Wednesday, November 21, 2007

Schwartz On Mandates and Single Payer

Brian Schwartz has just written the following OpEd on the problems with health care reform as envisioned by Colorado Governor Ritter and the 208 Commission:
Ritter's health care cure would prove more crippling to Coloradans

November 21, 2007
By Brian Schwartz

Colorado Governor Bill Ritter does not want does not want health care reforms that "throw more money at a problem without addressing the root causes of the crisis." Unfortunately, the state's 208 Commission does exactly that.

The Commission's favored proposals address the "crisis of the uninsured" by simplistically making it a crime not to have insurance. These involve two politically-controlled compulsory insurance schemes: a "single payer" system or an "individual mandate."

"Single payer" is a government-controlled monopoly where, as Canadian Chief Justice Beverly McLachlin wrote, "access to a waiting list is not access to health care." For a chilling picture of this, visit for video interviews with Canadian patients and reports on how, under "single payer," patients die waiting for care.

The individual mandate is essentially single-payer in disguise. Strict regulations on legal insurance plans severely limit competition, so insurance companies are effectively government contractors for politically-defined insurance.

A rationale for such compulsory insurance is to make the uninsured "responsible" by not allowing them to shift costs to the insured through higher insurance premiums. To address this, the Commission has proposed $1.1 billion in taxes for subsidized insurance and Medicaid expansion. This will cost $400 per privately-insured Colorado resident. Yet, the Commission's website shows the relevant cost shift from the uninsured to be around $200 million, or just $85 per privately-insured resident.

Compulsory insurance is unethical regardless of cost. Government should protect us from aggressors, but compulsory insurance is aggression. You'd face fines and ultimately prison for peacefully refusing to purchase politically-defined insurance.

Politicians love compulsory insurance because lobbyists will throw money at them in hopes of having their services covered. As P.J. O'Rourke observes, "When buying and selling are controlled by legislation, the first things to be bought and sold are legislators."

Indeed, politicians already succumb to special interests by forcing insurance plans to cover many benefits that you may not need. These mandates increase your premium costs by 21 to 54 percent. They reduce wages and are responsible for up to twenty-five percent of the uninsured.

Instead of expanding politically-controlled medicine, the Colorado Legislature should expand eligibility for "mandate-lite" policies and phase out mandated benefits. It should promote the Health Care Choice Act, which would allow you to buy insurance from companies in states with less damaging regulations.

Reform should also remedy the insurance-friendly tax code. Because the tax code exempts employer-provided health insurance, you're essentially stuck with your employer's high-cost, non-portable choices. Hence, insurance companies need not please you; they know that losing you as a customer requires changing jobs.

Tax-exempt insurance coddles insurers by encouraging you to waste money on more expensive coverage than you need, rather than keeping that money for yourself. Why save $100 on a more economic policy when after taxes you're only left with around $45? You might as well keep the costly insurance, though you probably won't utilize the high premiums and you could be saving.

This penalty on saving has resulted in our demanding prepaid medical care instead of real insurance. Since medical care appears almost free at the point of service, patients over-consume with little attention to cost, and providers need not compete on price. Providers need not satisfy you - as you are not a customer, your insurance company is. Yet, several studies have shown that patients with higher cost-sharing spend much less than those with prepaid plans - with negligible difference in health outcomes. They also seek more preventative care and motivate physicians to improve customer service.

To champion fairness and affordable quality medical care, legislators should support a tax code that treats out-of-pocket medical expenses and insurance equally, regardless of who pays insurance premiums. Phasing out the employer tax exemption and lowering taxes commensurately can achieve this.

Making all medical expenses and insurance tax-exempt may be more politically feasible. For example, allow anyone to open a tax-deductible Health Savings Account, regardless of one's insurance plan. Allowing us to purchase insurance with HSA deposits would free us from our employer's insurance, empower consumers, and encourage competition.

The 208 Commission foolishly supports Medicaid expansion. As shown in FAIR, my free-market proposal at, Medicaid fails to meet the Commission's criteria of increased access, personal responsibility, financial stability, and fairness. Instead of unfairly competing with insurance companies with Soviet-style government-controlled insurance, Medicaid could at least mimic Food Stamps by providing insurance vouchers.

This would be an improvement, but it's still unjust. For every dollar expropriated from you to fund Medicaid, private charities lose a potential donation. Tax credits for donations to medical charities would partially level the playing field. The threat of lost revenue would motivate Medicaid administrators to be effective, and taxpayers would have more freedom to fund charities they deem worthy.

Government controls cripple medical care. Effective reform requires phasing out destructive controls and programs, not creating more of them. Paraphrasing Colorado activist Robert LeFevre, government-controlled medicine is a "disease masquerading as its own cure."

Brian T. Schwartz is an optical engineer and freelance policy analyst in Boulder. This is a revised and expanded version of an article published in the Rocky Mountain News. His website is