Mandates to Buy Insurance

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A Nonpartisan Economic, Health and Public Policy Research Foundation

Mandates to Buy Health Insurance

 

We are told that for the risk pool to work efficiently all Americans have to be insured. The price of current insurance premiums is prohibitive and many can’t afford them. An individual mandate would be a new tax on every American. The play or pay option forcing employers to either provide health insurance or pay a new tax as a penalty is just as unacceptable as the individual mandate.

The truth is we really don’t need new mandates to insure every American. Currently, all persons over 65 and all disabled persons under 65 are insured through Medicare. Among the under 65 group employed individuals are either in the uninsured working poor making about 8 million persons, working covered with employer based insurance, working for a small company that either insures their employees or does not insure their employees. There are people that are self –employed that are uninsured. They are working against a federal government gradient by not being given the same tax advantages that those who own large companies. There are about 18 million people that  are not poor and uninsured because they either have a chronic medical condition which make them uninsurable or would pay a disproportionate amount of insurance premium for some reason. There are 8.4 million 18-25 year old persons who are uninsured because community rating increases their health insurance premium too high. Then there are about 9.4 million persons who are in between jobs and temporarily uninsured. Those who are non-working poor are covered by Medicaid. About 3.5 million of the non-working poor are eligible for government health programs but have not signed up. That leaves about 13 million illegal aliens who are uninsured but receiving free health care on The American taxpayers nickel.

There are about 125 million workers who are covered by Worker’s Compensation health insurance if the injury or illness occurs on the job but not after work when they are home. These 125 million persons include the working poor who are otherwise uninsured.      

There are several tactical options available make sure every American is insured that does not require either a new personal or employer mandate. The ultimate goal of all of these options are to design the lowest insurance premium possible making it more affordable for all Americans without forcing the insurance carrier to lower the premiums through a government edict which would just drive up health care costs.

We need to employ a strategy that creates incentives that make having insurance a desirable and affordable options for all Americans  rather than forcing them through government edict and incurring government punishment if they don't purchase insurance.

We can create  industry standard risk categories so that the young and healthy don’t have to pay a disproportionate premium but rather a low premium appropriate to their low risk status.

We need to create equitable tax laws by giving the self-employed the same tax advantages that employers of large groups enjoy. We also need to preserve the employer tax deductibility for health care to create an incentive for the employer to make a defined contribution into the private tax free account of the employee. Having a tax free account has many advantages but would provide a savings fund to pay insurance premiums when they are in between jobs. They also provide a fund to finance discretionary care that is price sensitive, used to pay for routine low cost care, or care associated with treatments that are low value. That is care that is associated with treatments that are controversial but chosen by the individual precluding any rationing by the government or insurance carrier.

A way to avoid a federal mandate and use a current state incentive would be to allow the employer to make a defined contribution of the Worker’s Compensation insurance premium into the account of his employees thus transferring the legal obligation on to the employee to buy a Worker’s Compensation Plan. If they purchased a  twenty four hour Plan such as The American Health Care Plan they would get Worker's Comp insurance as well as coverage when they were not working and make it completely portable. This would make sure that the 125 million workers  under this program both those who are currently working poor uninsured and those with employer based insurance, would be covered by health insurance 24 hours a day. The added advantage to this tactic is that we would eliminate the bad incentives that currently exist in the Worker’s Compensation program such as all of the time and money lost by people with back pain not otherwise specified. Under Protocol insurance this condition is not an insurable event because it is price sensitive.

It will take political policy to ultimately determine how we will deal with the elderly, the poor and the uninsured and uninsurable. However, the AHCP does not dictate political policy. I don't agree that top down government subsidy is the best way to cover these costs. There is no way to predict what new and innovative ideas will arise in a free market and the new atmosphere that it will bring which  is conducive to innovation. Also many of the current poor probably won't be poor in a free market which will also provide the atmosphere for new jobs in the private sector to arise. The free market needs to be instituted first to create a conducive environment to new, creative strategies to deal with this perplexing problem. Whatever strategy we ultimately choose, we should choose one which will not have unintended consequences and the strategy should be optimally efficient and cost effective. Until we have established a free market, we need to implement the economic reforms in finance and delivery to achieve efficiency and cost effectiveness. Under the current system ,we will probably have to partially subsidize the  health insurance premiums of the 3.5 million nonworking poor and those with pre-existing or chronic illness if we don’t want to drive costs and premiums up with insurance mandates to provide care for these people in a community rating and guaranteed issue scheme. This subsidy should not be top down government run since any government design costs too much and causes market failure. The partial subsidy would be for the amount of the premium above the mean charged to those of the same age without those conditions. Although this partial subsidy would cost money, it would cost much less than to pay for the cost of care of this people at pay master list price the highest tier of price in the Emergency room of a hospital as we do now. This subsidy would also create sufficient funds for all Americans to pay fair market price for health care and create equity in health care delivery, two very important features we should have in health care reform.

We need to create an incentive for the non-working poor who receive Medicaid, which was designed to be a temporary safety net only, to avoid using the emergency room at their local hospital the most expensive venue, as a clinic to receive routine health care. An incentive can be created with refundable tax credits. Since the non-working poor don’t pay taxes, refundable tax credits turn into cash. The Medicaid patient will pay in a combination of money + tax credit to equal fair market value price. By being a careful steward of the public dollar any tax credits left over at the end of the year converts into cash which stays in the patients account and creates a starter fund for when they move up to become a member of the working poor.

Finally the problem of the illegal alien. The problem most Americans detest is that the alien makes American money and sends it back to Central America and then our government gives them free health care at the American taxpayers expense.  There is another problem. American citizens  only have 1.6 children per couple. This has not produced enough younger persons to support the social security and Medicare programs. Currently there are 48 million persons using Medicare. When the post war baby boomers reach retirement age in two years, there will be an additional 89 million persons who will not be working and will start to depend on Medicare and Social Security. Medicare is 50 trillion dollars in the deficit and will not survive. The influx of aliens can solve this problem, if it is handled properly. In the American Health Care Plan, each of these aliens will have to invest their money in the asset savings account in American T bills not send it back to their country, In addition they will have to purchase insurance here in America, according to the tactics described above, just like any other American. In other words we can have the illegal alien assist us with our problems rather than add to them since they like our country so much.