HEALTH INSURANCE MANDATES

By Brian

Barack Obama’s health care policy has come under a lot of blogworld attacks for not including “mandates”, i.e. fines for people who don’t buy health insurance. Here’s a typical passage from Ezra Klein.

A central tenet of his proposal is that ” No insurance companies will be allowed to discriminate because of a previous bout with cancer or some other pre-existing illness.” You literally cannot have that rule without some mechanism forcing everyone to buy in, as the healthy will stay out. … A mandate is not how you cover everyone, it’s how you force insurers to cover everyone, and discriminate against no one.

I don’t know what the force of that ‘cannot’ is supposed to be, but I know it isn’t historical impossibility. Australia for several decades did just the thing Ezra thinks that you can’t do. It had community rating of health insurance, and it didn’t have health insurance mandates. This was true of the periods 1953-1975, and again from 1981-1984. At other times it had compulsory universal basic health insurance. The system wasn’t perfect, bringing in compulsory public health insurance was a very good thing, but it wasn’t as bad as anything I’ve seen in America, and nor was it somehow an impossibility.

The argument for mandates is basically that without them you have adverse selection effects. I don’t particularly think those will be huge. In Australia we still had insurance levels of 70-80. That was with a pretty good level of public provision of emergency care, so you didn’t have to worry about needing health insurance if you were in a car wreck. And it was with a system of GPs where (at the time) the uninsured were charged about as much for a doctor’s visit as I now pay in my co-pay. Had the health options for the uninsured then in Australia been as bad as they are now in America, a huge percentage of people would have been insured. As it was, the system still more or less worked, at least compared to anything the U.S. has seen.

Even if there were adverse selection effects, it isn’t clear what the downside will be. Ezra links to this 3 page Urban Institute report that comes out for mandates, and seems to say the downsides are that we’ll need more government financing. I think anyone who thinks we’ll get a better U.S. health system without some extra government financing is basically living in a fairy tale, so I’m not at all sure why this is a problem. Perhaps mandates are supposed to be politically easier to sell than tax rises, but this seems nonsensical. Given the hideously unbalanced state of the U.S. tax system, we can quite justly have tax raises that cost the vast majority of people not one penny. It’s impossible to have health care mandates that do that.

Of course, without some form of subsidy for insurers, a few insurers will probably fail. Again, I’m not sure that this should be a problem, given the appalling state of the U.S. health insurance industry.

What’s quite irritating about this whole debate is that several writers (most notably Paul Krugman) have been insisting that Obama’s credentials as a progressive are somehow undermined because he doesn’t favour penalising people who decline to buy health insurance. I seem to recall a few years ago John Howard running on a policy of penalising people who decline to buy health insurance. We didn’t think this was a particularly progressive policy when he did it. (Though to be fair to Howard, his penalties only kicked in for people earning significantly above average earnings.) And we didn’t think it was a sign of creeping conservatism in the Labor Party that they opposed it. Quite the opposite; it was caving to Howard’s policies that was the sign of creeping conservatism. We thought, quite accurately, that what Howard was doing was trying to undermine public (i.e. universal) health insurance by propping up private (i.e. partial) health insurance. To see a candidate be smeared as a conservative for not being enough like John Howard, well it’s a bit galling.

Now some may say that there are differences between the Clinton mandate plan and the Howard mandate plan, differences that are big enough to make one plan the paradigm of progressive thought and the other a clearly anti-progressive plan. Personally I think the differences aren’t huge. Both plans let people fulfill their mandated duties by buying into a government plan. Perhaps Clinton’s government-run insurer will be preferable to Medibank Private, but we’ll have to see how that pans out. Both plans have some steps for making it affordable for low-income people. Though in this respect Howard’s plan, which didn’t apply to low-income people, was clearly preferable. Perhaps the penalties will be fairer in Clinton’s plan than Howard’s, though since Howard’s penalty was an extra 1c on the tax rate, it’s hard to imagine that Clinton will suggest a more progressive penalty. Anything not income-tied would clearly be much less progressive.

Obviously Howard was proposing this mandate in a different context to the current American system. But the Clinton/Obama debate is taking place in a different context to the current American system. Both suggest making a range of changes to health insurance, with community rating being the key. The big question is whether we should make all those changes, or make them all and fine people who don’t buy in. I think adding the fines is no better than what Howard did, and I opposed that at the time (and still do), as did many people from the left, so I oppose the Clinton mandates. I could be convinced that there are deep reasons to support the mandates, but I doubt I could be convinced that it is the lefty thing to do. That wouldn’t be John Howard’s style.