No Individual Mandate, Really?

Part of the “My Prescription” series.

I’m resisting an individual mandate despite my left leaning ways.  Underneath it all I do not like large programs that dictate behavior. Liberty is important, but more than anything mandtaes can be impractical. How would you enforce such a thing? How much would enforcement cost?  How effective are mandates? And do we want to be punitive toward those who do not obtain insurance? These are all tough questions and questions I would direct to Hillary Clinton.

Under “My Prescription” all people would have equal access to health insurance while establishing equitable tax incentives to purchase insurance. Those people not purchasing health insurance are losing out on their tax credit and thus throwing money away. It changes the calculation.  Currently, a person looks at the $8,000 premium and walks away. No health insurance, but $8,000 in their pocket. Under “My Prescription” they look at the tax credit (let’s say $3,000), and they have the choice whether to spend $5,000 on the insurance ($8,000-$3,000 tax credit) and have health insurance or do I pay $3,000 more in taxes and not have the insurance.  That changes the game (these numbers are fictitious, but make the point) because people would now practically be paying to not have insurance. 

So do we need a mandate? I would like to give the “My Prescription” plan a chance to work without a mandate. I believe it would lower the number of uninsured tremendously.  It would eliminate the excuse that a person could not get insurance becasue of their medical history. It would make obtaining insurance very appealling, and lastly, it would have a better chance of political passage without such a mandate. If I turned out to be too optimistic in my estimates toward universal health care a mandate could be added later, but in the meantime “My Prescription” would improve quality by stimulating competition on costs and quality. It would improve incentives for public health and prevention of disease.  It would improve relationships between patient, doctor, and insurer by improving continuity of care. It would align the incentives with cost controls and quality of care. No, for now, I’m going to pass on the mandate.

Now We Build

Part of the “My Prescription” series.

But before we do let’s recap. In brief we need a new foundation. The employer based system is not working. So I am suggesting two fundamental changes: Health insurance exchanges and tax reform.

Health Exchanges will provide the pooling mechanism. They would be run by the States and would regulate the plans much like the New York Stock Exchange regulates stocks. The exchanges would have to force the plans to accept all applicants, to have a fairly standardized set of benefits, and I believe use a modified community rating. Community rating is when the premiums are based on the risk of the community as a whole, not the risk of the insured person and their specific circumstances. The modification is that insurers would charge everyone within their plan the same amount, but that each insurer can set that price (and thus compete on price).

I can hear the screams right now, “What about smokers? I don’t want to pay for them?” Neither do I, but I do want to make sure that the cancer survivor has access to good medical care. Further, competition would make smoking cessation programs financially viable. Second, I can anticipate, “You need to let the market operate unregulated.” I believe in the market, but without regulation insurers will only compete by avoiding high risk people, not on quality and price. Under this plan competition is limited in several aspects. I won’t deny it, but there is still competition. The insurer is competing on quality of care and efficiency of providing that care. And, “Won’t this make premiums more expensive?” Yes, community rating makes insurance premiums higher. Insuring sick people costs money, but I do believe that it is the morally correct choice.  Let’s see if this competition can reduce costs over time through directed competition.

So the next big thing is that we need publicly reported information about the quality of health plans, hospitals, physician groups, and physicians. There is an emerging movement already, but it needs to be a national priority. Competition only works when the consumer is an informed consumer. Let’s educate!

So we have exchanges that regulate health plans and use community rating. All people are included and all can choose their own plan. The plans are portable from job to job providing consistency of care and long-term relationships with insurers. The tax credits provide equity in the tax code, but still preserve the employer’s incentive to contribute. Employer’s continue to facilitate health insurance, but no longer sponsor it. Quality measures are reported to the public forcing health care plans, hospitals, and providers compete on quality and price while minimizing selection issues.

Next time we’ll discuss a few nuances of the tax proposals, why an individual mandate may not be necessary, and the need for either re-insurance or risk adjustment.

The State of Things

The Sunday Times placed a health care article on the front page above the crease. The article is not necessarily groundbreaking new information, but its updates typical stories  and costs in a new and shakier  economic climate. The article emphasizes that yes, the uninsured numbers are rising (nearing 48 million), but that the costs for the insured are rising in a time that when budgets are tightening. Here are stats from the article:

The average employees’ share of their family insurance premium has increased from $1800 in 2001 (the last recession) to $3,300 today.

Families spent more on health care (16.6% of income) than they do on food ( 13.1%) or housing (14.4%).

These trends are not new and the dynamics of who is hurting has remained the same. However, with increasing gas costs, food costs, and housing uncertainties, health care needs are being squeezed. Don’t be surprised if more and more of today’s insured will fall into the uninsured pool at an ever increasing pace.

Why Won’t We Sacrifice?

Big things often demand big sacrifices. When I consider revamping our health care system to a universal or near universal health care system I am aware that it will involve sacrifices. These sacrifices will be well worth it if we redo our system in an intelligent manner. But the sacrifice is too much to ask of us – it would appear. We get scared and leave the status quo in place.

I’m going to deviate from health care for a bit here…

During this political season I have not seen such an avoidance of sacrifice than the latest debate over the gas tax holiday. McCain and Clinton propose that the federal gas tax be lifted this summer to help middle and lower class wallets. They don’t want us to sacrifice by paying higher prices in order to decrease our dependency on foreign oil or to better our environment.

And their proposal is full of pandering and complete bullshit.

I know Obama wants to use that word as well, but can’t give this proposal the descriptors it deserves. All three of them know that the proposal makes no sense, but Clinton and McCain pander so low.

Let me explain why it is bullshit before I go on. If you give a gas tax (especially a temporary one) gas prices will drop initially. Since gas refineries can’t increase output appreciably over the summer there will be no increase in supply. However, since the price will drop initially, the demand for gas will increase and prices will respond by rising. Rising to where it is now with the gas tax. So then who gets that demand driven increase in price? No, not the middle class wallet. They are paying no matter what. Our appetite for oil is too big. It is the oil companies that would reap the benefit. The tax would be shifted from going to the government to the oil companies. Meanwhile we will use more gas, pollute more, and increase our oil dependency. Sounds like a great policy.

I believe Clinton is a smart candidate. She has taken economics 101. Yale has taught her well. She knows her proposal is full of bullshit and she is pandering. She is stooping low and is being deceptive. But back to my point. Why can’t Americans be asked to sacrifice? Why are high gas prices bad? It’s the market speaking. It’s a wake-up call to move away from oil. It may hurt, but it should push us to run from oil, not snuggle up against it.

Why can’t we be asked to sacrifice when we are at war? Why can’t we be asked to sacrifice to save our planet? Why can’t we be asked to sacrifice so that all Americans can have access to health care? Are we too comfortable and lazy? Are our leaders too weak to make the demands? I’m not sure, but I do know that sacrifice is needed at times. Let’s keep an open mind and vote for the candidate that is not afraid to ask of us to do better, to make changes, and to even, if necessary, to make sacrifices.