THE BLOG
03/18/2010 05:12 am ET | Updated May 25, 2011

Health Care Without Bankruptcy, Please

What kind of an America would we suddenly create if the President were to sign into law a health care bill with a mandate to buy private insurance? An America where millions would be covered, but bankrupt, broke, financially kaput. And unhealthy, too.

Wait--what?

You guessed it. All the fever-pitched, media-amplified ranting about "death" that has dominated the health care debate has likely done little more than obscure the ultimate sticking point for many Americans: a bill that would mandate--require by law--all Americans to buy private health insurance.

Make no mistake: the health insurance mandate would not be like the mandate to drive the speed limit. It would not just be a clever idea that nobody really followed. It would be law. There would be fines for not heeding it--and steeper penalties for shirking the fines.

And here is the kicker: a mandate for health insurance would, if signed into law by President Obama, would take the already flawed business model of health insurance and turn it into a perfect storm of financial and then physical ruin.

Right now we have a system that requires the government to cover those who are indigent and those who are elderly--Medicaid and Medicare--thanks to the legacy of the New Deal and the Great Society. There is a selfish bunch of Americans who are opposed to Medicaid and Medicare, but most see their value through their flaws. Despite the horror stories about "death panels" and "killing granny" (none of which are true), if the current health care bill were signed into law, poor and retired Americans will still be covered in the same way as they are today.

The big change will be for the rest of the country that would suddenly be faced with an unprecedented and up-to-that-point not understood requirement.

Everyone would be required to buy an annual health insurance policy for ourselves and our family members--dictated by government to purchase a private product.

Now, advocates for a mandate assure us that it would lower costs because it would plug the "leaks" in the insurance "pool." They also claim that there is already a mandate in the auto insurance market, and it has not caused anybody any harm.

In reality, there is no such thing as a coverage "pool" that does not leak. In the current situation, for example, undocumented immigrants will not be covered (of which there are, ehem, one or two in America). So at first, undocumented workers will be the biggest, identifiable and substantial "leak." Even after a mandate went into effect, emergency rooms would still be treating new arrivals to this country who live at the margins of our system, but need medical care just the same. Mandates without coverage for immigrants would mean that the cost of private insurance would still go up. Leaky pool.

As for the comparison to auto insurance: it does not hold. Consider, for example, the everyday scenario of an American who decides they need to buy a car. They shop around, then calculate whether they afford the purchase or lease expenses, fuel, maintenance, parking, and--insurance. At this point, many decide not to buy a car, thereby freeing them from the mandate. Others decide that they can afford a car, but cannot afford both liability and collision insurance. So, they get minimum coverage, exposing themselves to great financial risk.

In a mandate health insurance system, the same scenario would likely arise: forms of private insurance would arise offering coverage that satisfies the mandate law, but leave the individual exposed to so much financial risk that any real health crisis will be a guarantee of financial ruin. At least when it comes to buying a car, we can evaluate this risk and decide to take the bus. With a health insurance mandate, there would be no "take the bus" option.

Since no government can require people to spend themselves into poverty, the result of the mandate will be that a large chunk of the American middle class would choose to expose themselves to enormous financial risk in the long run in order to avoid spending all their money on health insurance in the short term.

The private insurance industry--probably the most sophisticated industry in history--will have no trouble developing precisely the kind of products that will feed off the short term concerns of middle class families. Families of four that earn enough money to feel like they are doing well, but not enough to pay $10,000 for a health care policy, will be enticed to buy policies that help them "save money," "control their costs," "take control," "get rich." It does not take much imagination to see how well these kinds of late-night-TV products would succeed. They would be the junk bonds of health insurance, the sub-prime mortgages of health care, the "Rich Dad" videos of the mandate era. They would fuel a health care bubble, and then, inevitably: a health care bust.

Five, maybe ten years, after the system started, we would be faced with our first financial crisis brought on by the mandate.

In such a crisis, the government would be faced with a rise in personal bankruptcy caused by fraudulent health care products that would make the housing crisis look like a tame night at the canasta table. Tens of millions of Americans would be in financial ruin because the policies they chose to buy to satisfy the mandate had left them exposed to crippling health care expenses. They bought a policy, as mandated, but because there was insufficient regulation to protect the consumer from junk policies--bankruptcy, all over the country, in every corner, over every hill and dale, bankruptcy.

At the same time, the health care personal bankruptcy crisis will be compounded by a credit card default crisis so vast it would even make jailbird Bernie Madoff short of breath. The financial sector would go down, again (because it, took, was insufficiently regulated). Talk of the "worst depression since..." would once again sweep across the country.

Meanwhile, with the personal bankruptcy and financial market crises unfolding in a perfect storm, talk would begin of the most shocking news of all: how unhealthy Americans have become since the mandate took effect.

Unhealthy with health insurance?

Think about it: What would be the one way to guarantee that your insurance premiums would not rise--a common method that millions of Americans use every day? Carry insurance, but avoid any situation where it would come into play.

So, even though these Americans at risk had insurance, millions would have figured out that the best way to avoid a personal financial crisis would be to avoid the doctor and hospitals altogether.

It would be a strange new world, indeed: a world of unhealthy people with health insurance--people whose solution to the financial dangers imposed on them by the mandate and an unregulated private insurance market would be to shift the risk from their household balance sheets to their medical files.

A mandate would mean health insurance, but bankruptcy--coverage, but bad health.

Even if it takes another few months, we would be far better off sitting back down and making sure we do not set in motion the mandate crisis of the future.

All in favor, say "Aye."

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