Grand Illusion

Why do we pretend that an insurance mandate will help the health care crisis?

Health care worker

Some time ago, Massachusetts weighed a new, innovative health care plan to cover the uninsured. As a result of a new mandate to buy health insurance, reported the New York Times, “no one would go uninsured” in the state. Following a tough political fight, the bill passed and prompted the same newspaper to editorialize, “Massachusetts last week ventured where no state had gone before: It guaranteed health insurance for every resident.”

The year was not 2006 but 1988, and the Democratic governor who presided over this legislation was Michael Dukakis. The result? The proportion of state residents who were uninsured subsequently rose and remained unchanged for almost two decades.

If insanity is doing the same thing repeatedly and expecting different results, state governments across the country became certifiably unhinged. As recently summarized by Steffie Woolhandler and her colleagues at Harvard Medical School, similar bills to eliminate the ranks of the uninsured later passed in Minnesota (“the most sweeping effort yet to provide health insurance to people who lack it,” according again to the New YorkTimes), Tennessee (“the most radical health care plan in America,” gushed the governor), Vermont (a bill that would “give Vermont universal healthcare by 1995,” predicted then-Gov. Howard Dean), and Washington (called “one of the most aggressive health care experiments in the nation … that would extend medical benefits” to all citizens), among others.

Among the six states that later passed health reform loosely based on the 1988 Massachusetts model, Woolhandler reported, not a single one saw a sustained reduction in the percentage of uninsured citizens, despite the largest peacetime economic boom in the nation’s history. As health care costs kept rising, making premiums too expensive for employers and individuals, every state repealed key elements of the reforms, including mandates to purchase insurance.

Is there any reason to think a nationwide plan now might do any better? It’s likely the federal bills will lead to fewer uninsured citizens in the short term—but very little of the benefit will come from the much-ballyhooed employer and individual mandates to buy insurance. That part of the policy is a brilliant red herring to appeal to moderates and conservatives. The real strategy is much simpler: Mostly, the federal government will just use new tax revenues to buy private health insurance for those who can’t afford it.

Consider Massachusetts’ most recent health reform effort, from 2006, which combined an individual and employer mandate to buy insurance (appealing to the Republican goal of greater personal responsibility) with subsidies for the poor (appealing to Democratic notions of social justice). Pointing to the success of the Republican aspect of the plan, former Senate Majority Leader Bill Frist claimed that 40 percent of the allegedly 500,000 newly insured state residents bought private insurance and that employer-sponsored private enrollment soared by 160,000 people. According to the state health department, the number of those without insurance fell by half, from 6.4 percent in 2006 to a historic low of 2.7 percent in 2009 following the reform. The Democratic-appointed state health secretary, JudyAnn Bugby, further stroked advocates of personal responsibility in the New England Journal of Medicine, concluding that “only about half of the more than 400,000 residents who gainedcoverage by December 2008 were publicly subsidized.”

A more nuanced reading of the data suggests a different conclusion. To begin, no one really knows how many Massachusetts residents gained insurance, since the state’s health department suddenly began using a new method to count the uninsured beginning in 2007—oddly, just after health reform passed. Compare the state’s estimates with the U.S. Census, which performs a monthly count of the uninsured for the Bureau of Labor Statistics. Using a larger sample size, they estimate that 5.5 percent of Massachusetts residents are still uninsured.

Still, if we generously assume the number of uninsured really decreased from 6.4 percent to 2.7 percent, about 233,000 people gained coverage based on the state population size—a significant discrepancy from the 400,000 cited previously by the health secretary. This matters when one sees as a critical piece of data: the numbers of new enrollees in MassHealth and Commonwealth Care, which are the state-sponsored free and heavily subsidized health plans for the poor. According to the state’s 2009 report, these programs accrued 276,000 new members after the 2006 reform made it easier to qualify for them—which is even more than the 233,000 people considered newly insured.

Further, the state report shows that private insurers’ total market share fell from 85 percent to 80 percent following reform, suggesting the real growth occurred in the state-subsidized plans. After 2006, enrollment in state-paid plans soared by 40 percent, while private-insurer enrollment grew only 2 percent, even though out-of-state enrollees, partially state-subsidized members, disabled people on Medicare, and double-counted individuals with more than one private insurer were all lumped into the “privately insured” category.

The upshot: The reduction in the uninsured is the result of government-sponsored health plans for the poor, not a sudden increase in people and employers willing to buy policies due to the new mandate. Why, then, do politicians continue to pretend that effective reforms do anything other than give away health insurance to those who couldn’t afford it?

They’re avoiding hard truths. Health costs are escalating at an unsustainable pace, which invariably will lead to high out-of-pocket payments, fewer health benefits, loss of coverage altogether, and lower take-home wages for many workers. (That’s already happening in Massachusetts.) The theory behind the mandate was that forcing people to buy insurance would expand the risk pool, add new money to the system, and offset these rising costs. Unfortunately, the uninsured are the least able to contribute enough money to save the system. There is a moral imperative to offer health care to those without it, but it’s dishonest to pretend that an employer and individual mandate will do anything about it. Mandates are a political sideshow; the actual resources to buy policies still have to come from somewhere (that is, higher taxes). That’s the hard lesson state governments learned in the 1990s as they repealed their high-minded reforms.

There’s another reason lawmakers pay lip service to the mandates. They foster the politically useful illusion that market-based nudges toward private health plans will eventually solve the problem of the uninsured. That sleight of hand benefits commercial insurers, who successfully dispelled any serious discussion of a broad public solution like the Medicare for All bill advanced by the late Ted Kennedy.

Though the plans unquestionably will cover more Americans by raising taxes, they’ll still leave millions without insurance. We’ll hear again about the failure of the market in health care and wonder why more personal responsibility failed to fix the health insurance crisis. And our leaders will pretend they didn’t see it all coming.