The Case Against Mandatory Coverage

Published March 1, 2006

Writing in the Washington Post on January 18, business columnist Steven Pearlstein argued, “the president must acknowledge that there can be no credible reform without extending health insurance for every American–every employer should be required to pay half the cost of basic health insurance for every employee.” The same week, Humana co-founder and retired CEO David Jones told a Naples, Florida audience that government should mandate health coverage because the uninsured “are simply taking a free ride.”

Like many other conservatives and Republicans, they call for mandating that every individual have at least “catastrophic” insurance coverage. I know a lot of physicians and insurance brokers who support this policy, and Republican governors in at least Massachusetts and Minnesota have proposed similar ideas.

Here’s a quick check list of a dozen reasons why mandatory coverage isn’t worth the effort:

1. “Free riders” are not really much of a problem. In a June 2003 report for Health Affairs, Jack Hadley and John Holahan reported about 3.5 percent of total health care costs are for uncompensated care. That is a trivial amount of money, far less than most stores lose to shoplifters.

2. Granted that some facilities are hit harder than others, I would venture these tend to be in areas where there are large numbers of illegal immigrants. Mandatory coverage will do absolutely nothing to solve that problem.

3. Health insurance mandates are often compared to mandatory auto insurance coverage, but the comparison falls short for several reasons. Auto mandates don’t work very well and certainly don’t solve the problem of uninsured motorists. And with an auto mandate you are required to insure against what your two-ton vehicle will do to other people, not to get your own car repaired.

4. In order to have a mandate, we would have to have substantial subsidies and assurances of access (you can’t force people to buy what they can’t afford or can’t find). But once you have those provisions, you probably don’t need the mandate. Very few people will absolutely refuse to carry an insurance card no matter what.

5. In order to have a mandate, the government has to decide what it is that is being mandated. Even with “catastrophic” coverage, someone has to decide what expenses go towards meeting the deductible–chiropractors? abortions? sex-change operations? herbal therapy? and on and on and on. Imagine the debates in Congress.

6. Once you’ve decided what to mandate, you must ensure such coverage will be available to everybody. What happens if no company wants to offer it in Montana? What if a company does offer it in Montana, but provides lousy service? Consumers will have no choice but to buy it, no matter how poor the service.

7. Once you force people to buy a product, you have to make sure the providers of that product aren’t ripping them off. That means federal control over premiums. That means federal scrutiny of carrier efficiency. That means examination of administrative expenses to make sure they are “reasonable.”

8. As far as I know, nobody has ever looked at the macroeconomic consequences of this idea. Having a mandate means every single individual must be insured (and pay premiums) at all times, regardless of their circumstances. I will be a witness that if I had had to do that in the early 1990s, I would never have been able to leave Blue Cross to start four different businesses, three of which are still in operation and employing 45 people in Northern Virginia. In every case, I had to tighten my belt in a whole lot of ways to get these ventures launched. Going uninsured for a while was just one of them.

9. There are much better ways to address the problem. I would note, for instance, that there were far fewer uninsured 20 years ago, before the states went crazy with mandates and small group “reforms” that dried up the market for coverage and raised costs dramatically.

10. Equalizing the tax treatment for people who buy their own coverage would also help a great deal. That way people wouldn’t have to rely on their employer in deciding whether to get coverage.

11. Encouraging innovation in insurance offerings would help, too. We have already seen that HSAs are changing people’s minds about the value of coverage. There may also be other approaches that would appeal to other segments of the market. Part of the reason people don’t buy coverage is because they don’t see much value in what is available. We need to reduce the barriers to entry, to make it easier for new approaches to be tried.

12. I know many physicians (and others) support a mandate (the California Medical Association is on record doing so), but they haven’t really thought it through. If carriers are scrutinized as described above, it won’t be long until physicians get the same treatment. If people are forced to buy a product and companies are forced to sell it at “reasonable” rates, it isn’t much of a leap to start looking at the inputs that drive those rates. Could it be that doctors are price-gouging their patients? My goodness, we can’t have that! And it’s off to the races.

Mandatory coverage is an idea that won’t solve the problems but will create a whole host of new problems and have serious negative consequences throughout the economy.

Greg Scandlen ([email protected]) is president and CEO of Consumers for Health Care Choices, Hagerstown, Maryland.

For more information …

The June 2003 report for Health Affairs by Jack Hadley and John Holahan, “Covering the Uninsured: How Much Would It Cost?” was a Web exclusive. It is available online at