Almost Forgotten: The Insurance Mandate Lie

The other day, I was reminded of one of the lies we’ve been fed about the Health Care Takeover the Democrats are desperately trying to pass through the Houses of Congress: The Individual Mandate, which would be just like your mandated automobile insurance. This specious line of reasoning has been almost forgotten amidst the arguments over abortion funding and the Constitutionality of reconciliation and trying to “deem” a bill passed by rule.

The individual mandate would require every American to purchase health insurance, or to pay a penalty (I call it a fine, because that’s what it really is) if they choose to go without. Proponents of this insurance mandate argue that it is like automobile insurance, where we are required to purchase liability insurance for our automobiles before we can drive them on the roads. They say that this mandate protects individuals from the financial harm of medical bills they cannot afford.

In this limited line of reasoning, they are correct, but that isn’t the whole story. This is, in fact, what insurance is really all about: Protecting us from the massive costs frequently associated with the unexpected. The individual state mandates for doctor visit coverage and other “expected” expenses is not insurance, and the sooner we separate the two concepts of insurance and payment plans the better, but I digress. The problem with comparing the health insurance mandate to the auto insurance mandate is thus: Liability insurance for automobiles covers my expense when I do damage to someone else; the health insurance mandate covers my expense when something happens to me.

To some, this may seem a triviality, but it is not. Liability insurance for automobiles not only protects me from having a large out-of-pocket expense when I am at fault, but it also protects the person that I have damaged in case I can’t afford to pay out of pocket. When I rear-ended somebody awhile back, I had two choices: Claim it against my insurance or pay for it myself. In that instance, even though I had the insurance, I chose to pay for it myself. The additional long-term cost in higher premiums wasn’t worth the relatively minor cost of the repair. The insurance was there to protect me against claims I could not afford. Had there been more damage, I might have chosen to let the owner of the other car file the claim, rather than pay for it myself. That was my choice.

The other difference between auto insurance and mandated health insurance coverage is that, in the one case, I am being required by the state to purchase liability coverage so that I can drive a car. In the other, I am being required to purchase insurance simply by existing/i>. This isn’t simply saying, “If you want to do ‘A’, then you must first purchase ‘B’.” Rather, they are saying, “You are subject to the requirement to purchase ‘B’.”

Think of the precedent this sets: If the Federal Government can fine us for not purchasing health insurance, what else can they require us to purchase? Perhaps next year, each American will be required to purchase an electric scooter to fit the President’s environmental agenda. Perhaps we will all be required to put solar cells on the roof of our home. Live in an apartment? You’ll be required to buy alternative-source electricity. Perhaps the government could compel us to fly twice per year to shore-up the airlines’ sagging balance sheets. Once the precedent for compulsion is set, what binds the government from doing it again and again and again?

One of the primary reasons given for the individual mandate is that it will increase the size of the insurance “risk pool” and thus, lower costs. This is short-sighted reasoning and ignores the economic Law of Supply and Demand. Certainly in the short term, it will lower the overall cost of premiums as more people buy insurance, but in the long-term it will have the opposite effect on total health care costs.

Think about it: When more people have health insurance, with all the statewide mandates and payment plan requirements thrown in, people will see that the cost of health care on a per-transaction basis will fall. The price tag to them becomes small: $20 for doctor visit co-pays. $125 for an ultrasound. $250 for an MRI. They have already paid their premium, and so the incremental cost of additional care is, to them, minimal. I have seen this in my own behavior: When I was not covered by insurance, I rarely saw the doctor, and only when I suffered from severe illness or injury. Now that I have health insurance coverage, an illness or injury I might have previously ignored now warrants a doctor visit. My insurance premium is a sunk cost, so as long as I have $20 co-pays, I might as well use them.

What people do not realize is that the actual cost of the care they receive is much higher, and the insurance company is paying the bulk of these costs. The $20 doctor visit was actually $150, the $125 ultrasound actually $900, the $250 MRI really $3,000. As the visible costs sharply decrease for the previously uninsured, the demand for these services increases in a similarly precipitous manner.

Without an accompanying increase in available medical resources such as doctors, nurses, equipment and the various categories of medical supplies, this rapid artificial increase in demand will drive up medical costs. It is as inevitable as the tides rising and falling or the moon waxing and waning. Doctors and hospitals will demand more medical supplies. Medical suppliers will demand more chemicals, plastics, and electronic components. Component suppliers will demand more raw materials, from metals to chemicals to other parts. Raw material suppliers will have to increase their prices to deal with the shift in demand and the increased costs in extracting those raw materials. That increase in raw material prices will be transferred back up the line to the final customer (that is, you and I), at what amount we do not yet know.

And this doesn’t even touch the increase in demand for the time of doctors, nurses and other medical professionals.

This is High School level macro economics. A mandate for health insurance coverage will increase the demand for health care (that is, “shift the demand curve to the right”). This artificial demand shift will cause an increase in health care prices (“raise the equilibrium price”) as surely as the rising sun causes the cock to crow. The rising costs will force health insurance companies to increase premiums, giving the Democrats every excuse they need to come back to the American People with their Public Option™ to “save” the system from itself.

This, I think, is the real reason for the mandate: It has nothing to do with covering more people, or ensuring that people don’t game the system when pre-existing conditions are no longer an obstacle to obtaining insurance (that’s a whole other diatribe). In fact, the mandate is intended to break the system. When the mandate is enacted it will, after a fashion, cause the price of health insurance to skyrocket making health insurance affordable to fewer people. These skyrocketing prices will be blamed on those uncaring, inhuman insurance companies and their evil, greedy, profit-hungry corporate managers. We are already being conditioned to think this way about insurance companies by the media and the Democrats. Then, when Americans demand a solution, the Democrats can step in with their Public Option™, explaining how it “works” so well in Europe, Canada and elsewhere (as they have tried to do each time they propose it here).

The Democrats have taken the long-term view on this: They understand that once this legislation is enacted, it will be virtually impossible to repeal or even curtail. They take pieces out of their legislation but never consider adding free-market alternatives, because they know each piece added from their agenda inexorably leads to higher costs and greater demands that the government “DO SOMETHING!” about those costs. They want to break the system so that they can take it over, and they know that once they control our health care, they control us.

This bill has to be stopped. It has to be stopped now. Not in November. Not in 2012. Now. Today.

Call your Congressman. I know you’re burned out, but call him anyway. Do it now, whether you’re at your office or a home computer or in a coffee shop reading this on your phone. Do it even if you think your congressman is sure to vote “No”. Tell them you don’t want higher costs. Tell them you don’t want government mandates. Tell them you don’t want this monstrosity that is the Senate bill. Tell them your vote in November depends on theirs today.

Cross-posted at The Minority Report.