Mandatory Health Insurance Now!

It will save private medicine -- and spur medical innovation.

Ronald Bailey from the November 2004 issue

(Page 3 of 4)

"National health insurance would make it possible to set and enforce overall spending limits for the health care system, slowing cost growth over the long run," says the proposal from Physicians for a National Health Program. In his 1998 book False Hopes, Hastings Center bioethicist Daniel Callahan is a bit blunter. "A steady-state, equitable medicine will have to limit, not expand, patient choice," he writes. "It will require frank rationing. It will work to resist patient demands, particularly demands stimulated by market pressure and incentives."

Unfortunately, there is no prominent political or intellectual figure on the national scene offering a comprehensive free-market alternative to socialized medicine. You certainly won't find one in the Republican Party. Frank Luntz, the Republican pollster and spinmeister, told an audience of libertarian and conservative activists last year that Republican politicians had simply failed to come up with any way, much less a persuasive way, to discuss health care with the public.

When it comes to health care policy, Republicans are Democrats Lite. "The Republicans always say, 'We're going to give you the same program, only less than that proposed by the Democrats,'" says Tom Miller, former director of health policy studies at the Cato Institute. "Republicans just offer cheaper, more apologetic programs." Witness the new Medicare drug benefit, which John Kerry immediately denounced as "a raw deal for America's seniors and a big windfall for the big drug companies." No matter how much they give away, Republicans can never give away enough to satisfy the demands of the nationalized health care advocates.

Piles of Bodies?

Why not just tell Americans they are responsible for buying their own health insurance from now on? If people couldn't pay for medical care, either through insurance or out of pocket, they wouldn't get it. "After people begin to notice the growing pile of bodies by emergency room entrances," Tom Miller wryly suggests, "they will quickly get the message and go get medical coverage."

But that's not going to happen, says Mark Pauly, a health care economist at the University of Pennsylvania's Wharton business school. "Americans don't want to see their neighbor dying bleeding in the street," he says. "Therefore we already make sure that everyone gets some medical care when they need it. The alternative would be a world in which voluntarily uninsured people wore a bracelet that read: 'In case of an accident, do not take me to the nearest hospital. I've made my choice.'"

Since it's unlikely that Americans will allow their improvident neighbors to expire without medical care in the streets, is there a politically palatable alternative that can preserve and expand private medicine in the United States? Yes: mandatory private health insurance.

The New America Foundation, a liberal policy shop in Washington, D.C., has outlined some elements of how such a system would work. The slogan for its proposal is, "Universal coverage in exchange for universal responsibility." The devil is in the details, of course, but the plan offers some interesting possibilities. For example, mandatory health insurance coverage might be combined with medical savings accounts that would encourage people to save and invest for future medical emergencies.

The New America Foundation proposal preserves private insurance and allows consumers to choose among competing insurance plans and coverage options. Most intriguingly, the plan offers a way out of the dysfunctional employer-financed third-party-payer model that is so grievously distorting our health care system. Employers eventually would devolve responsibility for health insurance to their employees by giving them the money the companies currently pay to insurance companies. Employees would then have a strong incentive to shop around for the best health care deals, putting pressure on insurers to keep costs low.

Even some Republicans are suggesting that mandatory health insurance be required for at least some Americans. Senate Majority Leader Bill Frist (R-Tenn.) recently argued that it is unfair to expect taxpayers to pick up the health care tab for the third of Americans without health insurance who make incomes over $50,000. "I believe higher-income Americans today do have a societal and personal responsibility to cover in some way themselves and their children," the senator said in a speech at the National Press Club in July.

Privatizing Medicaid and Medicare

Uninsured Americans currently receive health care for which they don't have to pay. Their bills are paid by tax dollars spent on Medicaid or the state Children's Health Insurance Programs, or through higher insurance premiums and medical charges to make up for the losses doctors and hospitals incur when they treat the uninsured. Why shouldn't we require people who now get health care at the expense of the rest of us to pay for their coverage themselves?

There's a big bonus. "Mandated coverage would replace Medicaid and state Children's Health Insurance Programs because lower-income and unemployed people would receive a voucher to purchase private health insurance," says Wharton's Mark Pauly. "This would mean full privatization for people under age 65." He holds out an even brighter prospect: "Actually, in principle, mandated coverage could replace Medicare too." The entire medical system could be privatized. The slowly expanding Medicare, Medicaid, and S-CHIP behemoths that are inexorably absorbing more and more of the U.S. health care system could be eliminated.

Mandatory health insurance would be not unlike the laws that require drivers to purchase auto insurance or pay into state-run risk pools. They also resemble the libertarian Cato Institute's proposals for reforming Social Security, which do not eliminate mandatory payments; they privatize them. Similarly, school voucher plans generally mandate that children receive an education. As the Rose and Milton Friedman Foundation notes, universal school vouchers would allow "all parents to direct funds set aside for education by the government to send their children to a school of choice, whether that school is public, private or religious." This system separates "the government financing of education from the government operation of schools."

Once government and health insurers have defined a standard basic package of health care benefits, the current dynamic of constant government meddling in health insurance and health care markets that leads to higher and higher costs should change. Consumers, transformed from passive recipients into direct purchasers, can be expected to be vigilant about government interference that would increase their rates or reduce their services.