What Are Mandatory Health Care Plans?
Thu Feb 22, 2007 at 04:14:11 AM PST
We have reached the point where almost everybody is in favor of “universal health insurance.” The problem is, as they say, in those pesky details. Why even the health insurance industry has a plan for “universal health care”… so long as they can get you and the government to fork the money over to them along with their 31% overhead and profit.
Various flavors of so-called “Mandatory” or “Mandated” health insurance schemes have, unfortunately, become the most popular sort of plan to get us to universal health care.
This diary will provide a generic outline, rather than picking on any one specific proposal, of what these sort of plans are composed of.
And why they inherently don’t work well.
* DrSteveB’s diary :: ::
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Variations of individual and employer mandated health care go back at least to Nixon. Bob Dole once sponsored a form of mandatory health insurance along with 19 other Repuglicans. One version of employer-based mandated health care trying to get to universal was passed in Hawaii in the early 1990s and has recently been sliding to failure. Progressive laws or regulations that would require employers such as Wal-Mart to provide health insurance are another variation of the piecemeal “mandatory” theme.
Recent examples include the one in the process of being actually being implemented (they hope) in Massachusetts, Schwarzenegger’s proposal for California, and proposals from Democratic Senator Wyden and former Senator Edwards. The latest versions of the concept originally comes out of center right think tanks,such as the New America Foundation, but has picked up some degree of bipartisan support.
So how, in general, is “mandatory” health insurance supposed to “work”
1a. Individual Mandate:
* Every individual person living in America is required by law to have health insurance.
* This is often compared to requirements for car owners to buy auto insurance (can you think of ways that your health is different than an automobile?).
* If you are lucky, you may get it from your employer.
* If you are very poor you may be eligible for Medicaid or some expanded form of Medicaid.
* If you are over 65, or otherwise eligible, you may have Medicare.
* Otherwise you will HAVE to buy it from the existing private for-profit health insurance companies.
* This means that the for-profit insurers are having the government guarantee them customers.
* Not surprisingly some forms of mandated insurance are promoted by the for-profit health insurance industry.
Now the above, by itself, is pretty ridiculous, even for Repuglicans. Therefore, most such plans have one or another, or several different ways mixed together, to help people get that now mandatory health insurance:
1b. For the Very Poor:
* Expand eligibility for Medicaid, or something similar to it, so that the poor or very poor have access to free(government paid via taxes) health insurance.
* More conservative/regressive versions make access to this more restrictive, such as only if you are child, or a woman with dependent children, or extremely low income threshold (e.g,. 100% of federal poverty cut-off).
* Even worse versions propose to provide tax dollars (e.g., vouchers) to the poor, so that they will then buy from the private insurers, rather than from the less-expensive less-overhead non-profit public sector. In effect another case of corporate welfare.
* More progressive versions make access to Medicaid like schemes easier, such as setting the income threshold at 400% of the federal poverty cut-off; and/or allowing adults to be eligible regardless of whether they have young children.
* Medicaid based versions have the draw back of being 50% paid for, and mostly run, by the States, rather than the Federal government. Hence, more progressive versions of such plans would make the program as in effect a partial expansion of Medicare (which is 100% federal; generally lower cost and higher quality than Medicaid) and not as an expansion of Medicaid (50-50 federal-state; higher costs and generally lower quality).
2. Employer Mandate
* Play or Pay: One or another form of requiring employers to either provide group insurance to their employees as a way of fulfilling the mandate, or if the employers opt-out, then having to contribute some percent of their earnings to the government system.
* There is typically an exemption for small employers e.g., under 10 employees or under 50 employees).
* If the opt-out point is set lower than what it costs companies to provide health insurance now, then those good-guy employers that are currently providing group health insurance to their employees, will of course opt-out; this amounts to a cost-shift to the employees and/or government.
* If the opt-out point is set higher than current costs, then it is in effect an increase in taxes on employers, while further subsidizing the health insurance industry.
* Remember, while the largest companies self-insure, most employers will be stuck in the middle, for the automatic exemption and too small to self-insure. Therefore the employer will have to buy group coverage from an insurance company.
But what if you are over the poverty cut-off and don’t have group coverage through your employer? What if you are an employer trying to buy group coverage for your employees?
* This is where you have to buy, generally from the for-profit private health insurance company.
* Mandated plans are inherently a regressive tax on individuals. This is because it is requiring low and middle income people, those above the public-eligibility cut-off, to pay more out of pocket to buy insurance.
* Generally the mandatory schemes will require that the health insurance industry provide a low-cost, but bare-bones (high deductible, no maximum out of pocket) plan that is supposed to be affordable to all as the minimum to meet the mandate.
* Everything in this section applies not only to the individual forced to buy solo coverage, but also for any employers or companies trying to buy group coverage (if they are to big to opt-out and too small to self insure) for their employees.
This brings us to the…
3. Insurance Company mandate
* The government will require that the insurance industry provide at least some sort of low cost affordable individual health insurance plan.
* The idea is that at the very least, in order to fulfill the individual mandate (#1a), if somebody is not able to get insurance through their employer (#2), and is above the income level or otherwise not eligible for a government program such as Medicare or Medicaid (#1b), then this is the option they could go with.
* One problem with this is that inevitably these plans, in order to reach affordability under the for-profit private-sector, wind up being poor quality of coverage, with high deductibles, continuous partial out of pocket payment even after deducible is paid (e.g., you pay 20% forever), no (or high) maximum on out-of-pocket costs, etc.
* Other sneaky details matter such as: is the deductible and/or the maximum out of pocket per condition or per person; and how often does it reset. Do “allowable charges” count towards deductibles and out-of-pocket maximums.
* Most important is how phony all such theoretical supposed controls on out-of pocket expenses are. In the real world, the private for-profit insurers practice the fine art of repeated denial of coverage every time you file a claim. They always seem to find ways for them to pay less and to have you pay more than you were told when you bought the plan.
* As noted, these problems ap
ply to both the individual or the small or medium sized business trying to buy group coverage from the private for-profit insurance companies.
Things to look for that try to make such plans less bad:
* high cut-off for getting public subsidy or access to government plan: so for example Wyden’s is at 400% which is less bad than Schwarzenegger’s 100%.
* Do they require community rating rather than individual rating; maintaining at least some semblance of the original purpose of insurance (risk pooling; spread the risk).
* Take all comers with no regard to pre-existing conditions (guarantee issue).
* Do they have, at least in principle, a maximum on allowable out-of-pocket costs; a cap before you get bankrupted.
* Is there at least the attempt to guarantee some minimal coverage plan at some affordable premium cost.
* Is there an attempt to limit allowable overhead and/or profit.
Things that make such Mandatory plans Inherently Hopeless:
* By leaving in place the for-profit public insurers, they inherently do not tap into the savings achieved by all public single payer.
* It is the excess overhead and profit of the for profit private insurers, running at 31% compared to the 4% by Medicare, that is part of what allows single payer to provide universal coverage.
* They preserve the wasteful, fragmented private insurance structure and therefore have no way to control costs.
* For example it can’t globally budget a hospital.
* Any gains in public and private coverage will quickly be offset as costs rise and government/business/individuals can no longer afford it.
* They force the uninsured to buy lousy coverage already responsible for 1 million bankruptcies per year. They will not provide access to care, nor will they protect you from financial ruin if you become ill (i.e. all the things an insurance policy is supposed to do).
* The reality is that the for-profit private plans that you are being mandated to buy can either be cheap enough to afford, or provide decent coverage, but not both.
Now all of the above is a nice simple explanation of how Mandatory Health care works.
Previously I outlined and described in some depth how single payer works, and debunked some of the myths propagated against single payer.
