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Mandatory health insurance
Glen Whitman reports:
1. According to an Urban Institute study, uncompensated care for the uninsured accounts for only three percent of U.S. health care costs.
2. 47 states require drivers to buy automobile insurance, yet the median percentage of uninsured drivers in these states is 12%.
3. States should eliminate required benefits from insurance policies and allow the poor to buy policies for (relatively) cheap catastrophic care.
Here is the full piece, from Business Week; this is a topic deserving of more attention. I'm still wondering what -- de facto -- will be done against those poor people who are required to buy health insurance but don't do so.
Here is Glen's post on Joel Waldfogel, and here is Glen attacking restroom hand dryers.
Posted by Tyler Cowen on October 6, 2007 at 08:02 AM in Medicine | Permalink
Comments
I would expect that what we've seen in Massachusetts -- first everyone lobbies successfully to get everything included in the minimum, then because of the resulting costs the mandate is dropped for many low-income folks -- will be replicated anywhere else that tries it. Certainly I have seen no indication that anyone has a plan to avoid it, and the Romney and Clinton plans both look to be carbon-copies of the MA approach.
Posted by: Grant Gould at Oct 6, 2007 8:52:26 AM
Interestingly if we had universal health care then auto policies would become cheaper. This is because they include health provisions for injuries caused in accidents.
Adjudicating these and determining which policy covers the costs would also be eliminated, thus providing additional savings.
Cutting down on the number of uninsured drivers is an enforcement issue. Here in NY one gets a windshield sticker to prove insurance. This is hard for cops to see and, for those who pay in installments, only proves coverage for the duration of the first payment.
Before this there were stickers put on the license plate which were a bit easier to see. And before that there were new plates issued each year with obviously different colors.
These other measures raise the cost of enforcement and so the states have cut back and passed the costs on to the insured drivers in the form of an "uninsured drivers" charge on the policy.
As usual it's a case of whose ox gets gored. What may be "cost effective" for the DMV may not be the best solution for society overall.
Posted by: robertdfeinman at Oct 6, 2007 10:55:16 AM
"47 states require drivers to buy automobile insurance, yet the median percentage of uninsured drivers in these states is 12%."
Liability insurance, to protect others, not the driver or the owner of the vehicle herself!
Can you name one state that requires collision insurance, which is the correct analogy to health insurance (i.e., insulating oneself, not others, from unexpected costs)?
Posted by: KipEsquire at Oct 6, 2007 11:40:43 AM
"According to an Urban Institute study, uncompensated care for the uninsured accounts for only three percent of U.S. health care costs."
This statistic says nothing about (1) those who are uninsured, and are "under" (as opposed to "un")-compensated (for instance, by medicare) or (2) those who are uninsured and just don't get the care they need, so there is nothing to compensate, or (3) those who are insured, but are un or under-compensated.
Posted by: popp at Oct 6, 2007 11:54:34 AM
Interestingly if we had universal health care then auto policies would become cheaper. This is because they include health provisions for injuries caused in accidents.
Assuming the state wouldn't try to recover costs from drivers (and their auto insurers). If you cause an accident, shouldn't you be held as liable for public expenditures as you would if you caused a forest fire?
I remember reading a proposal from John Semmens that states should stop producing license plates; instead, people be required to get their plates from their insurer. You could tell right away who was insured, who was not, and who was insured by those companies known for covering high risk cases. The companies would be responsible for anyone owning their plate, so they would be incentivized to recover plates from non-payers. I'm not sure how well it would work. I do know of one person who moved from VA to NM and had his rates go *up* because of the uninsured motorist provision, so I don't know that it would be worse than the existing system.
Posted by: Eric H at Oct 6, 2007 12:03:37 PM
Kip,
Ok, then why shouldn't we require drivers to purchase collision insurance?
Posted by: Yancey Ward at Oct 6, 2007 12:25:05 PM
Mentioning enforcement by insurance companies reinforces my point that states have chosen to allow uninsured motorists to drive as a cost-savings measure.
Since the insurance companies know immediately when a policy is no longer in force it would be simple for them to notify the DMV (perhaps they already do) and thus for the cops to take appropriate action.
There seems to be a class of laws that are on the books but not strictly enforced. People's sense of fairness or morality demands such laws, but there would be too much of an outcry if the enforcement was comprehensive. The most obvious example is speeding. (In my neighborhood this would also include holding a cell phone while driving.)
These are perfect examples of "do what I say not what I do". This is apparently a common human failing.
Posted by: robertdfeinman at Oct 6, 2007 1:15:53 PM
"There seems to be a class of laws that are on the books but not strictly enforced."
Yes, and that's where most of the erosion for the people's respect for the law comes from.
BTW, I'm glad Tyler doesn't consider Waldfogel and embarrassment to my Wharton. My thoughts here:
http://www.hodakvalue.com/blog/2007/10/flash_markets_arent_perfect.html
Posted by: M. Hodak at Oct 6, 2007 1:41:53 PM
Since the insurance companies know immediately when a policy is no longer in force it would be simple for them to notify the DMV (perhaps they already do) and thus for the cops to take appropriate action.
Which is what? Most people cancel their policy to change to another provider. Notifying the DMV and expecting immediate action would result in lots of unnecessary expense. Describing plausible policies ("There outta be a law ...!") is the easy part; figuring out the realistic application and unintended consequences is the hard part.
Posted by: Eric H at Oct 6, 2007 1:47:04 PM
Insurance companies report dropped coverage to the DMV immediately in my state (Maryland). The mandate is probably enforced very strictly on a single class of drivers -- those stopped by the police for a different reason.
Posted by: Mark at Oct 6, 2007 2:31:49 PM
Eric:
Here in NY you get in trouble if your policy lapses, so when switching to another insurance company you better make sure there is no gap.
Lots of the non-insured pay on the installment plan (you need to show proof of insurance to get a registration) and then let it lapse by not paying future installments. If you have any evidence for "lots of unnecessary expense" it would be nice to hear it.
On a cop show I saw recently (set in San Francisco, I think) the cops took the plates off a cab that had been stopped for some infraction. I don't know if this is realistic or dramatic license, but it is one example of how better enforcement could be carried out without to much additional effort.
Posted by: robertdfeinman at Oct 6, 2007 3:21:15 PM
Sorry, I meant unreasonable, not unnecessary.
What do you mean, "you get in trouble"? They actually send officers to your house? My state requires insurance to register, too. To my knowledge, they do not check up on it unless they have you pulled over for something else.
You say, "it would be simple for them to notify the DMV ... and thus for the cops to take appropriate action", as if that was all there was to it. If every time someone canceled or allowed their coverage to lapse, the company notified the DMV, and then officers are dispatched to the house, they would find many instances in which the person has moved, died, changed names, sold the vehicle, changed insurers, was late on a payment, was added or dropped to/from their parents/spouse's insurance, decided to let the insurance lapse while the vehicle is being overhauled (been there, done that), etc. Only a fraction of the reports would be legitimate, and only a fraction of those could be easily prosecuted. In addition, other people are moving from other states, buying used vehicles, and otherwise acquiring registered vehicles under the state's radar. Catching them would be even more difficult since there are no simple reports to make. Knowing this, the states selectively enforce the rule as an aside to other infractions.
What are we arguing, here? We seem to be in agreement that the states aren't enforcing the laws. We seem to be in agreement that enforcing those laws would cost more money. That leaves us with whether the benefit of enforcing those laws (mainly, decreased insurance costs) would be worth the cost (mainly, increased taxes); you seem convinced that it would be while I'm skeptical that it would be once you add up all of the social costs and benefits. After all, some of the uninsured may be low risks who simply can't afford insurance, while some of the insured are high risks who need it and should be paying more. The uninsured motorist costs partly stand in for Mankiw's missing Pigouvian tax. If enforced, some non-drivers will have to pay more in taxes to the benefit of drivers. And so on.
Posted by: Eric H at Oct 6, 2007 4:52:06 PM
Eric:
It's what I said before, who bears the cost? As things now stand it is law abiding citizens in the form of higher insurance premiums. Those without insurance are getting a free ride. The state has decided to allow this shift in costs.
The issue of good vs bad drivers is also irrelevant. Even a good driver can get into an accident. Most drivers think they are above average and most people also misjudge the degree of risk in many circumstances.
Suppose we had a referendum and asked voters whether they would prefer cops to go after those without insurance or those involved in marijuana (buying, selling or using). I would guess that the amount of police work involved might be similar in both cases (although not in the same neighborhoods necessarily). I have no idea what the results would be but, at least, the voters could explicitly decide which laws they wish to be ignored.
It is the backhanded way enforcement decisions are made that I'm objecting to.
Posted by: robertdfeinman at Oct 6, 2007 5:09:57 PM
3. States should eliminate required benefits from insurance policies and allow the poor to buy policies for (relatively) cheap catastrophic care.Wait - your saying states require a certain minimum coverage? In an age when everyone is complaining how expensive health care is? Am I the only person who thinks thats incredibly silly, and stupid?
Or was it done to avoid confusing contracts which allow insurers to deny claims more easily (I've always wondered why consumer-rights advocates don't drop the regulation agenda and start advocating better contract enforcement).
Posted by: G at Oct 6, 2007 5:29:56 PM
But I'm asking the same question: who bears the costs? Additional enforcement of these laws will fall on non-drivers and those whose money is better spent on food or housing. Or medicine!
So long as you want to talk about *social* costs, driver quality is not irrelevant. A very small percentage of drivers (elderly and the young) are responsible for most of the accidents, and the fact that risk exists and people may not be good judges of their own does not mean everyone's risks are equal or that differences are irrelevant. Just so with health insurance: adverse selection is a primary driver of the debate.
Posted by: Eric H at Oct 6, 2007 5:42:07 PM
Will Christian Scientists be required to buy health insurance? If so, will it be a violation of their First Amendment rights?
Posted by: anon at Oct 6, 2007 6:31:51 PM
Why all this concern about the uninsured? Whitman says that 3% of medical care is uncompensated. I can't Google up the exact figures at the moment, but I know Medicaid is bigger than 3%. Why not just throw the 3% into the Medicaid column? Medicaid recipients aren't compensating anybody for their care either.
And it's not as if the uninsured get off scot free. They are liable for care that they incur and they can lose everything not protected by bankruptcy laws if they fail to pay. To suffer a disease that's severe enough to throw you into bankruptcy, and to then suffer the bankruptcy in addition to the disease, all sounds pretty unpleasant. And if you go bankrupt you might well qualify for Medicaid anyway.
I say leave things alone and let adults make adult decisions about their lives.
Posted by: anon at Oct 6, 2007 7:07:47 PM
As far as I know "driver quality" is factored into insurance rates. Obviously it's not factored into those who don't have insurance, so I still don't see the relevance. Maybe I'm missing your point.
You seem to be advocating the standard libertarian line which is that people should be able to chose the degree of risk they which to be exposed to. As we know this argument never ends: seat belts, motorcycle helmets, etc.
The relevant issue here is that society has already decided that a person's freedom to chose is going to be restricted in this case by requiring insurance, so that's irrelevant. The issue thus becomes one of enforcement.
Getting back the original topic, when Hillary announced "mandatory health insurance" my first thought was how is she going to enforce it? Naturally, she left this unanswered.
Given that it has proved difficult to enforce for autos I can only imagine the problem will be bigger for health. Of course, the issue goes away if we go to a system of universal health *care* as opposed to *insurance*. We can leave this for another time...
Posted by: robertdfeinman at Oct 6, 2007 8:04:28 PM
I'm 61, retired (yes, early), living fairly comfortably, and with no medical insurance. I can't buy individual medical insurance in New York because the mandated minimum coverages are so generous. I can't buy catastrophic coverage because no one offers it in New York State. When I need a blood test, it costs me $200. When I got the same blood test a couple of years ago when I had insurance, it cost $10. The reason for the difference is that now I can't access the preferred provider organizations that the insurance compnies use to provide services. So, while I am probably healthy enough to pay for my own medical needs, I am being ripped off because the insurance companies force medical providers to charge uninsured persons exorbitant fees, thus forcing me, who cannot buy my own coverage, to subsidize insurance company-mandated price controls on medical providers.
I think socialized medicine might be more rational.
Posted by: Gordon at Oct 7, 2007 1:26:55 PM
Gordon,
Really? Your entire comment suggests otherwise. Of course, your assumption may be that socialized medicine for you may be less costly than you would incur if you actually purchased insurance today, rather than going without.
Posted by: Yancey Ward at Oct 7, 2007 1:42:15 PM
Don't think so. Isn't there a problem with someone subsidizing someone else other than via government taxation?
Oh, sorry, this is a Republican site. Subsidizing insurance companies is ALWAYS good.
Posted by: Gordon at Oct 7, 2007 5:44:35 PM
Gordon,
The problem with your situation is that excessive government regulation has stifled competition. And you want government to destroy the market and become the sole provider (monopoly). And even worse, that it will be illegal to choose not to purchase the monopoly's product even if that would be the rational decision (MC > MB).
One of the important self serving decisions made when drafting Sherman Anti-Trust was to make government immune from the regulation. Politicians have always known of the vast power they gain from being a monopoly.
Posted by: Nate at Oct 7, 2007 9:04:55 PM
I agree with the statement that health insurance should be mandatory and that cheap options should be provided for the less fortunate people. If health insurance was mandatory it would eliminate the situation people get in by not having the insurance. Some people that need emergency health care are unable to pay the bill, if they had health insurance they would not be in that situation, i think in the long run people would be satisfied with the mandatory insurance it would save them the headache of worrying about the bill.
Posted by: JH at Oct 8, 2007 11:58:32 PM
We are essentially peasant tenants at this point. More than half of our earnings are taken as taxes by law, every year. We must pay our lords for the privilege of living in a house, driving a car, and now we must pay in case we get too sick to labour in the fields or factories. We have only the pretense of owning property, and if we do not pay our annual rents that property is taken away from us. If our lords desire that property back for some reason, even if we have paid our rents, they may take it regardless without further ado.
Our only saving grace is being allowed, from time to time, to choose between a group of contending lords for which one of them will have the right to exploit us. I hear in Europe that the situation has gotten even worse than I describe, with a European elite that is self appointed and that claims precedence over nationally elected officials. As the European public have repeatdly refused to agree, these elites are pushing through a constitution that will not even try to attain public assent.
What sort of liberty is this?
Posted by: Cuffy Meigs at Jan 6, 2008 12:56:19 AM
Mandatory Health Insurance is one of the last chains to total slavery. Who do you think benefits from this. Our governement has been bought and paid for by lobbyists.
The Clintons , and I now that you all don't remember this, tried to come up with a tax for all of those who had their mortgages paid off. they felt that if they were not paying off a mortgage they had more to give.
when they were caught they laughed it off and said it was only a trial balloon. What evil lurks.....
you think off all of those old timers in their cabins living off the land and now they have to produce health insurance premiums.. or lose their cabin.
this is sick.. very sick.. and getting sicker.
we are all going to live and die.
if life was so precious we would put to death those who stole it from another. if life was so precious we would not abort so many babies. it is a matter of getting more money from us before we die.. and forcing us to be slaves to the man. This was America before the Supreme Court stated to study other laws to make decisions here!!!YOU USE TO be able to decide how you wanted to live and how you wanted to die. Now that is going to be gone. You won't die until they have extracted every last dime from you..until they use chemicals to kill you in your blood, water and food.
Posted by: joe dupont at Mar 16, 2008 10:21:18 AM
Posted by: 鑽石 at Apr 2, 2008 10:22:16 PM
