Let Them Eat Cake? Economist Says Ditching Mandates Is Good Medicine

Individual mandates – requirements that consumers purchase health insurance – is all the rage in the states.  However, some, including the folks at the Cato Institute, don’t like this policy prescription very much.  In a column published in this week’s BusinessWeek, Glen Whitman, an associate professor of economics at California State University, Northridge, had this to say:

“Politicians across the spectrum have tried or vowed to solve America's health-care woes by enacting an individual mandate – a law requiring every adult to purchase health insurance.  Despite its bipartisan support, the individual mandate is bad policy, a vain attempt to command a better result while doing nothing to achieve it.”

He also does not like laws that require insurance companies to provide minimum levels of health coverage, saying:

“Even now, every state has a list of benefits that any health-insurance policy must cover--from contraception to psychotherapy to chiropractic to hair transplants.  All states together have created nearly 1,900 mandated benefits.  Of course, more generous benefits make insurance more expensive.  A 2007 study estimates existing mandates boost premiums by more than 20%.”

His solutions include:

-Remove mandates for minimum coverage that increase insurance premiums. 
-Allow insurance companies to offer lower-priced policies to customers so that they can pick and choose the benefits they want.

This sounds simple enough.  However, Whitman is also saying something else – albeit subtly:  “The healthy should not be forced to subsidize the sick.  If you have a chronic condition, you will use more healthcare services and should be forced to pay higher premiums. 

Is Whitman telling the chronically ill to eat cake?  Or, is he on to something here?  If enacted, will Whitman’s plan force other changes that will enable consumers to make better healthcare decisions?  If you were forced to pay higher premiums because you engaged in unhealthy behaviors would you choose to be insured or simply change your actions? 

Let me know what you think.