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Markets, not mandates, for health care reform

Originally published in the Baltimore Examiner

By Christopher B. Summers
Published on Thursday, August 30, 2007
OP-EDS

BALTIMORE - Is forcing Americans to purchase health insurance the way to address the fact that millions of Americans are uninsured? Politicians from both political parties seem to think so. This type of mandate was central to former Gov. Mitt Romney’s health insurance plan in Massachusetts. Now Maryland Sen. Ben Cardin is proposing similar legislation on a national scale. Such a mandate, however, would require Americans to accept a level of unprecedented government monitoring without addressing the real problem — government policies have made health insurance unaffordable for millions.

Underlying these legislative efforts is the notion that there is a large “crisis” for those lacking health insurance. Does a crisis truly exist? Contrary to the impression left by most media reports, the uninsured are a diverse group. For instance, while many people want insurance but cannot afford it, a significant number of the uninsured can afford it but choose to go without. In Maryland, for instance, over a third of the uninsured have incomes in excess of 300 percent of the federal poverty level. Others (perhaps as high as two-thirds of the uninsured population) only lack insurance for part of the year. Furthermore, uncompensated care for the uninsured only accounts for 3 percent to 5 percent of medical spending in this country.

Clearly, there are problems associated with the uninsured. But these problems do not add up to the “crisis” that so many in government and the media proclaim. There are, however, steps that policy-makers should take to address these issues. Cardin’s approach, however, misses the mark.

The main problem with Cardin’s bill is its major increase of the Internal Revenue Service’s autonomy over every American. Instead of merely collecting taxes, the IRS under the Cardin proposal would also monitor our health insurance status. This oversight would be quite intrusive, since the bill requires the agency levy a punitive tax on anyone who goes without health insurance for longer than 60 days.

Cardin defends this proposed policy by comparing it to the requirement that motorists carry car insurance. The senator fails to appreciate that motorists do not need to be checked every two months to determine if they are still insured. Do Americans really want a more intrusive IRS?

The real problem that our policy makers should address is that insurance is unaffordable for millions of Americans. What the senator seems to miss is the fact that the government is largely responsible for why health insurance costs so much. States impose a variety of mandates and restrictions on health insurance. These mandates drive up the cost, stifle innovation and reduce competition. Some good examples of things that drive up costs in Maryland are Chlamydia treatment, cleft palate treatment, and in vitro fertilization. Also, the state mandates that insurers cover marriage therapists and massage therapists.

If Cardin truly wants to help those without health insurance obtain it, there are better steps to take. For example, he should support legislation that would let consumers purchase health insurance in another state. Right now, there is no true interstate commerce in health insurance. That situation has led to a situation in Maryland where two health insurance companies supply over 90 percent of small business and individual insurance policies.

Cardin could also support legislation to ensure that individuals receive the same tax break as businesses do when they purchase their own health insurance. There is no reason the government should favor employer-based insurance over individually-purchased insurance.

Taking these steps, which would reduce the cost of insurance for millions of Americans, is a better solution to the uninsured situation than mandating intrusive new government intervention in our lives. Cardin should be commended for desiring to help those without health insurance. However, his prescription of more government intervention is exactly the wrong thing we should be doing.

Christopher B. Summers is president of the Maryland Public Policy Institute.

Examiner