San Francisco Chronicle, October 13, 2009
President Obama has promised that his health reform plan will lower costs and expand coverage. He and his Democratic allies are counting on an “individual mandate,” or a requirement that everyone purchase health insurance, to achieve these goals.
But Obama hasn’t always been gung ho about a mandate. During his presidential campaign, he opposed the idea.
His instinct then was right. An individual mandate would effectively impose an additional tax on middle-class Americans already struggling to pay for health care.
During the February 2008 Democratic Party debate, the individual mandate emerged as a point of contention between Obama and Hillary Rodham Clinton. Obama attacked the idea by saying, “If we make it affordable, people will purchase it.” The key to expanding coverage, he argued, is reducing the cost of insurance.
Candidate Obama’s position still holds, even if President Obama has changed his mind. Americans will purchase health insurance if they can afford it. A mandate would penalize those who are least equipped to handle financial penalties.
The leading reform plan in the Senate, proffered by Sen. Max Baucus, D-Mont., and largely supported by Obama, would saddle those who do not buy insurance with fines of between $200 in 2014 and $750 in 2017.
As a result of these middling penalties, the Congressional Budget Office estimates that 25 million people will opt to pay a fine and remain uninsured. Insurers are counting on premiums from this largely healthy, young population to subsidize other less healthy people in the new insurance pool. Without that premium income, PriceWaterhouseCoopers estimates that by 2019, a family policy will cost $4,000 more under the Baucus plan than it would in the absence of reform.
Further, an individual mandate will become prohibitively expensive for all taxpayers. Since Massachusetts implemented a mandate in 2006, public spending on free and subsidized insurance for low- and middle-income Bay Staters has ballooned from $1.04 billion a year to a projected $1.75 billion in 2010.
Extending the subsidies necessary to sustain a mandate nationwide would bring about a federal budgetary catastrophe. Indeed, the Baucus plan already earmarks $463 billion for subsidies over the first 10 years.
Meanwhile, viable strategies for reducing health costs are being ignored.
Scaling back state-level insurance regulations is one way to reduce costs dramatically. In California, for instance, every insurance policy is required to cover 56 therapies and procedures, including everything from chiropractics to in-vitro fertilization.
Such micromanagement increases insurance costs by as much as 50 percent, according to the Council for Affordable Health Insurance, an organization promoting free-market health care solutions through research and advocacy.
Expanding the use of high-deductible insurance plans and tax-advantaged health savings accounts is another way to decrease health costs. Most Americans don’t know the cost of the health care they consume because they don’t directly pay for it – their insurance companies do. This third-party payment system encourages overconsumption of health care and is a reason for skyrocketing health costs.
Instead, we should return health care dollars to patients. Such a reform would encourage Americans to shop around for the best deal on health services and discourage the use of costly facilities like emergency rooms for non-emergency care.
President Obama appears to have fallen prey to the canard that we can expand health coverage by mandating that everyone buy insurance. But he had it right the first time.
Sally C. Pipes is president and CEO of the Pacific Research Institute. Her latest book is “The Top Ten Myths of American Health Care: A Citizen’s Guide.”
This article appeared on page A – 11 of the San Francisco Chronicle