Mandate for Health

The federal judge in Florida who ruled President Barack Obama’s health care program to be unconstitutional has shone a light on one of the peculiarities of the health care system.

The judge claimed that Congress does not have the authority to require people to buy health insurance. Other federal judges have ruled to the contrary, and the question is likely to be settled in the Supreme Court. But resistance to the idea of the coverage mandate points to one of the appealing features of the single-payer system now being contemplated in Vermont.

With a single-payer system, no one is required to buy health care coverage. Everybody is automatically covered. Insurance is no longer the mechanism that provides us, or denies us, health care. Instead, everybody gets health care just the way that seniors get Social Security or Medicare.

President Obama settled on mandated coverage for two reasons. First, he made a political calculation that it would be too difficult politically to create a system that, essentially, abolished most health insurance. The health insurance industry had too much to lose, and opposition to what has been called a “big-government takeover” of health care would have been all the more fierce. So Obama did not push a single-payer system and eventually had to abandon the so-called public option, which would have provided an alternative to private plans. He settled on a program that would require everyone to sign up for insurance, with financial assistance for those who couldn’t afford it.

But in order to make the private coverage system work, Obama had to incorporate a mandate into his plan. This was the same decision made by Mitt Romney when, as governor of Massachusetts, he was fashioning the new Massachusetts plan. Because the new system would require health insurance companies to offer coverage without consideration of pre-existing conditions, policymakers feared that people wouldn’t buy insurance at all until they got sick. And insurance cannot operate that way. In order to spread the risk and the cost, a large risk pool is necessary, which means people must pay into the insurance system even in their younger years when they are well and not just when they get sick. Otherwise, insurance money would continuously flow out with no money flowing in. Without a mandate, it would be like allowing people to wait on buying car insurance until they have had an accident.

So in order to make the insurance system work, people were required to buy in. Two judges have now challenged the constitutionality of that mandate. But the whole issue raises the question of why insurance companies are necessary in the first place.

The single-payer system eliminates the need for insurance companies for most coverage. Companies would still be able to offer supplemental coverage, as they do to supplement Medicare. But everyone would get coverage without a mandate to buy insurance.

There would still be a mandate to pay, but it would have another name. In the case of a single-payer system it would come in the form of a tax. A tax is a mandate to pay that is spread in the broadest way. The proposal put before the Legislature by William Hsiao suggests a payroll tax of 11 percent, split between employer and employee. Such a tax would take the place of insurance premiums, reducing costs, eliminating waste and curbing the pernicious incentives associated with insurance. At the same time, it would serve the same purpose as health insurance, creating the broadest possible risk pool by taxing everyone who is on a payroll and spreading the money around to everyone who needs health care.

It is unknown whether legal, political and economic questions can be resolved in Vermont allowing for the creation of a single-payer system. But constitutional questions about mandated coverage indirectly highlight the irrationality of a system with its own mandate: If you want health care, you are mandated to buy insurance — mandated not by the government, but by the system as it exists. The trouble is no one is mandated to provide coverage you can afford.