to subsidize the profits of insurance companies. I find this morally problematic, unless the insurance companies are held to the same strict standards as public utilities. And I see no indication that this will be the case under the Schwartzenegger plan.

Posted by: Josh G. | Jan 9, 2007 1:02:04 PM

One thing people should keep in mind is that there's nothing new about individual mandates: anyone who drives a car is already subject to this, i.e. they have to carry auto insurance. And, there's no subsidy here, which illustrates the problem for the poor when there isn't a subsidy: they either have to pay for insurance they can't afford, or drive without it and risk getting caught. In other words, the provision and amount of the subsidy is indeed the issue.

Posted by: Rebecca Allen, PhD, ARNP | Jan 9, 2007 1:38:48 PM

"In other words, the provision and amount of the subsidy is indeed the issue."

Thats an issue. I have another issue. When individuals instead of employers, groups, or govwernment agencies are forced to maintain purchasing relationships with health insurers, it is easier to engage in cherry picking and find loopholes to deny payments to people who get sick. People have to remember premium deadlines, they have to fill out all the paperwork right, they have to remember claims deadlines and master the appeals process. If insurers discover problems or opportunities to deny care, they can do so for each consumer, without placing a larger contract at risk.

Posted by: RW | Jan 9, 2007 1:48:40 PM

While I agree with you, Ezra, I think the emphasis is wrong. There may be knee-jerk opposition to anything labelled "individual mandate," but the intelligent opposition is based on the fact that these proposals typically don't include two of the sine quibus non of health care reform, community rating and the benefits of a single payer (see Vikingkingq's posts above). A quick perusal suggests Schwarzenegger's plan falls short on both fronts.

Posted by: tinman | Jan 9, 2007 2:09:38 PM

Last Year Glaxo's CEO also called for universal health insurance for all. The report appears at http://www.emaxhealth.com/72/5564.html

Posted by: Lilia | Jan 9, 2007 5:04:47 PM

The California governor vetoed a better plan than the one he is offering. His plan is a sop to the insurance industry which has supported him with contributions.
My state rep has offered better.
A second, third and fourth opinion on healthcare
(Use www.bugmenot.com for login & password if you need one for the LA Times.)

Posted by: Mike | Jan 9, 2007 5:55:26 PM

any thing that doesn't force down the cost of the insurer (and I dont think economies of the number of people on a healthplan will do it) will fail. this is a cost issue. insurance, and healthcare in general costs too much int he US. I believe there was a chart the other day on here by the NY Times that explained atl east to me the real problem- the real problem is cost, and the mandate doesn't seem to solvet hat issue. it only solves the issue of coverage. those aren't to me the same things.

Posted by: akaison | Jan 9, 2007 6:41:37 PM

sorry- of the insured and of the health system-not the insurer since I have become convinced that the insurer is part of the problem, and probably not a part of the solution. i agree that health like a few other modern things like education should be considered almost like a public good. the idea that people are being saddled before they get out oft he gate with crazy costs related to these things is mucking up any chance of what one would call the middle class.

Posted by: akaison | Jan 9, 2007 6:43:31 PM

Actually there is a difference between the individual mandate and the state tax supported schemes. Its a difference that has been touched upon in comments, and conveniently overlooked in the initial post.

1. we are incvolving and supporting an an entire industry to provide what is becoming a utility. Not always a bad thing, but certainly not a necessary one. I see no reason for private insurance companies to continue to exist.

Their entire existance is based upon taking populations and betting that they will pay more then they will cost. They then take those populations and shape them to maximise profit. Good for a company, good for 'protecting' a small segment of the population, but no good for protecting everyone. Someone has got to lose out, and no private company is going to volunteer.

If its goping to be universal, just make it universal. Throw it into our already existing universal general fund, income tax. Then we can use the giant system we have already created to continue to allow people loopholes based on good behaviour. Rebates and credits for things like buying eco cars, large family burdens, could work around the poor, and provide the poverty subsidy with less overhead.

Then noone needs to walk into a hospital with proof of insurance from some obscure company, you just walk in and get treated. Why do we automatically flock to the solution with the most paperwork?

Posted by: david b | Jan 10, 2007 7:36:46 AM

I agree with davidb's comment:

If its going to be universal, just make it universal. Throw it into our already existing universal general fund, income tax. Then we can use the giant system we have already created to continue to allow people loopholes based on good behaviour. Rebates and credits for things like buying eco cars, large family burdens, could work around the poor, and provide the poverty subsidy with less overhead.

Then no one needs to walk into a hospital with proof of insurance from some obscure company, you just walk in and get treated. Why do we automatically flock to the solution with the most paperwork?

---

I would just add the following thoughts:

We don't need health insurance, we need health care.

And collectively, we have the imagination and the resources to solve this.

It seems to me that the goal should be free or nearly free medical care at the "point of sale" (so-to-speak).

Until we turn the whole health care system in the U.S. on its head and see health care as more like an utility rather than a for-profit big business, we will only serve to further enrich the current health care structure. This existing structure does not now and never will serve their communities with comprehensive, personalized and diverse health care options.

While discussing better options in health care, we must also throw into the mix:
- reducing the cost of educating health care professionals;
- reforming how pharmaceuticals are developed, produced and marketed;
- ensuring the absolute right to privacy for all patients;
- encouraging alternative health care options, physical education and nutrition;
- removing for-profit business models from health care at all levels.

What we will end up with with either be revolutionary, universal and compassionate or it will fail.

But we have 250 million a day to spend in Iraq... surely we can find the money to solve the most pressing economic problem we face today.

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