Mandatory Health Insurance is Not Universal Choice

“Covering the uninsured” through more government power is a misplaced priority. It gives politicians, instead of patients, control of health-care dollars. Nevertheless, many Americans understandably view the fact that the U.S. is the only developed country that does not have so-called “universal” coverage as a national disgrace. Furthermore, many believe that the uninsured delay primary care until their illnesses worsen and they show up at emergency rooms for wildly expensive — but unpaid – treatment, imposing an extra burden on hospitals, the privately insured and taxpayers.

However, an analysis of national health spending for 2000 showed that the uninsured incurred less than 7 percent of all medical-care expenses, and significantly fewer of them were likely to present at an emergency room than either the privately insured or those dependent on government-run programs, such as Medicaid. In 2003, 1.8 million insured kids visited California ERs, versus only 80,000 uninsured kids. The claim that 4 percent of the kids who present at ERs are somehow driving hospitals to the financial brink is implausible on its face. On top of this, almost two thirds of uninsured California kids are eligible for government-run plans but not enrolled!

“Universal” health care in other countries is less a reality than a government slogan: Over one in six Canadians have no access to a primary care physician, and waiting times for specialty treatment have grown so long that the Canadian Supreme court judged in 2005 that government-monopoly health care violates citizens’ civil rights. Indeed, American and Canadian health care are equivalent in one respect: Patients control very little of the cash flow – only 15 cents on the dollar.

Hawaii passed a law for compulsory health insurance in 1974, but the Aloha State has never claimed success. The State Health Insurance Program of Hawaii “moved the state closer to universal coverage” in 1989. As late as 1993, Hawaii’s efforts at “universal” coverage were described by a scholar as “lodged somewhere in midstream.” If it were only so easy! In 1974, one in 50 Hawaiians was uninsured. Today, after more than three decades of mandatory insurance, that number stands at one in ten. Of course, Hawaii is not immune to national trends, but scholars have concluded that the state’s pay-or-play mandate might have reduced the ranks of the uninsured by 5 to 8 percent at best.

Former governor Mitt Romney of Massachusetts signed legislation for “universal” health insurance in 2006. It has resulted in a terrible trade-off: While uncompensated hospitalization costs have dropped by $250 million, the cost of coverage has gone up by $820 million. And costs are spiraling up so fast that Governor Patrick has formed a blue ribbon commission to change the way hospitals and doctors get paid.

“Universal” health insurance does not have to result in government monopoly. Switzerland, for example, has mandatory private health insurance and lower health costs than the U.S. However, Swiss system has characteristics other than compulsion that likely better explain these positive outcomes:

  1. The Swiss tax-code does not punish employees for buying health insurance directly, like the U.S. does, so the Swiss are free to buy health insurance in a robust and competitive individual market. This means the Swiss are able to keep one health insurance policy for as long as they want, rather than switching insurers when they switch jobs. As a result, Swiss insurers have superior incentives and ability to price the risk in their plans than American insurers do.
  2. The Swiss government does not order its residents out of private insurance and into a government program when they turn 65, like the American government does. This reinforces the superior incentives discussed above.
  3. Swiss insurers have long had the freedom to levy higher deductibles and co-payments than has been practical in the U.S., resulting in lower premiums and leaving more spending under patients’ direct control. American laws and regulations have, until recently, inhibited the availability of such plans to most people. Our traditionally low deductibles and co-payments have led to “over insurance” and significant over-consumption of health care.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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