Mandatory insurance takes what’s wrong with health insurance and makes it worse. It means higher costs, affordable insurance becomes illegal, and less incentive to please patients. Amendment 63 would block Colorado politicians from imposing mandatory insurance. It would also prevent the feds from pressuring the Colorado legislature to enforce Washington’s version of it.
In opposition, Edie Sonn of the Colorado Medical Society says Amendment 63 “will lead to higher health care costs for insured individuals and businesses as they are forced to absorb the costs of the uninsured.” This cost-shifting argument is both wrong and deceptive. Mandatory insurance will increase costs and impose much larger cost shifts.
President Obama says we’re “paying 900 bucks on average” because some uninsured patients don’t pay medical bills. He’s referring to a Families USA study that Independence Institute economist Linda Gorman has shown to be highly flawed. The study over-estimated the cost of uncompensated medical care. It “disregarded categories accounting for roughly 33 percent of the payments” for the uninsured such as auto insurance, community health centers, and various government programs.
The cost shift is no more than $85 annually per insured Coloradan, according to the Lewin Group’s 2007 “Baseline Coverage and Spending” report for the Colorado Blue Ribbon Commission. This amount is trivial compared to how much mandatory insurance increases premiums. Consider Massachusetts, which has mandated insurance since 2006. The most affordable plans sold through Massachusetts’ insurance exchange cost almost three times more than those available in Fort Collins. The Boston Globe reports that the premiums in Massachusetts are the highest in the country and emergency room visits and costs have increased.
Mandatory insurance entrenches the main cause of high health care and insurance costs: The patient is rarely the paying customer. Health care prices decrease or stabilize when patients pay, rather than insurers. Examples include Lasik, and cosmetic surgery, and whether you like it or not, abortion.
But patients are rarely customers because the tax code and other controls favor excessive insurance. The typical health plan is not insurance, but prepaid health care. If car insurance worked this way it would cover routine and predictable expenses such as oil changes and new brakes.
Prepaid health care insulates patients from the true costs of treatment. Patients are typically oblivious to prices or more affordable alternatives. Since the patient isn’t paying, physicians have incentive to exaggerate diagnoses such that third-party payers (insurers, Medicare, Medicaid) will finance expensive treatment. Prices of health care and insurance soar as a result.
Mandatory insurance makes this worse by banning lower-cost insurance policies. Politicians mandate costly benefits and limit deductibles, which both increase premiums and further distort insurance into prepaid health care. A typical mandated benefit increases insurance premiums by about 0.75 percent, concludes a 2008 study lead by MIT economist Amanda Kowalski.
Legal health plans under the Obama health control law must include at least ten mandated benefits such as laboratory, preventive and wellness services (HR 3590, sec. 1302). If you paid cash for such services you’d make sure they were necessary. Such discretion isn’t needed if your health plan pays.
The CMS opposes Amendment 63 by objecting to cost-shifting. But mandatory insurance does this, too. Instead of saving money to self-insurance, banning lower-cost policies makes people buy more costly and comprehensive insurance than they’d like.
For more affordable insurance and health care, politicians should repeal damaging political controls, not add them. For example, change the unfair pro-insurance tax code so it no longer punishes people for paying cash for medical care.
There’s no right to medical care, but we have the right to seek it through voluntary exchange. Colorado Amendment 63 would protect Coloradans from politicians seeking to violate this right.
Brian T. Schwartz, PhD writes for the Independent Institute’s PatientPowerNow.org blog.