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What's our collective desire on individual mandate?

December 17, 2010|David Lazarus

What part of the insurance business do opponents of healthcare reform not understand?

That's a question I frequently ask myself when I hear people complaining about a requirement that almost everyone buy coverage in return for insurers not being able to turn anyone away, regardless of medical condition.

This week, a federal district judge in Virginia ruled that the so-called individual mandate is unconstitutional because Congress overstepped its bounds in approving the requirement.

Judge Henry Hudson, who was appointed by President George W. Bush, ruled that an individual mandate exceeds the regulatory authority granted to Congress under the commerce clause of the U.S. Constitution.

The Obama administration said it will appeal Hudson's decision, setting up a showdown in the Supreme Court.

I understand why the idea of an insurance mandate is troublesome to some people. Any time the government says you have to do something, it goes against the grain of good old-fashioned, don't-tread-on-me, live-free-or-die American values.

But here's the thing: If we want to rely on private companies for our health insurance, and if we want them to cover everyone, then we need to spread the risk as widely as possible to keep costs down.

"You have to have a mechanism to get healthy people into the risk pool along with sick people," said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan Washington think tank.

"If you don't," he said, "people will just wait until they get sick before being covered. That will cause premiums to go way up."

Higher premiums, in turn, would deter more people from buying insurance, and before you know it, we're back where we started, with millions of people lacking coverage.

Worse, insurance companies might decide there's no upside to having to provide coverage to anyone who asks, and they might stop offering individual insurance altogether. That would leave us even worse off than we are now.

About 50 million U.S. adults were without health insurance for at least part of the last year, according to a recent report from the U.S. Centers for Disease Control and Prevention.

The healthcare reform package spearheaded by President Obama wouldn't remedy that. At best, it would extend coverage to about 30 million people now lacking employer-based insurance.

But that's a big step in the right direction.

A poll last month by the Kaiser Family Foundation found that 71% of voters favor the provision in the reform package that would prohibit insurers from denying coverage to people with preexisting conditions or other medical issues.

Most Americans clearly believe people have a right to insurance. Yet that same poll finds a nearly identical percentage of voters — 68% — are against the individual mandate.

It's a classic case of wanting a puppy as long as someone else walks it twice a day and cleans up after it. So let's cut to the chase.

To extend insurance to the broadest number of people for the lowest possible price, you have to spread the risk equitably among those who probably will be taking advantage of coverage and those who will not. In the case of healthcare, that means having both sick and healthy people in the risk pool.

That's how insurance works (along with sufficient regulation to ensure fairness).

"It might sound un-American to make it compulsory," said Alain Enthoven, a professor emeritus at the Stanford Graduate School of Business who served as a consultant to the Carter administration on healthcare issues. "But one way or another, you have to have everyone in the system."

An individual mandate accomplishes that, but it's not the only way. Instead, we could do what Medicare does: The government-run insurance system charges higher premiums if eligible participants put off enrolling in the program.

So, yes, we could allow people to wait until they become sick before they purchase health insurance, but such people would be required to pay significantly higher premiums than if they had signed up while still well.

A key problem with this approach, however, is that it would probably make insurance even less accessible for lower-income people, thus exacerbating current problems.

A third approach would be to expand the Medicare system to include everyone, with costs met by tax dollars rather than monthly insurance premiums. I've long believed that this is the most effective and efficient way of creating universal health coverage.

But for reasons I can't begin to fathom, many Republican lawmakers who receive their health insurance through the government, and many conservatives who eagerly participate in the Medicare and Social Security systems, believe a "public option" would be tantamount to socialism.

So here we are.

The United States, for better or worse, is committed to a private-sector-run, employer-based health insurance system. Yet we face the extraordinary problem of 50 million people without insurance.

People who find that unacceptable — and I believe that's everyone — will need to come around to the idea that insurance basically means safety in numbers. It would be nice if everyone would just voluntarily participate in a system that ensures coverage for all.

But that's not going to happen.

That's why mandates aren't just smart. They're essential.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

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