Universal health care or universal nightmare?

As the public outcry over our broken health care system gets louder, individual insurance mandates are being hailed as the solution. Individual mandates legally obligate individuals (as opposed to, say, employers) to purchase health insurance for themselves and their families. They are central to Sen. Hillary Clinton's health care plan, as they were to the (stillborn) Schwarzenegger/Nunez plan for California. But will mandating health insurance guarantee universal access to medical care?

For starters, the numbers don't add up. As legislative analyst Elizabeth G. Hill noted, there was reason to believe that Schwarzenegger’s plan would have run out of money by the fifth year of operation. And while Sen. Clinton has claimed that with her plan those who are “satisfied” with their current policies can keep them, this promise presuposes that keeping such policies will be possible. But that is precisely the problem: there is no evidence that they will be – quite the contrary. In fact, as the prices of services and premiums continue to rise, employers are increasingly offering policies that are either more expensive or shift costs to the employee, in the form of higher deductibles, co-pays, or coinsurance, when not dropping benefits altogether (Gould 2007).

The deepest problem is confusing universal health insurance with universal access to comprehensive medical care. Clearly, in both cases universal means “everybody”, but a “universal” social health insurance, such as single payer health care reform, and a “universal” health insurance mandate, based on liability insurance, differ in fundamental ways, and the implications of this difference for health reform are enormous.

In a social insurance system, everybody contributes to a system. Because contributions are compulsory and proportional to income – usually a mix of taxes and payroll deductions -- and because many individuals participate (a locality, a state or province, or a nation), the system is financially sustainable. Because risk is spread widely, there is no need to separate people into different “pools”, which saves everybody time and money. And because the system consolidates the purchasing power of many individuals, it has the capacity to negotiate prices with providers of medical care. For these reasons, a social insurance system has the greatest capacity to control costs and to provide a guaranteed amount of medical care to all participants.

In contrast, with individual mandates, everybody is compelled by law to buy liability insurance in the “health insurance market”, with policies priced according to individual or group risk (the latter is currently the case with employer provided insurance). The social problem of meeting a people’s medical needs is transformed into a “problem” of millions of individuals and families, “empowered consumers”, who have no choice but to comparison-shop for policies, while weighing their current and future medical needs against other basic needs, like housing or groceries – a “universal” nightmare.

The assumption underlying the idea of mandates is that as “customers” flood the “marketplace”, competition will bring prices down. Which of course may apply to the price of insurance policies, but not necessarily of medical services. Yet the real “disease” in American health care is rising prices of medical care (which is why the price of policies keeps going up). As economists Gerard Anderson, Uwe Reinhardt and collaborators noted, “It is the price, stupid” (Anderson, Reinhardt et al. 2003).

Spiraling, out-of-control prices are a product of a dysfunctional system built upon perverse incentives, among others, an incentive to “cut costs” not by buying in bulk, or eliminating waste, administrative or otherwise, but by denying payment for care and cherry-picking “good” customers (least likely to need health care). This is because those who are in charge of controlling costs are those whose interest in providing health care is only instrumental to the fundamental goal of making profit by selling a commodity: insurance policies. So whenever underwriting helps private insurers deny payments for care, even as it increases administrative waste and leaves people in the cold with their medical needs, insurers are happy to “invest” in it, so long as it contributes to their profit-maximizing goal.

Another key assumption underlying the idea that the solution lies with individual mandates is that shopping for health insurance policies is functionally equivalent to shopping for designer shoes: faced with an offer, a customer is free to take it or leave it. If the price is too high, customers wait for a sale. But, of course, the demand for medical care cannot be likened to the demand for designer shoes. A critical operation cannot be put off until prices come down.

Now proponents of individual mandates claim that insurers will be legally bound to sell policies to everybody regardless of "pre-existing conditions”, and to not rate policies according to “individual risk” (although they can still do so on the basis of “group risk”). But how are we to know, assuming insurers comply, that they won’t “spread” their “losses”, or rather, their foregone profits, to everybody else, and raise the price of everybody else’s policies? Scandal after scandal give us little reason to believe that private insurers will stop selling policies that meet their profit-maximization goals, and will suddenly begin to deliver what they have failed to do for decades.

A system heavily reliant on for-profit health insurance is fundamentally flawed: its ultimate goal is profit, not meeting the health care needs of the American people. Only a system based on the principle of social insurance can meet this fundamental human need because that is precisely its goal. Only such a system constitutes meaningful universal health care reform.

And sound legislation towards this system exists: they are single-payer plans, SB840, the California Universal Healthcare Act, recently vetoed by Schwarzenegger, and HR676, the expanded and improved Medicare for All Act, dismissed over and again by the mass media, by health policy “experts”, and by most politicians as “politically unfeasible”.

But they forget that if health care reform is about anything at all, it is about meeting a fundamental need of the American people, who have shown their collective political power at important crossroads in American history, especially when they are fed up. And because people are fed up, there is in our day hope for meaningful health care reform. Nothing can stand in its way, if the American people demand it.


References
Anderson, G. F., U. E. Reinhardt, et al. (2003). “It's The Price, Stupid: Why The United States Is So Different From Other Countries.” Health Affairs 22(3): 89-105.
Gould, E. (2007). The Erosion of Employment-Based Insurance: More working families left uninsured. Washington, DC, Economic Policy Institute: 1-24.
White, J. (1995). Competing solutions: American health care proposals and international experience. Washington D. C, The Brookings Institution.


Claudia Chaufan teaches sociology of health and medicine, public health, and health policy at the University of California at Santa Cruz. She is the Vice President of California Physicians Alliance, the Californa Chapter of Physicians for a National Health Program, an organization that supports single-payer health care reform.