The Problems With Individual Health Care Mandates
With Hillary Clinton and John Edwards’ health care plans, the idea of individual mandates has popped up as a topic in how to address the health care problems facing the U.S. In the past, I’ve expressed some support for this kind of a policy (see this post, and this one).
Now over at the Cato Institute Glen Whitman has some pretty decent sounding arguments as to why such mandates won’t do much. These arguments boil down to:
- The cost savings by forcing everyone to obtain health insurance is small.
- Noncompliance with Clinton’s proposal will likely be a large and on-going problem.
- How to define a minimum benefits package.
- Limiting flexibility in health insurance packages.
- The problems of community rating.
With regards to the savings the argument goes like this:
Currently the uninsured get their health care via the emergency room. This is expensive and inefficient care at best. Thus, if we can get these people out of the ER and into a general practitioners office or some other source of health care that is more appropriate health care expenditures would decline.
Whitman argues that while these kinds of costs do exist they are actually a fairly small part of health care spending overall and as such an individual mandate even with full compliance is unlikely to provide much of a solution to the rising cost of health care. Further, as currently structured Clinton’s plan has no enforcement mechanism for those who decide to still opt for no insurance. While Clinton’s plan does include subsidies and other incentives to induce people to purchase health care there is nothing ensuring that they do. As such, compliance will not be 100% thus reducing any benefits obtained due getting the uninsured out of the ER.
And let’s be clear here on these “incentives” that are part of Clinton’s plan: they merely transfer the costs from health care purchasers to tax payers. Since tax payers and those who purchase health care tend to be pretty much one and the same, there will be little or no savings here. So you get a tax break to purchase health care, but taxes go up to cover the short fall in tax revenues caused by these subsidies. Net result: no change in aggregate (at best).
The same political pressures that allows oil companies to secure yummy crunchy pork in various energy bills, transportation bills, etc. would also be at work when it comes to defining a minimum benefits package. From a purely theoretical standpoint no benefits package should cover child birth. Child birth is a completely voluntary procedure and as such should be paid by the patient and not by an insurance company. How many think that this kind of hard and rather rigorous economic logic will work well with young families planning on starting a family, single soon-to-be mothers and others? My guess is not well and any minimum benefits package will include pregnancy care and child birth costs.
Also, individual mandate policies are, at least, closer to the “one-size-fits-all” than other options. As such innovative health insurance policies that might appeal to a portion of the population might be prohibited and thus reduce over-all welfare and economic efficiency–or in more simple terms be more expensive.
Finally there is the issue of community rating. Unless very, very carefully constructed this kind of pricing mechanism will result in some sort of cost-shifting. The ironic thing is that this was what individual mandates were supposed to put an end to. Recall the logic of why individual mandates will save money. These policies will keep health care providers from shifting the cost of the uninsured back onto the insured. The problem is that not everyone accesses health care in the same way or at the same rate. As such you could have individuals in rural and sub-urban areas subsidizing those in urban areas, or vice-versa. The poor could subsidize the non-poor. So on and so forth.
I have to say these are some fairly decent arguments against individual mandates. I’m not totally convinced that they are useless, but then again my vision of individual mandates is very different than what Hillary Clinton is offering. Overall I find her health care plan to be…severly lacking.
What she is proposing is quite similar to the current system in the Netherlands. Everyone is required to carry health insurance and compliance is near 100%. A few thousand have not complied at last count. There are strict regulations on insurance companies as to what they must offer and how much they can charge, who they must accept, who they can release, and why; yet there are still enough insurance companies willing to work here that we have substantial choice. We have quite well served by this over the past few years. Our coverage has been better (more physician choices) than what I received from Kaiser in the US. We have a few doctors within a short bike ride and can generally see a GP on the same day. The few times we have needed a specialist we did not have to wait more than a week and costs are quite reasonable both for insurance and treatment. There may be some issues with scaling from ~16 million to ~300 million but these should not be insurmountable.
It’s not just the uninsured, Steve. We have premium health insurance. At least here in Chicago physicians don’t distinguish among different insurers in determining how to allocate service. If you have a problem that won’t wait until your primary care physician has time for you, typically several weeks or longer, it’s standard practice for your PCP to tell you to go to the emergency room.
This highlights a fundamental bad assumption in all universal coverage proposals: that primary care providers have excess capacity. They don’t and whatever cost savings can be achieved as a consequence of universal coverage will be more than offset by the cost increases due to supply and demand.
Grewgills, solutions in the Netherlands are not portable to the United States. It’s not just a matter of scaling. For example, the number of physicians per 100,000 in the Netherlands is 328; the number of physicians per 100,000 in the U. S. is 264. That’s a significant difference which will be aggravated by universal coverage. Additionally, the Netherlands has a significantly more homogeneous population than the U. S. That affects willingness to pay which in turn influences political support.
There’s a physician shortage everywhere. This is a basic problem. There need to be fundamental changes in how medical care is delivered and IMO no other reforms can succeed without dealing with that problem.
The experience in the U. S. has been that reform in the healthcare system is so politically painful that we’re only willing to consider a major reform every 15 years or so. Medicare Part D has been extremely disruptive and difficult.
We have fiscal problems related to financing healthcare that won’t wait another 15 years. That’s why, for me, any reform that doesn’t deal with the supply of healthcare and its distribution, however good it may otherwise be, is a non-starter.
Reform is definitely in our future and it will not under any circumstances be the abolition of Medicare, Medicaid, and the VA. That battle is already lost (or won, depending on your point of view) and it’s actively counter-productive to attempt to re-fight it.
When the market reacts by increasing the supply of PCP’s and lowering the supply of emergency room doctors forced to act as PCP’s, we’d enjoy lower costs, would we not?
I’ve not been told to wait a couple of weeks for a PCP, ever, and I’ve had plenty of good and bad insurance over the last ten years. Maybe you need a new practice.
That’s a sure fire way to eliminate the financially sensible subculture in only a few generations. When only the financially reckless are having children, where will that leave us in 50 years?
No. The supply of healthcare in the U. S. is controlled by a cartel and the cartel believes that its interests reside in restraining the supply.
I’m currently on my third in eight years. They’re all the same hereabouts in that respect.
I haven’t heard what the punishment would be for not having health insurance beside the possibilitie of not being able to get a job. Isn’t it hard to pay for health insurance if you can’t get a job?
Curretly Clinton’s plan would have no punishment mechanism for failure to comply.
That would certainly be the lingering perception. Ethnically NL is slightly more white than the US (~85% as opposed to ~82%). Religiously NL is a bit less homogenous (RC 31 vs 24, Prot 20 vs 54, Jew 0.2 vs 1, Mus 5.5 vs 1, Other 2.5 vs 10, and None 41 vs 10). The Netherlands appears a bit more culturally homogenous than the US, but that is largely due to size and a more homogeneous climate.
The willingness to pay and political support being considerably higher in NL is much more about socialism not being the bogeyman in the NL that it has been in the US. Call universal health care socialized medicine in the US and watch the politicians seek cover. Do the same in NL and watch no one care.
This is a more significant problem but not one that cannot be overcome.
BTW isn’t it usually the contention of those who oppose universal health care that socialized medicine will automatically reduce the number of doctors? My quick scan of the WHO record indicates that the US (2.56) has less doctors per 1000 pop than every Western industrialized nation other than the UK (2.30), Canada (2.14), Australia (2.47), and New Zealand(2.37). Japan (1.98) and Poland (2.47) also have less. Canada and the UK alleviate this somewhat by having slightly more nurses to make up for having slightly less doctors. This seems to put the lie to the contention of many (not necessarily Dave here) that universal health care will mean less doctors.
I have lived several places in and out of the US and have never had to wait more than a day or two for an appointment, have generally been able to get same day walk in service from a GP, and have never been sent to an emergency room for non-emergency service.
There is certainly a physician shortage in some places, particularly in rural and poor areas. This is a problem that should be addressed, but I don’t think that all other health care problems should be held hostage to this one.
This fiasco has certainly made things both more difficult and more necessary.
Re: certifying doctors and med schools
This should be done by the government rather than by the AMA. This would open the door to more med schools and more physicians. The AMA guidelines could be used as starting point to craft certification standards.