Obamacare

Saying No to CoerciveCare

Whether it's Mitt, Hillary, or Arnold doing the sales job

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One week ago, California Gov. Arnold Schwarzenegger's "universal" health-care plan was shot down by a committee in the state's Senate, 7-1. The most vociferous opponents were not fiscal conservatives, but labor unions that launched a last-minute revolt against its most crucial feature: an individual mandate that would have forced everyone to buy coverage.

This defeat has national political implications. Hillary Clinton, for example, has denounced Barack Obama for refusing to include an individual mandate in his health-care plan. Yet many California unions argued that a mandate would force uninsured, middle-income working families to divert money from more pressing needs toward coverage whose price and quality they cannot control.

The unions are correct: This is exactly what is happening in Massachusetts, where Mitt Romney enacted a similar plan two years ago as governor. (And Mr. Romney's plan is the inspiration for both the Schwarzenegger and Clinton plans.) The experience in the Bay State deserves a lot more scrutiny than it has been getting.

Massachusetts uses a sliding income scale to subsidize coverage for everyone up to 300 percent of the poverty level—or a family of four making around $60,000. Everyone over that limit is required to pay for their own coverage if their employers don't provide it. All this has inflated demand, which, combined with onerous regulations on insurance suppliers, has triggered premium increases of 12 percent for this year—double last year's national average.

No one is escaping the financial sting. The state health-care bill for fiscal 2008-2009 is expected to be $400 million more than originally projected—an 85 percent increase. Still the state won't be able to full shield those it subsidizes from the premium increases. But uninsured folks who don't qualify for government help really get pounded. Before the hike, the cheapest plan for uninsured couples in their 50s cost $8,200 annually. Now, unless government bureaucrats hand them an exemption, they might well find it cheaper to pay the penalty—up to half the price of a standard policy—than purchase insurance. That is, pay to remain uninsured. This is legalized extortion: TonySopranoCare.

The government response to rising premiums is, unsurprisingly, price controls. The Commonwealth Health Insurance Connector Authority—the bureaucracy created to oversee RomneyCare—is considering prohibiting underwriters from raising premiums more than 5 percent for unsubsidized plans, meanwhile requiring them to cover 40-odd benefits from hair prostheses to chiropractic services. If companies can't scale back coverage, they'll have to compromise care; and the Connector is perfectly willing to assist.

As reported in the Boston Globe, the Connector is encouraging insurance companies to include only a limited network of cheaper physicians and facilities in some plans to hold down premiums. Patients who wish to see more expensive providers will have to dig into their own pockets. Dr. Steffie Wollhandler, a professor of medicine at Harvard University, worries that the Connector will revive Gov.
Romney's original idea of enrolling poor people in plans that only offer access to neighborhood health centers ill-equipped to treat anything beyond routine ailments. Forcing people to buy substandard care they cannot afford is not universal care, she says. "It is a hoax." And so Massachusetts is marching toward a system of two-tiered medicine—the alleged market inequity that universal care is supposed to cure.

How about enforcing the mandate? In Massachusetts, non-compliers lose their personal tax exemption—about $220—the first year, followed by fines in subsequent years.California was planning to garnish the wages or impose liens on the mortgages of the uninsured to pay for coverage. "This bill was like telling someone who is in need of help, 'I'm going to give you food, but I'm going to take away your clothes," Leland Yee, a Democratic senator from San Francisco, told the California Chronicle.

The problems with RomneyCare have prompted Mr. Romney himself to abandon it. And Mr. Obama is surely correct that part of the reason 45 million Americans are uninsured is not that no one is forcing them to buy it, but that they can't afford it. It may be too much to hope that Mr. Obama would embrace market-oriented measures—such as deregulating insurance markets, giving patients more control over their health care dollars, and fixing the federal tax code to let individuals, like employers, buy health coverage with pre-tax dollars—to bring down insurance costs. But unlike Mrs. Clinton, he at least seems to understand the perverse side effects of an individual mandate.

Should Hillary Clinton ever be in a position to bully people into buying coverage, a coalition of labor and fiscal conservatives might well do to HillaryCare what it just did to GovernatorCare.

Shikha Dalmia is a senior analyst at the Reason Foundation. This article originally appeared in the Wall Street Journal.

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  1. As a former health insurance underwriter, I can attest that the fondest dream of insurance companies is a customer that can’t walk away from the table and say, “screw you, I’m not offering coverage at those prices.” It’s entirely predictable that a mandate would result in huge rate increases — followed by government attempts to set price controls – followed by the predictably disasterous effects that price controls always wreak.

  2. Ooops — should have read:

    a customer that can’t walk away from the table and say, “screw you, I’m not offering buying coverage at those prices.”

    Preview, dammit!

  3. IN today’s NY Times Paul Krugman comes out in favor of Hillary over Obama because her Healthcare plan forces people to buy into it.

    Here’s a quote from old Paul: “After all, we already have programs that make health insurance free or very cheap to many low-income Americans, without requiring that they sign up. And many of those eligible fail, for whatever reason, to enroll.”

    I can’t get over how disdainful he is of the idea that people have chosen to do without helth insurance, even though it’s affordable.

    Krugman and Clinton don’t care if you chose to not have insurance, for whatever reason, “you will be assimilated, um, covered!”

  4. With 2 trillion dollars in waste, I think the healthcare industry needs more guarantee of payment….

  5. IN today’s NY Times Paul Krugman comes out in favor of Hillary over Obama because her Healthcare plan forces people to buy into it.

    Hold on, guys, there’s something more important than a health insurance crisis going on here: You actually gloss over (or– gasp– read!) his columns?

  6. The basic problem is that people see price as the creator of scarcity rather than a reflection of it. When you see that health insurance costs $10,000 a year, and you are only willing to pay $8,000, you think that lowering the price tag lets you buy insurance. The reality, though, is that insurance costs a lot because medical care costs a lot, and medical care costs a lot because there is a limited supply of doctors, hospitals and medical equipment, the supply of which is often artificially restricted by the government. It’s impossible to give everyone top quality health care because there aren’t enough top quality doctors to see everyone.

  7. I am Canadian and I am forced to buy health insurance. Our premiums are very low (single person pays $54/month) but our system is so highly subsidized that we never see the real cost of any treatment we receive. Never!

    We have 2 major problems in our system (and the systems that would likely be implemented by Obama and/or Clinton). First is waiting……and waiting…..and waiting. Canadians are forced to wait to see specialists (often many months and people do die waiting for treatment in Canada), wait or be denied diagnostics wait to be seen in an emergency ward of a hospital.

    And second, when we get health care it is sufficient but not the best. Yes we have universal coverage and our poor and working poor are all covered (which actually saves money in the long run due to the high cost of not getting timely treatment for conditions) but mediocrity is the price we pay.

    If health coverage is offered at a low price or for free I do not understand why people would not want it. But I don’t understand a lot of what other people do and that does not mean they should be forced to live by my rules. Your system does charge you WAY too much for prescription drugs, though. And that should be addressed.

  8. Why can’t we go for a duplex system? A government-run health care system which provides for the basic stuff and nags you about eating your veggies, then if you want extra bells and whistles on top of that (or a cut in the waiting) you pay out of pocket/get private health insurance?

    Half of the battle is the insurance paperwork. If we forewent all of that tracking etc. for individuals under the government-run system, we could free up an immense amount of $$$, is my feeling.

  9. Schwarzzengroper may well be the WORST governor Californicate has had.

    Good piece, Ms Dalmia.

  10. Two comments:

    First, the alternative to forcing the uninsured to buy insurance is that the care is paid for by the insured and/or (depending on the state) the taxpayer, via “uncompensated care”. Such care is often delivered in very inefficient ways (e.g. through emergency rooms). The alternative, for many though not all of the uninsured, is not that the uninsured then pay for whatever medical care they need out of pocket. Thus, given that we will never let the poor actually go without care, the question is how best to arrange their care. How to deal with middle class health care (and many of the uninsured are middle class) is a different issue in my view.

    Second, it is not that Americans pay too much for prescription drugs but that Canadians pay too little. Essentially, they free ride on the drug research that is paid for implicitly via prescription drug prices in the US.

    Jeff

  11. Half of the battle is the insurance paperwork. If we forewent all of that tracking etc. for individuals under the government-run system, we could free up an immense amount of $$$, is my feeling.

    I want to make sure I understand what you just said. Do you think there could be less paperwork under a government-run health system?

  12. Half of the battle is the insurance paperwork. If we forewent all of that tracking etc. for individuals under the government-run system, we could free up an immense amount of $$$, is my feeling.

    finishes laughing /wipes eyes

    Let me assure you that BlueCross/BlueShield paperwork is a walk in the park on a spring day when you’re in love in comparison to the Medicare rulebook.

  13. A government-run health care system which provides for the basic stuff and nags you about eating your veggies, then if you want extra bells and whistles on top of that (or a cut in the waiting) you pay out of pocket/get private health insurance?

    Because the premise of the government-run system is that healthcare is a right. Once you’ve made that leap, you’ve fatally undercut any basis for telling the po’ folks they can only get second-class care.

  14. Health insurance is a misnomer. Imagine that your home insurance included maintenance – painting every year, replacement granite countertops every two years, room additions…
    And as long as doctors are paid piecework, and can recommend tests and procedures that you can’t evaluate, and doctors tell you that you can die if you don’t do that, and someone else pays, health care prices will rise and rise and…

  15. ray wrote:

    people do die waiting for treatment in Canada

    That is a lie because Universal Health Care is perfect and has no flaws whatsoever! Don’t you know that there are 890 trillion uninsured people in America? You probably want all of them to die!

  16. Interesting, people also die waiting for care in every hospital, in every city, in every state in the USA. If there is not mandate for everyone to be covered in some form or manner, there there will still be poeople showing up in ER demanding medical care for which they cannot and do not intend to pay. There is not good “fix” for the societial issues of freeloading and poverty. I say, Europe and Canada style healthcare, esp like in France!

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