Mandating health – or auto – coverage doesn't mean everybody will comply

It takes a special effort to propose a $12 billion solution to a so-called problem that costs $9.5 billion, then claim that you are reducing the cost of the problem. Gov. Arnold Schwarzenegger appears up to the task.

He has proposed some very specific taxes that will immediately increase California's health spending by 6 percent in a futile quest to "cover the uninsured." The plan will not, however, cover the uninsured.

California law requires car insurance, but 25 percent of the state's drivers remain uninsured. The reason one quarter of drivers break this law is that they do not expect to get caught; that is, they do not expect to be in an accident. So it is for those without health insurance.

Those ranks include half the children eligible, but not enrolled in Medi-Cal or Healthy Families. For many, perhaps most of them, this is a sensible decision: Four in five uninsured Californians self-report good, very good, or excellent health. Nevertheless, the governor has bought into the conventional wisdom: "Cover the uninsured!"

He has also bought into the myth that uninsured Californians drive up health costs by delaying primary care and showing up at emergency rooms once their ailments have become unnecessarily expensive to treat. This myth now bears a number – a "hidden tax" that the uninsured impose on the insured of $1,186 per insured family and $455 per insured individual – kindly furnished by the New America Foundation. This $9.5 billion figure is misleading in many ways.

First, many uninsured have jobs. One fifth earn more than three times the federal poverty level – about $50,000 for a family of three. By forgoing health insurance, these people are voluntarily paying extra income tax – likely more than $2,000 a year for the family above. Even the governor estimates these extra taxes at $8.4 billion – so the uninsured already pay almost 90 percent of the so-called "hidden tax" as explicit taxes.

Second, the uninsured are not responsible for hospitals closing ERs. They use less primary care than the insured, but they also use fewer emergency services. According to UCLA's Center for Health Policy Research, a group as obsessed about "covering the uninsured" as the governor and the New America Foundation, the difference between uninsured and insured delaying or not getting nonprimary, "other medical care" was only 7 percent in 2003. This included screening tests, visits to specialists, and urgent care, as well as ER use.

In absolute numbers, more than three times as many insured Californians delayed or avoided such care as uninsured Californians. Children were surveyed specifically about ER use: 1.8 million insured kids visited ERs, versus only 80,000 uninsured kids. In fact, because the uninsured use health services much less than the insured, they pay the insured a "hidden subsidy" of $24 billion annually – or $2,965 per insured family. So, if they do all become insured, which is unlikely, costs will go up by twice as much as the governor anticipates.

Finally, there is a real hidden tax, but it is due to overinsurance, not uninsurance. Because of bad incentives, insured Californians use 2.5 times more health services than the uninsured – much of it wasted. U.S. Sen. Tom Coburn, R-Okla., an obstetrician, agrees with economists who estimate that one-quarter to one-third of health care is wasted because almost nobody has the right incentives to use it wisely.

At the low end of this estimate, the "hidden tax" of overinsurance in California is more than $6,000 per insured family, dwarfing the hidden tax of uninsurance.

Politicians don't talk about this hidden tax, because asking the 24 million insured Californians to take responsibility for the problem is likely a path to electoral defeat. The politician who figures out how to do so will earn our thanks. Until then, we will be deluged with proposals like Gov. Schwarzenegger's: a focus on "covering the uninsured" that is unhealthy, unwise and expensive.