Tuesday, October 9, 2007

Business Week OpEd Opposes Individual Mandates

The October 15, 2007 edition of Business Week includes the following opinion piece by Glen Whitman criticizing individual insurance mandates. Here are some excerpts:
"Bad Medicine For Health Care"

From Hillary Clinton and John Edwards to Mitt Romney and Arnold Schwarzenegger, politicians across the spectrum have tried or vowed to solve America's health-care woes by enacting an individual mandate--a law requiring every adult to purchase health insurance. Despite its bipartisan support, the individual mandate is bad policy, a vain attempt to command a better result while doing nothing to achieve it.

...As anyone who has ever driven above 55 mph knows, mandating something is not the same as making it happen. Some people will not comply: 47 states require drivers to buy liability auto insurance, yet the median percentage of uninsured drivers in those states is 12%. Granted, that number might be even higher without the mandates. The point, however, is that any amount of noncompliance reduces the efficacy of the mandate.

... To enact any mandate, legislators and bureaucrats must specify a minimum benefits package that an insurance policy must cover. Yet this package can't be defined in an apolitical way. Each medical specialty, from oncology to acupuncture, will push for its services to be included. Ditto other interest groups. In government, bloat is the rule, not the exception.

Even now, every state has a list of benefits that any health-insurance policy must cover--from contraception to psychotherapy to chiropractic to hair transplants. All states together have created nearly 1,900 mandated benefits. Of course, more generous benefits make insurance more expensive. A 2007 study estimates existing mandates boost premiums by more than 20%.

If interest groups have found it worthwhile to lobby 50 state legislatures for laws affecting only voluntarily purchased insurance policies, they will surely redouble their efforts to affect the contents of a federally mandated insurance plan. Consequently, even more people will find themselves unable to afford insurance. Others will buy insurance, but only via public subsidies. Isn't that just what the doctor didn't order?

A better approach to health reform would focus on removing mandates that drive up insurance premiums. States ought to repeal some or all of their mandated benefit laws, allowing firms to offer lower-priced catastrophic care policies to their customers. The federal government could assist by guaranteeing customers the right to buy insurance offered in any state, not just their own, enabling patients to patronize companies in states with fewer costly mandates. Indeed, removing mandates would do far more to expand health-care coverage than adding new mandates ever could.
My only additional comment is that in the final paragraph I would advocate removing "all" (rather than just "some or all") of these harmful mandated benefit laws.

(Via Marginal Revolution.)