In Part 1 of this multi-part Huffpost series on the health care debate, I criticized the leading Democratic candidates -- Hillary Clinton, Barack Obama, and John Edwards -- for surrendering, without firing a shot, to the insurance and drug companies by opposing universal single payer health care.
In this second installment, I elaborate on the difference between universal single payer health care and the Clinton/Obama/Edwards universal insurance mandate plans and argue that universal mandates are bad social policy.
First, let's define our terms:
"Universal Single Payer Health Care" (aka "Medicare For All"): From the moment that you're born until the moment that you die, you will be covered by single quasi-public non-profit health insurer that will pay for both preventative care and for all necessary medical procedures and medications. You choose whatever doctor you want to see and you and your doctor decide on the care you need. It won't matter whether you're employed or not or whether your employer offers health coverage. You can never be denied insurance.
"Universal Insurance Mandate": If you like your employer's health plan, you can keep it. If your employer doesn't provide health insurance and you don't qualify for Medicaid, the government will make you pay for your own health insurance out of your own pocket. If you're too poor to afford the premiums, at tax time every year the government will give you a credit to reimburse you for part of last year's premiums. If you're middle class, the government tax credits may be too small to make the insurance really affordable, or you may have to buy a less expensive high deductible policy in which you have to pay for your doctor visits out of your own pocket, unless you get really sick and need major surgery or an extended hospital stay. You and your doctor will still have to fight with your insurance company on whether it will cover procedures your doctor thinks are necessary. If you try to avoid buying your own insurance or think you can't afford it, the government will penalize you.
To be fair, the Clinton/Obama/Edwards plans have some positive points. By banning "pre-existing conditions", they would allow people to buy insurance who are simply uninsurable now. By requiring insurance companies to charge the same premiums regardless of age or health, they would make insurance more affordable to middle aged people. (Conversely, they would make insurance more expensive for younger people.) By providing tax credits, they would help lower middle class people afford at least lower priced, high deductible "catastrophic" policies. Most of the plans include a Medicare-like public alternative that individuals may purchase and whch competes with private insurance.
But overall, a universal insurance mandate is bad public policy compared to universal single payer health care. Some of the reasons:
1. It's a colossal waste of money. While the administrative cost of Medicare is about 2-3 percent, approximately 30 percent of private insurance premiums go to overhead, profits and executive salaries. In 1999, the last year for which I could find numbers, health care administrative costs totaled $294.3 billion or $1,059 per capita, compared to $307 per capita in Canada. With insurance premiums having climbed 87 percent in the past decade, it would be a fair guess that administrative costs now exceed $400 billion per year. That's more than enough to cover all of the uninsured without raising taxes.
2. Universal mandates punish the middle class who make too much to receive government subsidies, but too little to afford the cost of health insurance that the government will coerce them into buying. Massachusetts passed a state universal mandate program in 2006 which proponents of a universal mandate point to as the model for a national plan. According to recent a study by the Greater Boston Interfaith Organization, the premium for the minimum insurance plan is unaffordable for households earning between 300%-500% of the poverty level. Premiums for the minimum plan are free for those earning up to 150 percent of the federal poverty level of $10,210 for individuals and $13,960 for couples. Premiums are reduced for those earning up to three times the poverty level. Those earning more than that (i.e more than $30,630 for individuals, $41,880 for couples) must pay 100 percent of the premiums themselves. Premiums range from $1464 per year for young adults to $9600 per year for those over 55. So a 55-year-old couple earning $42,000 a year would have to pay $19,200 a year in premiums, nearly 46 percent of their pre-tax income, for a plan with deductibles of $2,000 per individual and $4,000 per family and out-of-pocket expenses of up $5,000 per year for individuals and $7,500 for families. A government mandate requiring people to pay these kinds of premiums, even if a national plan had somewhat higher subsidies, is effectively a huge hidden tax increase for the middle class and a huge boondoggle for the private insurance companies to whom the government delivers large numbers of new customers.
3. The universal mandate plans assume that most people will continue to be covered by their employers and therefore they won't have to reach into their pockets to pay the full cost of meeting the government mandate. But employer-based health insurance is a dying dinosaur. Each year fewer employers offer insurance. Between 2000 and 2006, the percentage of employers offering some type of health insurance declined from 64.2 percent to 59.7 percent and it continues to decline. Even many people whose employers now provide health insurance are underinsured -- according to a Consumer Reports survey, 29 percent of people with health insurance are "under-insured," with coverage so meager that they often postpone medical care because of cost. Moreover, as insurance premiums escalate at a far greater rate than inflation or wage increases, more and more employers increase their employee's share of premiums, raise deductibles and co-pays and reduce benefits. If you lose your job, you lose your insurance. In the larger picture, leaving the burden of health insurance on employers makes American companies less competitive in the world economy, compared to other capitalist democracies where the government pays for health care. Recently, Toyota named the savings in health care costs as the main reason for deciding to open a new auto plant in Canada rather than the U.S.
4. Large numbers of people opting for lower-cost, high deductible plans will lead to many middle class people avoiding preventive care and necessary treatment until they are already very sick, leading to worse health outcomes and in the long-run resulting in higher costs from waiting to treat preventable diseases until they become serious. If, after paying thousands of dollars a year in premiums, a middle class family has to pay $2,000-$4,000 in deductibles before their insurance kicks in, many won't go to the Doctor until it's an emergency. For example, someone with a chest infection won't seek care, thus infecting others, and possibly ending up in the hospital with pneumonia. Men won't get their PSA checked, women won't get pap smears and breast exams, people won't get colonoscopies, thus leading to cancers not being found at the early treatable stage.
5. The strongest argument by progressives who support a universal mandate is that the plan would include a Medicare-like public alternative that would compete with private insurance and, because it would so clearly be superior to private insurance, would eventually evolve into a single payer system. If this plan is modeled on Medicare, it would be a fairly generous plan in which you can choose your own doctor, in which most treatments your doctor recommends are covered, and in which deductibles and co-pays are low. This means that, even after greatly reducing the administrative costs associated with private insurance, it will still be expensive compared to high deductible plans. This leads to "adverse selection." The young and healthy would opt for the cheaper plans. The people who will buy the Medicare-like plan will be those who think their health care costs are likely to exceed their premiums -- in other words, the older and sicker. Far from slowly evolving into a single payer system, as its progressive supporters like Paul Krugman argue, the Medicare-like plan is likely to become more and more expensive as time passes, making it less and less affordable and forcing more and more people back to bare bones private insurance.
End of Part 2
Coming in Part 3: Why Universal Mandates represent not just bad social policy but a losing political strategy.