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Colorado Amendment 63: refuting the “cost-shift” & other flawed opposition

Health care needs real reform, but mandatory insurance does the opposite by entrenching the worst of current policies. It bans affordable insurance, increases costs, and further extends insurers’ government-granted privileges at patients’ expense. Amendment 63 would prohibit the Colorado legislature from imposing mandatory insurance. Don’t be seduced by flawed arguments against Amendment 63, which the Colorado Legislative Council summarizes in its “Blue Book” mailed to voters.

Mandatory insurance will not remedy rising medical costs. Medical care and insurance prices soar because insurers, Medicaid, Medicare have replaced patients as paying customers for routine and discretionary care. Thanks to mandated insurance benefits, a pro-insurance tax code, and Medicare and Medicaid, most health plans are prepaid health care rather than insurance. Patients don’t care about prices or lower-cost treatment options. Doctors have an incentive to exaggerate diagnoses that justify costly treatment.

Prices stabilize or decline when patients pay directly for treatment. Examples include cosmetic surgery, refractive eye surgery, and like it or not, abortion. Meanwhile, prices of high-deductible insurance have increased less than comprehensive prepaid plans.

But rather than empowering you as a customer, mandatory insurance further empowers insurers — not just by forcing you to buy their products, but by outlawing affordable plans. It limits co-payments and deductibles and forces you to buy insurance with costly mandated benefits. These controls further block patients from being the customers who doctors and insurers seek to please.

But what about uninsured free-riders? The Blue Book summarizes this flawed “cost-shifting” argument for mandatory insurance: It “prevents the insured population from having to cover” medical expenses of the uninsured. But mandatory insurance imposes a far greater cost-shift by forcing you to buy more coverage than you might otherwise want. This excess cost forces you to add a large charitable donation to your insurance premium.

Echoing a flawed Families USA study, Boulder Congressman Jared Polis’s website says families pay an “annual hidden tax of $1,100 … to cover the cost of the uninsured.”  The study’s flaws include “inflating estimates of uncompensated care” and “disregarding important sources of payment” such as community health centers, government programs, and car insurance, notes Independence Institute economist Linda Gorman.

The actual cost-shift is small: just $85 per insured Coloradan according to a 2007 Lewin Group study. A recent Kaiser Family Foundation report came to a similar conclusion – that the cost-shift is at most “1.7% of private insurance premiums.”

Mandatory insurance increases premiums much more than this by mandating excessive coverage. For example, legal insurance includes costly mandated benefits you may not want. A typical mandate adds 0.75 percent to premium costs, concludes a 2008 study led by MIT economist Amanda Kowalski. HR 3590 (“ObamaCare”) will require everyone’s plan to include at least ten, including preventive care, maternity care, and substance abuse services.

Consider Massachusetts, which has enforced mandatory coverage since 2006. It “has the most expensive family health insurance premiums in the country,” reports the Boston Globe. The least expensive plans in Worcester, MA cost about three times as much as those sold in comparable cities like Fort Collins. The Massachusetts Medical Society reports “long wait times for appointments” and “more practices closed to new patients.”

The Blue Book’s “Arguments Against” correctly note that by 2014 the federal government will enforce a Massachusetts-style mandate on nationwide, and that Amendment 63 could not block this federal law. But Amendment 63 will be critical if the U.S. Supreme Court finds mandatory insurance unconstitutional. The feds may respond by requiring states to enforce mandatory insurance before they can receive federal funds.

Amendment 63 would also protect our right to pay doctors directly for medical care. The Blue Book’s argument says this is “unnecessary” because “no law restricts this practice.”  This argument is silly, as is the related argument that Amendment 63 could impede “current and future health laws and regulations.” This is the whole point of Amendment 63: to prohibit further government abuses of our right to pay for medical care as we see fit

Such arguments evade the core issue: While medical care is not a right, we each have the right to seek it through voluntary exchange with others. This means the tax code should be “medical care neutral” instead of punishing self-insurance while rewarding or mandating excessive insurance. It also means politicians should stop forbidding us from buying more affordable insurance policies sold in other states. This would make insurance affordable for millions of uninsured Americans.  Rather than add to health-damaging political controls that violate our liberty, politicians should repeal them.

This article was originally published in the Boulder Daily Camera on October 3, 2010.