Dinallo Explains Need For Health Insurance Mandate
New York’s former insurance superintendent, Eric Dinallo–now an NYU professor, and potential candidate for state attorney general–published an op-ed in yesterday’s New York Daily News in which he explains why individuals must be required to buy health insurance to reform the system. But he also suggests that a public option is required to make sure coverage is affordable for all. Frankly, I wonder whether he might think my call for a Health Insurance Assigned Risk Plan might do the trick?
In his article–”Everyone Into The Pool! It’s The Only Way Insurance Works” (go to http://bit.ly/4wfHwe to read the entire piece), Mr. Dinallo patiently explains why under any health care reform plan, if everyone is not required to buy coverage, we’ll end up with adverse selection–in which people will only sign up when they suspect they’re sick and will incur bills.
If President Obama gets through Congress his proposed restrictions banning denial of coverage for preexisting conditions or cancellation for being ill, an individual mandate is even more essential, since without such a requirement, insurers would simply get stuck with anyone who becomes sick. That would soon bankrupt the system.
This is no joke, as Mr. Dinallo cites a Kaiser Foundation finding that about 2 percent of those with insurance account for some 40 percent of claims costs.
Mr. Dinallo also insists that the experience in Massachusetts, which imposed an individual mandate but failed to see costs drop as a result of the state’s reform initiative, does not undermine his argument.
In fact, he says that while “the basic principle is sound,” where Massachusetts dropped the ball was in “failing to make an insurance plan available for everyone to be able to purchase…”
He suggests that’s why it’s important to have a public option with federal reform, or “something very close to it.” He explains that “if we are to require insurance, it needs to be available regardles of how much you earn or how sick you are.”
I wonder what Mr. Dinallo thinks of my idea, outlined in my Aug. 19 blog entry (http://bit.ly/mH55x) to establish a Health Insurance Assigned Risk Plan to assure that everyone is covered, with those unable to get insurance assigned (at reduced group rates) to existing carriers, according to their market share in that particular state?
What do you folks think about individual mandates and their implications?
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As long as such an Assigned Risk Pool’s RATES are actuarially sound and those with standard rates don’t end up subsidizing those in the pool.
However, we KNOW that won’t be the case since the Administration’s goal is to make those who make more money subsidize those who don’t.
The only way this might work is to make the “pool” policy a “major medical” policy with a deductible to make the insured pay all the day-to-day routine costs on a pay as you go basis. Then provide a government-backed reinsurance pool for any catastrophic illness above an agreed-upon threshold.
Good luck selling that to Congress.
Sam, the whole health-care mess is the natural and inevitable result of the “progressive” do-good impulse that “everybody ought to be entitled to the best health care available,” whether they pay for it or not. The unavoidable dark flip side of anyone’s entitlement is someone else’s forced obligation.
Force must be threatened and used to make people do what they know is not in their self-interest, like providing services to people who are not going to pay for them.
Once you start down that path, there is no end, no stopping point. Every such mandate begets a dozen additional mandates to enforce the first mandate. Each of them begets a dozen more. Very quickly, we will be bound hand and foot by government mandates, and individual liberty will be gone.
In every aspect of life, including the care of one’s health, people ought to get what they (or their parents) pay for, whether directly or through actuarially sound insurance plans in which nobody is forced systematically to subsidize anyone else.
The harshness of that at the low-income or no-income end of the spectrum can be softened by charity, but let’s recogize it as charity, and provide it locally and voluntarily, which is the most efficient, instead of creating government enforced entitlements and obligations, which eventually inevitably become “expense accounts” that run amuck. Witness the Ponzi schemes known as Social Security and Medicare.
Dinallo is wrong when he says that forcing everyone into a pool reduces costs. Let’s not confuse the costs incurred by providers with the prices they charge. Pools don’t reduce prices, they increase them by separating the consumer of services from the payer for those services. The consumer no longer cares what the prices are, he just demands the best service–”expense account living,” don’t you know.
Pools may shift the burden of paying those prices from high-risk members to low-risk members, if the premiums that each member must pay are actuarially unsound by failing to reflect the actual risks each member faces.
Costs are what the medical services providers incur, and what it costs them to provide services does not depend on the structure or membership profiles of the insurance plans paying their fees.
Insurance deals well with catastrophes, but it’s the most inefficient and costly way of paying regular “maintenance” expenses. I cringe when I see on TV those ads for “maintenance plans” for one’s car, but that’s where we are today with medical maintenance “insurance” plans.
The key to the reduction of the actual costs of medical services is to limit health insurance plans to “major medical,” with high deductibles, where the consumer retains an interest in getting his money’s worth.
If anyone also wants to buy a medical maintenance “insurance” plan, let them, but not at someone else’s expense.
I keep hearing complaints about having to “subsidize” others for medical costs if we insist that everyone buy insurance of some type or be in an insurance pool.
The reality of the situation now, however, is that we already subsidize the uninsured whenever they become ill or injured and end up in the emergency room and/or default on their medical treatment costs.
It’s a decision we as a society have made to treat ill and injured people when they come to hospitals for help regardless of their income levels, and a reflection of today’s high hosptal costs made necessary in part by those who don’t or cannot pay.
In addition, insurance in general is an organized subsidy in its concept. Everyone pays into the pool so that when a few have a loss, there are funds available to indemnify. Now, in most cases, nobody is forced to buy insurance, but I believe healthcare is an entirely different animal.
First, for most other insurance types, we can avoid losses by not engaging in that risky behavior such as owning a car, for example. In Insurance 101 we call this risk aversion. Or, if we do engage in that behavior we just suffer the consequences if there is a loss–risk retention.
With your health, however, we can’t just voluntarily avoid sickness or injury (losses) altogether and we WILL be treated (compensated) when we suffer a catastrophic illness or injury. Since risk aversion is not entirely optional, why should a mandate to protect yourself by buying insurance and contributing to the pool be optional unless we as a society are prepared to just refuse service and let people die without treatment?
It would be great, as Mikk suggests, to provide charity for those who can’t afford healthcare. Unfortunately, today’s healthcare is so expensive, I don’t believe charity could come close to rectifying the situation. It doesn’t now. And, in reality, a type of charity is happening now everyday in the emergency room at your local public hospital and it is very inefficient.
Why can’t we follow the lead of just about every other industrialized nation and provide access to healthcare for everyone? Why do we continue to close our eyes to the great benefit citizens of these countries enjoy, the freedom from worry of being able to be treated for health issues without facing budget busting hardship or bankruptcy? We have much to learn from others.
Here’s a good article that summarizes what other countries do:
http://www.msnbc.msn.com/id/32898477/ns/health-health_care