December 06, 2007
Why Health Insurance Isn't Like Auto Insurance
I feel a bit silly actually writing a post explaining that things with "insurance" in the name aren't all the same, but such is life. So long as non-compliance with auto insurance mandates is going to be tossed up as an argument against health insurance mandates, though, it's probably worth explaining why the two are not alike.
1) You Can Drive Without Swiping Your Auto Insurance: This is the most obvious, and most important, difference. If your car required proof of insurance to start, more people would be insured. But it doesn't. Cops don't even ask for insurance when they pull you over. The only time insurance is relevant is when you're in an accident.
Health insurance mandates, by contrast, make proof of insurance a prerequisite to using the system. To see a doctor, you do have to swipe your insurance card. To enter a hospital, you do need to show proof of insurance. In the Edwards plan, you'll need to enter your policy number on your tax form. If you can't, you'll be enrolled in the basic plan. This alone will reduce noncompliance dramatically, because compliance will be necessary to use the health system. Auto insurance, by contrast, is not necessary to use a car.
2) Car accidents are less likely than flus: Everybody reading this has been to the doctor. Most reading this have never been in a car accident. People are not unaware of the relative rarity of those events. It's easy to skip car insurance under the theory that you will not need it. It will be harder to skip health insurance under the theory that you will not need it. (This is Obama's argument. The danger is that people will skip it until they do need it, as explained here.)
3) We do not subsidize auto insurance: At least so far as I know. By contrast, all of the major Democrats, including Obama, subsidize health insurance to 300 percent or 400 percent of the poverty line. If lower income folks were given help on auto insurance, more would purchase it. As it is, they will be given help on health insurance,and so more will purchase it. This isn't rocket science. It's also one of the useful things about a mandate: The very fact of its universality means a hue and a cry will go up if the government doesn't ensure affordability. Thus, the government has to ensure affordability, or publicly dismantle its mandate. My hunch is it will do the former.
There are, of course, many more, but those should suffice for now.
Cops don't even ask for insurance when they pull you over.
Sure they do, at elast here in Michigan. Doesn't detract from your larger point, though . . .
Posted by: rea | Dec 6, 2007 11:36:11 AM
How about: you need car insurance to drive, and you need health insurance to live.
Posted by: Christmas | Dec 6, 2007 11:38:50 AM
Allstate don't require Auto body shops disclose private information about the insured.
Try to find an in-network child psych with a typical HMO -- all the psychologists and psychiatrists I've consulted with (about my son's learning disability) have dropped the major HMOs because they require complete disclosure about patients' treatment and diagnoses -- sexual compulsions, substance abuse, etc. FIVE shrinks I've interviewed have told me that they'd rather take NO insurance than violate patient confidentiality.
Posted by: Jamey | Dec 6, 2007 11:45:36 AM
I think point #2 is getting to the real difference. Health Insurance is insuring something very different than Auto Insurance does. The equivalent Insurance for autos would be a maintanance insurance that covers different kinds of trips to the mechanics.
The other difference is that autos have a value over which the auto is considered "totalled". We don't like to put price tags on humans.
I am not so sure if an insurance model is so appropriate for health care (except for major medical -- OTOH, if regular maintanance would save money for insurers by preventing accidents, as regular health care can prevent major medical problems, then of course, auto insurers would partially pay for your trips to the mechanics for oil changes and such). Indeed, perhaps the best way to provide care for the un-insured is, well, just to provide care (via community clinics) and then worry about subsidizing major medical and such?
Posted by: DAS | Dec 6, 2007 11:51:30 AM
You can survive without a car for X days, weeks, or months even in suburbia. Rides from family/friends, borrowing an old beater, renting a car, even *gasp* using public transit will get you by. Therefore, you can shop for the best cost/benefit ratio when something fails on your car (although most people don't).
You cannot survive without heart attack treatment for X minutes. You cannot survive without treatment of fast-growing but fixable cancers for more than X days. You do not have the bargaining position or the time to shop for value. Very few people can even judge the value of a medical treatment and even they probably can't do it when they are the one lying on the gurney.
Posted by: Cranky Observer | Dec 6, 2007 11:52:48 AM
Actually, IMHO, non-compliance with health insurance mandates will be more of a problem than non-compliance with auto insurance mandates.
Auto insurance costs less, for one thing. Also, complying with auto insurance is rather ingrained in us (and routine traffic stops in which they do, as rea points out, check your insurance, are far more common in some places -- I'm talking about you New Jersey, the speed-trap, er Garden state -- than for us young-uns to actually have to go to the doctor).
I see mandates as nothing but (political) trouble. If I have decided I can't afford health insurance yet the government decides that I can ... well, I'm just gonna hate gummint and vote GOP -- 'cause they claim to hate gummint as much as I do -- then, won't I?
Posted by: DAS | Dec 6, 2007 11:55:40 AM
Where I live, cops ask you for insurance proof.
Posted by: Jason C. | Dec 6, 2007 12:09:29 PM
By contrast, all of the major Democrats, including Obama, subsidize health insurance to 300 percent or 400 percent of the poverty line.
This is a good point, and one that needs to be stressed. Moreover, nobody has seen the actual bill an actual Democratic president will submit to Congress. All of you who are bemoaning how immoral it will be to force some family somewhere to spend $8,000 they don't have on health insurance should consider the fact that, in America, it's not illegal to petition the government for changes. How 'bout keeping the pressure on Congress and the President to make sure the bill is a great piece of legislation, and truly makes affordability a top priority so the scenario above doesn't transpire?
Thing is, nobody can deny that an individual mandate plan might not work well if it's part of a, well, crappy piece of legislation. Crappy legislation generally doesn't help people very much because it's, er, crappy. But an individual mandate plan that's part of a great piece of legislation is superior to legislation without an individual mandate, because it can rapidly achieve universality.
Posted by: Jasper | Dec 6, 2007 12:13:22 PM
First thought-- this post was the correct counterpoint to be made, not what Gruber wrote. I think its pretty clear that if you do accept car insurance as an analogy, the 95% compliance Obama's plan offers is as good or better than experience with car insurance compliance. That said, the question with the car insurance model is whether its a good proxy for understanding the level of compliance with health insurance mandates and whether its significantly better than Obama's universal access plan. On this question, here's my rebuttal for your points above:
1)In the Edwards plan, you'll need to enter your policy number on your tax form.
Its unclear what would prevent you from cancelling the health insurance the moment you no longer need it. As I've stated previously, since Obama's plan also has community rating, people can similarly sign up for insurance when they need it, and cancel it when they don't. The problems you think this causes with overall actuarial feasibility in insurance markets, would cause problems for Edwards' plan as well. In other words, automatic enrollment isn't sufficient to increase compliance over Obama's plan. As long as people can cancel it when they are no longer accessing the system, the plans functionally work the same. I'm unaware of what mechanisms have been proposed or are feasible to ensure people always have health insurance, not just when they are looking to access health care.
2)It will be harder to skip health insurance under the theory that you will not need it.
Its very likely that mandates will lead to "catastrophic coverage only" plans to make them more affordable yet legally compliant, that would then make health insurance very similar to car insurance on this point.
3)The very fact of its universality means a hue and a cry will go up if the government doesn't ensure affordability. Thus, the government has to ensure affordability, or publicly dismantle its mandate. My hunch is it will do the former.
We have one actual data point here. Massachusetts. And on this point, given a choice between increasing subsidies or exempting those that can't afford insurance, Massachusetts chose the latter. If Massachusetts, albeit with a Republican governor, can't pull off the level of subsidies necessary to make it affordable for all, it is really realistic to expect Congress? Seriously, where is the evidence for this? Republicans feel comfortable pushing back on level of subsidies for children's health insurance. My hunch is that it will lead to exemptions, not greater subsidies, and I think the data/history on this question supports my case.
Posted by: wisewon | Dec 6, 2007 12:16:03 PM
People without health insurance do not go to the doctor for the flu. Trust me. They go to the emergency room when there is a crisis. So, in fact, your first point makes health and car insurance much more similar than you'd like to think. In a crisis, the hospital is not going to deny service. Presumably, under a mandated system, a person without insurance who needs health care would 1) receive health care; 2) be fined for not having health insurance (a fine they are unlikely to pay unless, like with a car accident and lack of proof of insurance, they have to go to COURT to pay -- will the courts now be involved in lack of proof of health insurance as well?); and 3) be billed for the care they received (again, which they are unlikely to pay, because they don't have the money).
Posted by: cms | Dec 6, 2007 12:21:13 PM
Republicans feel comfortable pushing back on level of subsidies for children's health insurance. - wisewon
Part of the reason they do is because they know they can find examples of "rich" people getting subsidies (and then, of course, these same Republicans complain about non-rich people being hit with the AMT). Why? Because of cost of living differences throughout the country.
One problem which'll occur if we go to a mandate is that the subsidies will be generous enough to insure affordability, in which case the GOP will attack "rich people getting subsidized for health care" or the subsidies will end up leaving people who can't afford health care out, in which case the GOP will attack "gummint mandates people can't afford".
We already see this with income tax (btw ... if we do want to make income taxes more progressive, which we should do IMHO, how do we adjust for the fact that someone making $200 K/year in Podunkville is pretty well off and can afford a higher tax rate than someone making $200 K/year in NYC?) ... we'll see it again with health insurance.
Posted by: DAS | Dec 6, 2007 12:25:36 PM
btw - an accident is not the only time you have to show proof of insurance, a speeding ticket will suffice. How many people have received speeding tickets in their lives vs. have needed to go to the hospital for a life-threatening illness or accident? Again, if you are ignoring a mandate and not getting health insurance, you will only use health care in a crisis situation. A mandate in no way makes health care universal. Is it better than no mandate? Probably. More people covered is better than fewer. But the argument that mandate=universal is completely dishonest.
Posted by: cms | Dec 6, 2007 12:28:35 PM
Sure they do, at elast here in Michigan. Doesn't detract from your larger point, though
California as well (maybe not behind the Orange Curtain, though--I haven't been there since my passport expired). But yeah, larger point still valid.
Posted by: Tom Hilton | Dec 6, 2007 12:32:36 PM
Moreover, nobody has seen the actual bill an actual Democratic president will submit to Congress. All of you who are bemoaning how immoral it will be to force some family somewhere to spend $8,000 they don't have on health insurance should consider the fact that, in America, it's not illegal to petition the government for changes. How 'bout keeping the pressure on Congress and the President to make sure the bill is a great piece of legislation, and truly makes affordability a top priority so the scenario above doesn't transpire? - Jasper
'Cept it doesn't work that way.
The most pressure always comes from those with the resources to exert pressure, i.e. those with vested interests in things being made crappier. And second in terms of pressure are those who follow agendas set by neo-aristocratic media drones and/or their local nutter agenda setters.
Generally the output of sausage making is worse than the input, not better.
Moreover, there is a lot of pressure on Congresscritters to support the sausage, no matter how offal-filled it gets. Because they know if they want a future political career yet they vote against a bill simply because it's bad, they'll get hit with "why did X flip-flop on issue Y?" attack ads. Look at what they did to John "I was for it before I was against it" Kerry.
If people would understand how sausage making works, a lot of these concerns would disappear as the political calculus would be different with an informed public. But given that most people are informed by our neo-aristocratic media AND they mistake what the media has to say for liberalism (and adjust their opinions to be to the right of the media's neo-aristocracy), don't expect things to change anytime soon.
Posted by: DAS | Dec 6, 2007 12:33:31 PM
"Most reading this have never been in a car accident."
Since I have been in at least three car accidents (involving other vehicles) I find this hard to believe.
"We do not subsidize auto insurance."
I believe states often subsidize auto insurance for high risk drivers.
Posted by: James B. Shearer | Dec 6, 2007 12:34:46 PM
If Massachusetts, albeit with a Republican governor, can't pull off the level of subsidies necessary to make it affordable for all, it is really realistic to expect Congress?
Wisewon: Yes. Having the resources of the national economy at your disposal, and no constitutional limits on borrowing, puts Washington in a much better position to robustsly fund insurance reform than any single state, even a relatively affluent one such as Massachusetts. Indeed, for all its liberal reputation, the Bay State has some quirky conservative features. Most prominently, a progressive income tax is against the state constitution. The legislature can't make the income tax code more progressive even if it wanted to, save by amending the state constitution -- something the Bay State's supposedly liberal voters won't tolerate. By contrast, making the federal income tax more progressive -- while requiring a fight -- shouldn't prove impossible. Bill Clinton did it as recently as 1993. The AMT so doing it now.
Posted by: Jasper | Dec 6, 2007 12:42:35 PM
As someone who recognizes the adverse selection arguments for some individual requirement, I think you are arguing against yourself.
Notwithstanding that it routine for cops to asked for "insurance and registration, please," I think the other side of your point is even more problematic: We shouldn't have doctors/hospitals/providers be in any enforcement role in any way. That's not their job.
As a health advocate, it's our concern that such an enforcement tactic would actually be a *disincentive* to get care. If someone hasn't complied with a mandate (for good or bad reason), then actually seeking emergency or other care is the equivalent of turning themselves in. You don't want people--even scofflaws-- to have a fear of going to get medically necessary care.
To their credit, those folks here in California and I think the presidential candidates don't see enforcement in this way, and I hope you don't, either.
Posted by: Anthony Wright | Dec 6, 2007 12:53:40 PM
The cost distribution for auto insurance is way different than it is for health insurance, right? The top 1% of drivers can't really account for 50% of insurance payouts.
Posted by: Nicholas Beaudrot | Dec 6, 2007 12:53:45 PM
Most reading this have never been in a car accident.
I'm with James. I don't believe this. Counting in my head, I've been in seven minor multi-vehicle traffic accidents in my life. And I was hit once while riding my bicycle.
Posted by: Brock | Dec 6, 2007 12:57:18 PM
We shouldn't have doctors/hospitals/providers be in any enforcement role in any way. That's not their job.
Anthony Wright: Why not? Why would it be so problematic for a hospital -- as part of its admissions procedures -- to say "sign here" on a form signing up the patient for health insurance?
I understand your argument that says facing the probability of being signed up for health insurance could be a disincentive to get care. I just think it's a weak one. After all, under status quo rules, a hospital can't deny you emergency care, but it most certainly can and will send you a bill for the care it has just provided you. So sooner or later you'll be hearing from them or their bill collectors. It seems to me the likelihood you'll be (horror of horrors!) forced to join a health insurance plan is less of a disincentive than facing an immediate bill for thousands of dollars worth of care.
The most pressure always comes from those with the resources to exert pressure, i.e. those with vested interests in things being made crappier.
DAS: I think a lot depends on the economy. If things continue to worsen, I imagine people in Congress will fear passing a bill that sticks significant numbers of their previously uninsured constituents with fat premiums bills. I think a lot of them may say "Madame president, we know the voters expect us to get this UHC bill passed, but to do so you're going to have to increase the subsidies, or I'll lose my job."
I agree with you that the insurance lobby will contribute in ugly fashion to the sausage making come what may, but I think this will just make the bill more expensive. I don't think it need derail such critical components as guaranteed issue or community rating. If I'm wrong, it won't matter who the president is, or what type of plan is presented to Congress, and we all might as well take our marbles and go home now.
Posted by: Jasper | Dec 6, 2007 1:14:28 PM
Posted by DAS: "The other difference is that autos have a value over which the auto is considered "totalled". We don't like to put price tags on humans."
One of the comforting things about universal health coverage was, I thought, that we wouldn't have insurance companies pulling the plug on people's lives when they'd reached their premium limit. But the government will have to come up with some kind of price tag for a human life as well--they can't spend endless amounts of money to keep people alive either.
Posted by: Texican | Dec 6, 2007 1:31:32 PM
"all of the major Democrats, including Obama, subsidize health insurance to 300 percent or 400 percent of the poverty line"
So is the funding mechanism going to be (a) everyone over 300 to 400 percent of the poverty line will pay a tax to subsidize insurance for persons with incomes lower than theirs or (b) out of general revenues or a dedicated tax so that middle class people pay a tax and then get it back in the form of subsidies paid to insurance companies?
Posted by: ostap | Dec 6, 2007 1:38:39 PM
Health insurance mandates, by contrast, make proof of insurance a prerequisite to using the system.
The field of medicine will not be comfortable being the enforcers of this mandate. If someone shows up at a hospital with no identification, they aren't going to be turned away. Period.
Ezra, please, please stop pretending that mandates are a slam dunk in terms of effectiveness. There are a slew of real-word practical considerations that add up to real doubt as to whether mandates could really achieve compliance greater than 95%.
Posted by: wisewon | Dec 6, 2007 1:38:40 PM
Ezra, please, please stop pretending that mandates are a slam dunk in terms of effectiveness.
Wisewon: I don't think Ezra is "pretending" that mandates are a "slam dunk." I think he and other health care policy experts are making a persuasive case that, absent the political conditions necessary to enact UHC-paid-for-by-general-taxation, mandates are a necessary and critical component of getting us to universal health care -- a goal that seemingly all Democrats supported a short while ago.
Posted by: Jasper | Dec 6, 2007 1:50:52 PM
"To enter a hospital, you do need to show proof of insurance."
And if an accident victim has no insurance, the ER orderlies will carry him to the curb and call the morgue? Is that how mandates will be enforced?
"compliance will be necessary to use the health system. Auto insurance, by contrast, is not necessary to use a car."
I have health and auto insurance. I drive my car every day. I haven't seen a doctor in 2 years.
Posted by: Bloix | Dec 6, 2007 1:56:38 PM
The comments to this entry are closed.