More healthcare

Jason Rosenhouse replies to my post yesterday about health insurance. You'll recall that I took progressive opponents of the current Senate bill to task for complaining about a mandate that people buy health insurance as if we didn't have parallel examples to see how insurance mandates work. Jason objects:

For one thing, the moral case for requiring car insurance is a lot stronger than it is for health insurance. Why should you have to buy car insurance? Because other drivers need to be protected from you. Simple as that. You can do a lot of harm with a car, and there has to be some system in place to make sure you can pay for any damage you cause.

The only thing comparable to this with health insurance comes if you end up in an emergency room. Then all of us have to chip in to pay for your care. But to tell some twenty-something that he has to buy expensive health insurance because there is a microscopic chance he will end up in an emergency room hardly seems like an impressive argument.

Actually, no. It also applies when some jerk on the bus coughs on me and gives me whatever bug he has. It applies when I can't hire the best employees for new business because I don't have an insurance plan yet. It applies when costs for everyone are higher because people who are healthy today opt not to pay into the insurance system that will cover them when they do get sick.

The basic case for mandating individuals to buy health insurance is that a broad risk pool keeps prices low for everyone. If the only people on insurance are sick people, then the cost of insurance will be too high for sick people to pay, and everyone loses. Mandates, having employers default to covering employees rather than to not covering them, and other provisions of this bill all broaden the risk pool and ensure that people who are sick now and people who are not all pay for people who get sick tomorrow. (This was the fight from the Democratic primary in 2008, when Clinton and Edwards argued that mandates were essential up front, and Obama argued that they might be appropriate once other incentives were in place. Baucus sided with the Clinton/Edwards argument when he drafted his Senate bill, and insurers made it clear that they would be on board with plans involving a mandate because they want the new customers).

Jason is right that a car accident and an emergency room visit are the closest analogies for auto and health insurance, in that most medical treatment is not a result of a single instantaneous event. We have to broaden our timeline when we talk about medical insurance, thinking of the course of a cold or the flu the way we think about a single incident in a car. Getting people with infectious diseases the treatment they need right away is crucial for controlling those diseases. My health insurance absolutely does bear the cost of other people not taking care of their health, whether it's because people can't afford the vaccinations they need, or skimp on antibiotics when they have a bacterial infection (breeding resistant bacteria) and then use the leftovers when they get a cold months later (thus growing and ultimately spreading the resistant population).

Finally, we all pay into Medicare, and people who get effective preventive care in their 20s and 30s are going to be cheaper to care for when they are on Medicare in their 70s and 80s. That saves me money in the long run.

We could go further. David Leonhardt points out that our current mishmash of insurance coverage undermines American productivity, hurting the broad economy because people cannot afford to undertake risky new ventures that would involve foregoing employer-based insurance. A mandate will reduce costs, and coupled with the subsidies and other features of the bill in Congress now, would make it easier to start or join up with a small business. I can think of no parallel to that economic argument with respect to car insurance.

So that's why mandates are good, or at least broadly speaking acceptable in the context of health insurance. Not only does my health depend on the health of those around me, my health insurance depends on the health insurance of those around me, as does by overall economic wellbeing.

Jason continues:

Then there is the fact that the car insurance market is a lot healthier than the health insurance market. There is real competition among car insurers, and decent coverage is available at reasonable prices. Unless you are a truly rotten driver who is constantly causing accidents or racking up moving violations, you are not going to lose your insurance. Even the practice of automatically raising your rates after an accident is not so widespread as it once was.

By contrast, in many parts of the country, there essentially is only one health inusrance provider. The health insurance industry has also proven itself so unscrupulous in its business practices, that it is rather galling to force someone into it without ensuring that there is competition in the market.

This I agree with, and while I think the bill's system of allowing insurers to operate more freely across state lines is the wrong solution, it's worth noting that it does address the problems with lack of competition. And bear in mind that none of the plans on offer have offered a public option to a wide enough population at an early enough point to really address this problem. It's frustrating, then, that anti-mandate rhetoric is starting only now, when the bill is unlikely to change, rather than raising this ruckus early on, when the bill was more malleable. For a while, a public option was under discussion that would have only been created if insurance industry competition was inadequate at some point down the road, but even that delayed version of a sadly adulterated public option seems dead. But there's always a way to reinstate it. If, when the mandate kicks in four years from now, there's inadequate competition, people can vote in a Congress that will fix things. And the solution then won't be to kill the mandate but to allow people to buy into Medicare (perhaps, as was proposed in the House, at prices higher than those paid by retirees).

And then there is simply the fact that this analogy is completely unresponsive to Atrios' argument. That we force people to buy car insurance hardly implies that it is acceptable to force people to buy health insurance. As it is this bill places a huge financial burden on a lot of people who can not afford it. Don't expect a lot of gratitude from them for âsolvingâ their health insurance problem.

The fact is that a mandate without any serious measures to curb the worst excesses of the health insurance industry is repugnant. The benefit of broadening the insurance pool to spread out risk hardly seems like an adequate counter to this simple fact.

Fair enough. But the bill in question does a lot to curb those excesses. Pre-existing conditions are out, along with recissions. There are subsidies for low-income families, and far fewer options for the insurance industry to single out some group of people for higher rates. Jason himself cites many of those very real reforms.

Partly on that basis (citing Paul Krugman and Robert Reich, who are making essentially the same argument I am), he grudgingly backs the bill.

But the fact is, there's a better reason, to be discussed shortly.

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Josh -

I think you're being unfair to the anti-mandate folks. The mandate has always been problematic, but it was tolerable because it was supposed to come with measures like the public option that would put real pressure on insurers to keep premiums down and service adequate. This was precisely the point Atrios made in the post you said didn't make sense. Its not mandates per se that are the problem, its potentially very expensive mandates into a system that does not provide a good product.

The way things have played out the mandate has survived but most of the things that would have put real pressure on the insurance companies to improve service and keep down costs have been gradually stripped out. That's because mandates benefit the insurance companies, while the other measures do not. That's the reason mandates are a big issue now when they weren't before.

The bill eliminates recissions and preexisting conditions on paper, but in practice that is largely meaningless. It will not take long for the industry to find ways around those prohibitions. And the subsidies are simply not adequate. This bill is not even as good as you seem to think it is. For these reasons we are back to what Atrios said. We are forcing people to buy shitty insurance they can't afford.

You write

If, when the mandate kicks in four years from now, there's inadequate competition, people can vote in a Congress that will fix things. And the solution then won't be to kill the mandate but to allow people to buy into Medicare (perhaps, as was proposed in the House, at prices higher than those paid by retirees).

Again, sounds good on paper. But people already voted in Congressional majorities committed to reform and a President ready to sign it, but they are still not getting what they want because of sick Senate rules. Those rules aren't going anywhere, and electing sixty progressive Senators is pretty much a mathematical impossibility.

So another way your scenario can play out is that people see they are being forced to pay huge sums of money for a bad product and say, “The Democrats did just what the Republicans said they would do. They (effectively) raised my taxes and didn't give me much in return. Guess I'll vote Republican.”

Bear in mind that health insurers are exempt from antitrust laws. Their competition to date has primarily been on mix of features, the usual battleground in oligolipolistic systems. Prices have been limited by the usual monopoly constraint: you lose more customers to higher prices than you gain in revenue.

The bill significantly reduces the number of colors that they offer, but the big item is that it also guarantees the insurers that people can't just opt out if the price gets too high [1].

Prediction: after the mandate goes into effect, or after the 2010 election (whichever is later) insurance rates will climb steeply across the board. The reason given will be preexisting conditions, "fraud" (no more recision) etc. Bills will be introduced by the Right and co-sponsored by Joe Lieberman to fix those "universal coverage" problems, and maybe to increase the fines for being uninsured.

[1] Not quite true -- you can still opt out if you're willing to pay a fine. Think of it as price supports on insurance.

By D. C. Sessions (not verified) on 19 Dec 2009 #permalink


I disagree with your assessment of the current bill's handling of pre-existing conditions and recission. I also think it's clear that we don't need 60 progressive senators to fix the bill's flaws. Making this big first step took 60 votes, but finding ways to fix the bill will be less controversial. Nathan Newman has some cogent thoughts on the politics of the bill down the road:…

As for the bill's provisions on recission and pre-existing conditions, yeah, insurance companies will find some loopholes. But more people will get care than would otherwise (that is, the loopholes will be smaller than the currently sievelike system. And to get those reforms, you have to have a mandate. If you require coverage of pre-existing conditions and have no penalty for being uninsured, the smart move for a consumer is to stay uninsured until you need medical care, then sign up with a pre-existing condition, get care, then go uninsured again until you need more care. This produces what's known as a "death spiral" for the insurance system. The Obama campaign's plan avoided the worst of that by a set of clever policy moves, too few of which were preserved by the Congress, so you need a mandate to be able to end two of the worst abuses by the existing insurance system.

As someone who is fairly healthy, I've never had to contend with the current system's handling of pre-existing conditions, but people I've known who had to navigate those waters tell horror stories. There's no question that people have died as a result of that system. Even after the insurers find loopholes in the new system, fewer people will die.

And if the insurance we're forcing people to buy is shitty, then we need to come back and fix it. Social Security was shitty to begin with, as was Medicare. That's not an argument against the bill, it's an argument for taking this as a starting point and building on it.