Thursday, June 14, 2007

Can We Control Health Care Costs Without Universal Coverage?

My good friend, Joe Paduda, over at his blog, "Managed Care Matters" has responded to my recent post: The Mandate Myth--Health Reform Plans Don't Have to Mandate Coverage to Work But They Do Have Be Affordable.

Joe has made the point that it might be important to mandate coverage in order to prevent cost shifting. He is pointing out that unless we mandate that everyone is in the health care insurance pool we will have some people refuse to pay their fair share. That would result in their getting a free ride and the rest of us having to pay higher prices to offset the uncompensated care many of these people would receive.

In my post, I made the point that there are a number of examples of very successful health plans getting a sufficient cross section of risk even though their participation is completely voluntary. Most self-insured employer plans, for example.

Joe raises a very different, but related, point having to do with equity and every single citizen paying their fair share to get the system to its most efficient level.

A health care system with absolutely every person in the pool will be cheaper than one where maybe 10% of the people are looking for a free ride. But, even with 10% of the people on the outside, an insurance system will have an adequate spread of risk to be viable. In fact, the old underwriting rule is that you need 75% of those eligible to get a workable spread of risk.

In today's health care debate, there are those who believe everyone should be required to be in the health insurance pool and there are those who believe in the principle of individual responsibility and choice. John Edwards has proposed an individual mandate and Barack Obama has not, for example. Most Republicans strongly believe that choice, including the freedom not to choose, is very important to any future health care system.

My only point is that an insurance system can work under either principle--a mandate or no mandate. Joe takes it a step further raising the equity issue--a valid point.

I will leave you with three conclusions:
  • While a mandate leading to 100% participation will make the system lower in cost, a voluntary system that attracts almost everyone with affordable health care costs will come very close to achieving the same premium levels. We have learned this over and over in the benefits business through the years.
  • I don't want to see us fail to agree on how to reform the system over the mandate issue.
  • The much bigger issue is affordability. The relatively insignificant incremental improvement in cost from going from covering 90% of the people to covering 100% via a mandate is small compared to the other things driving health care costs so high in the first place.
As Massachusetts is learning, whether to mandate or not is a moot issue if you can't get the cost of health insurance down to something the consumer can afford.
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