Health reform is back on the national agenda thanks to the rapidly rising costs for medical care and growing ranks of the uninsured. A stagnating national economy and state fiscal crises mean that more Americans are losing their health insurance while fewer states can afford to help them. For the first time since the collapse of the Clinton health plan in 1994, politicians are talking about comprehensive reform and universal coverage. So it should come as no surprise that policy entrepreneurs are taking the opportunity to promote their pet solutions in anticipation of the coming national debate over health reform.
Mandatory self-insurance -- which would compel all Americans to purchase health insurance (much like all drivers are required to purchase auto insurance) with public subsidies going to those who cannot afford the cost -- has emerged as the flavor of the month in health reform. Ted Halstead, president of the New America Foundation, argued in a Jan. 31 New York Times op-ed piece that mandatory insurance is "the most promising solution to America's health care crisis." Sen. John Breaux (D-La.), a congressional leader on health policy, has offered a similar plan, praising mandatory self-insurance as a "bold and new idea."
But individual mandates for health insurance are not a new idea at all. Indeed, current proposals are strikingly similar to an individual mandate proposal advanced by then-Sen. John Chafee (R-R.I.) in 1993. The Chafee plan failed to attract much support, but it is easy to understand why individual mandates have made a comeback: They appear to offer a simple, affordable and politically feasible path to universal coverage. That appearance, however, is deceptive. In reality, individual mandates are unlikely to live up to the promise proponents have attached to them.
Halstead's case for individual mandates is based on a misleading portrait of the uninsured. To Halstead, the uninsured are mostly "middle class" -- young, healthy Americans who can afford to purchase health insurance. If only they were compelled to buy insurance, Halstead argues, not only would we get universal coverage but these healthy newcomers to insurance pools would also drive down the cost of premiums.
In fact, the uninsured are not mostly middle class: Nearly two-thirds (64 percent) of the uninsured earn less than 200 percent of the federal poverty level. As a result, if universal coverage is truly the goal, an individual mandate program would have to offer much higher subsidies to a much broader segment of the population than Halstead implies. And because the average premium for health insurance is $8,000 for families and $3,000 for individuals, Halstead seriously underestimates the federal price-tag for subsidizing individual mandates. That price would decline if the "basic" insurance that Halstead would require all to buy really means only catastrophic or bare-bones policies. But such plans would not provide adequate health security.
Nor can Americans expect to pay less for their medical care under an individual mandate system. The uninsured average 30 percent fewer hospital days and 40 percent fewer physician visits than the insured. Once insured, we can reasonably expect that those who currently lack health insurance will use more medical care -- which is, after all, one of the goals of universal access. There is simply no getting around the fact that any plan for universal coverage is going to cost more money to pay for that additional care.
Moreover, individual mandate plans have no cost-control mechanisms. They instead rely on the vague hope that competition between private insurers will lower health-care costs. Yet the American experience with competition in medical care provides no basis for relying on a private insurance system -- the most expensive in the world, incidentally -- to slow health spending. Without government regulation and freed from the negotiating leverage that big companies now exert for premium discounts, there would be no constraints on private insurers who wanted to raise prices. Under an individual mandate program, health-care spending and insurance premiums would continue to escalate, necessitating sizable increases in public subsidies -- and likely generating political pressure to retreat from universal coverage.
Finally, individual mandates could exacerbate the very problems they seek to solve. The flaws with linking health insurance to employment are well-known; for instance, workers who lose their jobs also lose their health insurance. But despite flaws such as these, most Americans (63 percent) have employer-based health insurance that provides for shared financing and a convenient way to pool risk. An individual mandate would replace this system without guaranteeing anything better to take its place. Mandatory self-insurance with government subsidies would tempt employers to stop paying for employees' health insurance, especially for low-wage workers. (Breaux's plan tags employers with a "maintenance of effort" requirement, which he says would address this problem, but it's essentially an employer mandate whose political liabilities individual mandate plans are supposed to avoid). And the insurance market could very well segment further on the basis of health risk, as groups of healthy individuals form their own health plans and leave chronically ill Americans stuck with expensive and increasingly unaffordable insurance.
The aspiration to universal coverage embodied by the new wave of individual mandate plans is a welcome improvement over the incrementalism that has dominated the health-care-reform debate for the last decade. Yet without generous subsidies, clear mechanisms to pool risk and effective cost control, an individual mandate that makes being uninsured illegal will no more solve the health-care crisis than a mandate that makes unemployment illegal would solve joblessness. If what we want is affordable and secure health insurance for all Americans, individual mandates simply won't get the job done.
Jonathan Oberlander is assistant professor of social medicine at the University of North Carolina at Chapel Hill.
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