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Although Democrats favor an individual mandate as part of health reform, Merrill Goozner notes that a Republican Congress passed a “voluntary” Medicare Part D drug program with its own mandate. The program charges one percentage point increase in the premium for every year the senior stays out of the program. This lead Goozner to conclude the following:
Tags: Mandates
If California were to enact a mandate for insurance companies to cover certain services, how much would this cost? How would it affect public health? Would utilization change?
To answer these questions, the California legislature charged the California Health Benefits Review Program (CHBRP) to estimate the medical effectiveness, public health and cost implications of proposed health benefit mandates. A paper in Health Services Research discusses the methods used to evaluate these potential mandates. In particular, legislators want the following two questions answered:
The data sources used to answer these questions include:
These reviews estimate not only the short term impact of a mandate, but also the long term impact. For instance, if a certain mandate increased utilization in the short run, costs likely will rise. If the increased utilization improves patient health in the long run, however, costs may decrease over a longer time horizon due to decreased hospitalization rates.
Health insurance mandates increase health insurance cost. By compelling insurance companies to cover certain medical treatments, cost inevitably rise. Of course the people who receive these treatments benefit while those who do not must pay additional premiums. A recent paper by the Pacific Research Institute summarizes the findings of various studies of the impact of mandates on health insurance premiums.
Of course, the actual mandate will affect the increase in premiums. For instance, a mandate to cover one specific vaccine likely would provide only a small increase in premiums, especially since many insurance policies would already cover this treatment. On the other hand, a mandate to cover all forms of cancer treatment for all types of cancer likely would drive up premiums significantly. What one can conclude from the above studies is that mandates do increase cost. The degree to which health insurance premiums increase, however, is not a settled matter.
Tags: Health Insurance, Mandates, Premiums
The health reform bills currently propose introduce health insurance subsidies for individuals who do not qualify for health insurance provided by the government. The goal of these subsidies is to make health insurance more affordable for the lower and middle class. The subsidies gradually decrease for higher income levels.
In “Obama’s Prescription for Low-Wage Workers,” Michael Cannon notes that one also can see these subsidies as increasing the marginal tax rate. For instance, let us John makes $16,000 and has a 25% income tax rate. Under the new health reform bill, John would also receive a subsidy to purchase health insurance. Let us assume the subsidy is $5000. Thus, his after tax income is $17,000 [(1-.25)*16,000+5000].
What happens if John has the option to work at a new job that pays him $20,000? Of course, he will earn more income but his health insurance subsidy will also decrease. If the health insurance subsidy decreases to $3,500, then his after tax income in your new job is now $18,500 [(1-.25)*20,000+4000]. Although John’s gross income increased by $4000 when taking the new job, his after tax income only increased by $1500. This is in a marginal tax rate of 62.5%. In fact, Mr. Cannon’s research finds that mandates and subsidies impose effective marginal tax rates on low-wage workers “averaging between 53 and 74 percent.” When marginal tax rates are high, extra hours worked lead to a smaller increase in after-tax income. Thus, the labor supply decreases.
One thing Mr. Cannon ignores, however, is the current Medicaid poverty trap. Poor individuals are eligible for Medicaid. However, if they get a better job paying them more money, they may lose their Medicaid eligibility. Poor individuals may refuse to take better paying jobs to keep their Medicaid coverage.
Once the subsidies are implemented, however, poor individuals will be more likely to take a better-paying job since they can receive subsidies to buy private health insurance even if they lose their Medicaid coverage. The high marginal tax rates are more likely to affect the labor supply of the lower-middle class and middle class individuals. These individuals are in the same scenarios as John is above. Higher pre-tax earnings will not necessarily translate into significantly larger after-tax earnings. I predict that the higher marginal tax rates Mr. Cannon mentions will decrease the labor supply most for individuals in the middle class.
Tags: Health Reform, Mandates, Marginal Tax Rates, Subsidies, Taxes
Cato Institute Senior Fellow Michael Tanner is not a big fan of some health care reforms that are being proposed. He reviews recent health reform proposals in his Obamacare article. I review a few of his arguments below.
Source: Tanner, Michael D. (2009) “Obamacare to Come: Seven Bad Ideas for Health Care Reform” Cato Institute Policy Analysis no. 638.
Tags: Cost Effectiveness, Mandates
A recent paper in the May 2008 edition of the Journal of Health Economics by Carpentera and Stehr finds that mandatory seat belt laws save lives.
“…we find consistent evidence that state mandatory seatbelt laws – particularly those permitting primary enforcement – significantly increased seatbelt use among high school age youths by 45–80%, primarily at the extensive margin. Unlike previous research for adults, however, we find evidence against the selective recruitment hypothesis: seatbelt laws had consistently larger effects on those most likely to be involved in traffic accidents (drinkers, alcohol-involved drivers). We also find that mandatory seatbelt laws significantly reduced traffic fatalities and serious injuries resulting from fatal crashes by 8 and 9%, respectively. Our results suggest that if all states had primary enforcement seatbelt laws then regular youth seatbelt use would be nearly universal and youth fatalities would fall by about 120 per year.”
So should we implement mandatory seat belt laws? From the evidence in their paper, Carpentera and Stehr believe so. However, is this issue truly so clear cut?
One question is whether or not mandatory seat belt laws really caused increased seat belt use. Did the seat belt laws cause increased seat belt use or did increased seat belt use lead to the increased popularity and passage of a law?
This paper is important in that it quantifies the benefits of the mandatory seat belt laws, but does not quantify the costs. What is the cost of enforcement in terms of 1) time law enforcement must dedicate to seat belt policing instead of “real” police work? and 2) the cost to the justice system and work absences due to the adjudication or appeals process for seat belt violation, and 3) the violation of a person’s individual freedom to choose to not wear a seatbelt. In this case, there is no externality to not wearing a seat belt; the person harmed from not wearing a seat belt is that person themselves. A libertarian would be strictly against a mandatory seat belt law. Nevertheless, a compelling argument can be made that minors do not use an optimal decision-making process when deciding whether or not to wear a seat belt.
Do I support a mandatory seat belt law? No.
I believe that parents should help to convince their child to use seat belts and that it is possible that schools should educate children on the benefits of using a seat belt. However, using police resources to fine individuals who do not wear seat belts seems to be a waste of resources. If mandatory seat belt laws are not enforced, then this would free up police resources, but also would weaken the impact of mandatory seat belt laws.
Seat belt save lives. But I think parents and schools–not the government–are the best institutions to spread this message.
Tags: Mandates, Seat Belts
Merrill Goozner has an interesting post (“Unfair and Unbalanced Wonkery on Mandates“) arguing that insurance mandates aren’t good policy (I agree with him on this).
For the record: I’m opposed to mandates for two reasons. First and foremost, they’re bad politics. Americans don’t like to be told to do anything. They especially don’t like unfunded mandates.
That leads to point two. Without sufficient taxes on businesses that don’t provide insurance to their employees and/or significant savings from health care cost control (not likely given the opposition of insurance companies, drug companies, hospitals, doctors, and other providers in the system), mandates will result in inadequate plans for the uninsured — catastrophic plans that still leave the newly insured at the emergency room door for basic care and without preventive services. Higher taxes are a prescription for political failure. Lousy plans maintain the status quo in public health. Some choice.
The rest of the Goozner post argues that a single payer system is not socialized medicine. While it is true that physicians are not directly employed by the government in a single payer system, since the government is paying all physicians salaries–especially if the physician has not outside options to receive payment from another source–I would say that a single payer system is de facto socialized medicine.
Tags: Mandates
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