Mandatory Health Insurance

A while back the BuffaloPundit and I carried on a debate over potential solutions for the problems of health care in America.  In the end we came to a rough agreement that the Swiss model which requires all citizens (and all visitors) to purchase insurance was a good first step.  Well, the state of Massachusetts has followed our advice, sort of.

Lawmakers overwhelmingly approved a bill Tuesday that would make Massachusetts the first state to require that all its residents have some form of health insurance.

The plan - approved just 24 hours after the final details were released - would use a combination of financial incentives and penalties to dramatically expand access to health care over the next three years and extend coverage to the state's estimated 500,000 uninsured.

I still think that mandatory health insurance coverage is a sensible policy.  But wouldn't it be tempting to skip buying car insurance if that wasn't mandatory?  And since hospitals are required to provide care for free to the uninsured in some cases then it's clear that the rest of us end up paying for it -- further driving up costs.

But Massachusetts has diluted its wisdom.  Of course, the indigent will continue to receive their health care for free under Medicaid.  And, it must be said, that will serve as an incentive for some to make themselves appear indigent (under-the-table employment for example) in order to qualify for the free version of the now-required insurance.  Not a lot of people, perhaps, but undoubtedly some.

The part of the plan that's almost certain to wipe out any of its potential benefits is this.

The measure does not call for new taxes but would require businesses that do not offer insurance to pay a $295 annual fee per employee.

Ultimately the cost is designed to be borne by business.  Imagine, for example, that you're a small businessman (or businessfemale) who's currently paying $1000 per employee for annual health insurance benefits.  If times get tough (or if you're just greedy,) wouldn't you rather pay the state's $295 finefee?  Yes, you would.

And it doesn't take doesn't take a psychic to figure out that the state will soon get wise to that ploy and raise the fine, um, fee to oh, I don't know, $1000 per employee.  In the end all businesses will effectively be required to provide health insurance to all their employees.  That, according to many, is good social policy but it's a disastrous economic plan. 

Many businesses are mobile and can simply leave a state that overburdens them.  Some businesses (restaurants, stores, and art galleries) can only exist where they are now -- they can't leave.  But they're not captives either.  They can simply choose not to grow.  If growth means adding new employees; but each new employee means adding another $1000 of expense -- then future growth may well be sacrificed for current comfort.

The comfort of the business-owner, that is.  He or she may still continue to do quite well, thank you very much; but all those young Massachusettians looking for employment may find it harder to get a job in the old commonwealth (a term which now takes on even more meaning.) And I can see New York jumping on this idea, too (again it doesn't take a psychic.)   But just as California's hare-brained energy program of the late 90s was called "privatisation" but wasn't; this will be heralded as promoting "individual responsibility" and won't.

It'll fail just as surely, though.  Good idea -- bad plan.

Comments

[V]

The problem would continue to be Greed,Rate Fixing and Collusion. H.M.O.'s while making record profits are raising rates 10-15% a year. Mass. Is going to be a disaster. Watch the rates skyrocket.

A controlled national healthcare system is the only one that will work. Yes the T word.

[Craig]

Nah! (buzz-sound)

A controlled national health care system will only encourage prices to skyrocket. The government can then do one of two things. Lower the rates that it pays to doctors and hospitals for care or ration care to citizens (as Canada does now) to prevent over-use.

Doctors are now fleeing Canada for the US because their pay has been so severely limited by health care budget constraints. Even though the government can constrain spending, it cannot just decree that prices drop.

Those are unacceptable to me. We wouldn't allow the government to ration our food stocks, why would we sit back and allow them to decide when we can go to the hospital -- as Canada does?

Why do you government health-care fans ignore those issues? Even the people who work in hospitals expect to get paid according to their education and effort.

Altruism is lovely but naive.

[Ben McD]

"Why do you government health-care fans ignore those issues?"

In order not to, you have to accept the premise that the gov't is a far more dangerous influence in the economy than private business.