Saturday, August 22, 2009

Taxes and Mandates


The Washington Post offers an editorial arguing that the government cannot constitutionally impose a mandate that all uninsured persons obtain health insurance. Well, yes and no.
The otherwise uninsured would be required to buy coverage, not because they were even tangentially engaged in the "production, distribution or consumption of commodities," but for no other reason than that people without health insurance exist. The federal government does not have the power to regulate Americans simply because they are there....

This leaves mandate supporters with few palatable options. Congress could attempt to condition some federal benefit on the acquisition of insurance. States, for example, usually condition issuance of a car registration on proof of automobile insurance, or on a sizable payment into an uninsured motorist fund. Even this, however, cannot achieve universal health coverage. No federal program or entitlement applies to the entire population, and it is difficult to conceive of a "benefit" that some part of the population would not choose to eschew.
The first thing to consider is that, with a health insurance mandate directed at employers, most individuals are going to end up insured through their jobs. So how about we create a new payroll tax to cover health insurance but instantly credit back any deductions made for health insurance through the employer - both the employer's share and the employee's share. Employers who do not offer insurance will collect the payroll tax, implementing the same instant credit consistent with their employees' documentation of health insurance coverage.

The amount paid in premiums will be confirmed through end-of-year filings by health insurance companies. The self-employed will either insure so as to qualify for the tax credit, or pay the tax. So you could choose not to buy insurance, sure, but you would end up paying a tax in the approximate amount of what basic healthcare coverage would have cost. No mandate - just the choice between buying insurance or paying a roughly equivalent tax without getting insurance. Collected taxes can be used to help offset the cost of caring for the uninsured.

Why wouldn't that work?

Me? I'm off to start my new insurance company. Here's the business model: I charge a premium in the lowest permissible amount (the least expensive plan you can buy to avoid any penalty from the mandate), use that to obtain reinsurance for losses above, say, $50,000, and offer essentially no other coverage. Participants can fund HSA's, if they wish. If a participant gets through a year without making a claim, I refund... let's say 50% of their premiums. The rest goes to the cost of administering reinsurance, administering claims (something I would outsource), and profit. Coverage for pre-existing conditions? Not a problem. Unhealthy people will stay away in droves. Anybody want to invest?

2 comments:

  1. Has anyone in a position of authority said/written anything about how they will reduce costs?

    I find it hard to believe that merely extending coverage will fix the problem.

    I understand the theory of a "public option" being used to promote competition, but I'm not sure how realistic it is, it seems to me that you are really going to artificially create a price ceiling. If you set it high, you won't have any impact. If you set it low, you will quickly have a "single payer" by default system. If you set it "just right" you will promote competition . . . but good luck with setting anything "just right."

    Now if you changed the laws about "who can provide medical care" (PA or RN base vs. MD) or if you increase the number of providers in some other way . . . that might get you somewhere.

    CWD

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  2. Your pricing argument might make sense if, for example, the Post Office put all of its competitors out of business. Yet they flourish. Various public/private hybrid models exist in other countries. Private insurers continue to offer services to augment Canada's Medicare system (similar to Medigap coverage under our Medicare system).

    If the story truly is that private health insurance companies in this country are so fat, lazy and incompetent that they can't compete with a government program, you have to question what value they actually bring to the table.

    The question, though, is whether the government can constitutionally mandate that individual citizens buy health insurance. Before reaching the point of how the system might be gamed, I was pointing out that even if we assume the author's point to be true the government could set up a tax scheme that would leave people able to "opt out" but while still paying the premiums - which, realistically speaking, means that (save, perhaps, for a few masochistic souls) people would buy insurance. You could take it a step further, and have the government sign the hold-outs up for insurance.

    Would universality, of itself, reign in prices? It should have an impact on some of the waste, such as excessive use of emergency rooms by people who should be seeing a PCP, but it's not realistically likely to do much to reign in either the overall cost of healthcare or the rate of inflation. That's one of the problems of this debate, though, isn't it? We're trying to fix more than one problem. There's no particularly reason to believe that the solution to one problem (high numbers of uninsured people) will solve another (e.g., health costs); it's pretty easy to think of solutions to one problem that could worsen another.

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