Heath insurance
April 27th, 2006AP had a depressing story this week on the increase in "moderate to middle-income" Americans who were uninsured for at least a part of last year. It’s not particularly surprising, though, since fewer employers are providing insurance, and buying individual insurance is out of reach for most lower-income families.
A couple of people have asked me what I think of the new Massachusetts health insurance law, which requires everyone in the state to have health insurance (or face fiscal penalties) and provides subsidies for low-income individuals and families. I’m a little dubious about whether it will work, but it’s certainly worth trying. No one else is even making a serious attempt at achieving universal coverage, and I have to admit that the Massachusetts model is a lot more politically feasible that my preferred choice of a single payer model. And I’ve got a lot more confidence in this approach than in Health Savings Accounts as the solution to the uninsurance problem.
If you want to know the details of the argument for an individual mandate system, check out the New America Foundation, which has been pitching this approach for a while. But in brief, the argument is that there are a significant number of young healthy people who could (theoretically) afford to pay for insurance, but gamble that they won’t need it. They know that if they really get sick, they can show up at a hospital, and won’t be turned away for inability to pay. An individual mandate therefore both makes them pay their fair share, and reduces the costs of uncompensated care, freeing up funds to pay for insurance for those who really can’t afford to pay.
The reason I’m skeptical is that I haven’t seen anything that explains how the Massachusetts approach deals with the problem of the small minority of people who have major health problems, people like Annika. Unless you have some way of putting such people in a risk pool with a large number of mostly healthy people (as in the typical employer-provided plan), there’s no way they can afford an insurance plan that charges their actuarial costs. As soon as people are choosing their own plans, anyone who is healthy will keep their costs down by staying out of insurance plans that are attractive to very sick people. And so the costs of those generous plans spiral up and up. If anyone knows how Massachusetts is dealing with this problem, I’d love to hear about it.