On Compulsory Health Insurance

The Boston Globe published this article on January 30th, revealing that, lo and behold, the proposed compulsory health insurance system will require much greater out-of-pocket payments than what was originally thought. I wrote the following back in April, when Governor Mitt Romney first announced the proposed system. I feel the same way today.

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Firstly, the comparison between compulsory health insurance and compulsory auto insurance is just plain wrong. Auto insurance can be justified by the fact that driving a car is, at least nominally, a choice that someone can make. (Whether a choice really exists for people living in low-density areas not served by public transportation is another issue.) When you choose to register an automobile, you know that you will have to obtain insurance for it, and it is a factor that figures into your cost-benefit analysis. On the other hand, the responsibility to obtain health insurance under Gov. Romney's plan vests as soon as you are born, or at least upon your eighteenth birthday -- something over which you have ABSOLUTELY NO CHOICE.

This plan amounts to nothing more than a tax, and it is a simple head tax, the likes of which do not exist elsewhere in the world of American government. You buy a house, you know that property taxes will be due. You buy retail goods and you know that you will have a sales tax to pay. You get a job and you know that the government will collect some portion of your income as taxes. While we can argue whether these choices are actually legitimate choices in practice, economic modeling shows that sales tax and income tax levels do affect how much people spend or work. In contrast, this health insurance tax accrues based on a decision that took place in the past, which people have no legitimate means to change. The essence of the American taxation system is that it is nominally elective, meaning that a person can adjust the amount of taxes he pays by adjusting his relevant activities accordingly. In this situation, the vital element of free will has been suffocated.

Secondly, this plan smacks of corporate handouts. Ideologically, and at the risk of being sacreligious, a Hillary Clinton-style universal health plan administered by the government (assuming that it would be managed in the most efficient manner -- a major assumption for sure) is more pure than the Massachusetts system. Political arguments notwhithstanding, a tax imposed and collected by the government in exchange for certain social services is ideologically legitimate. By contrast, a tax imposed by the government but collected by a third party private interest raises issues of the government abdicating its responsibilities to the private sector.

Government social services are compulsory -- you are taxed for them and you receive them, whether you like it or not, and the government does not make a profit. They pay out in benefits all of what they take in as tax revenues. Private services are optional -- you can choose whether you want to receive the benefits by paying for them. The firms will collect a profit on your purchase, but if the price they offer is worthwhile, you will pay it. Firms will set their price at a level that will generate utility for consumers. In the Massachusetts system, a line has been crossed. We are now forced to line insurance companies' pocketbooks under penalty of law, whether or not we feel the price they set is worth the benefits we receive. This insurance has become a completely inelastic good and people will have to take any price the insurance industry sets. Sure, the various insurance companies will remain competitive with one another, but one need look no farther than the oil companies to see what can happen when a little implicit collusion takes place. Rest assured that the Massachusetts insurance industry is celebrating a huge windfall today.

Finally, I take issue with the government telling me that I need to mitigate my risk. As a 25-year-old male in good health with no chronic medical conditions, no need for eyeglasses, and no regular prescription medications, a retail health insurance policy is a bad deal for me. I'm willing to take the chance of ending up in the hospital, and if I do, then I've lost my bet and I'll pay the bill. This compulsory insurance system is socialism, since healthy folks like myself will be forced to contribute to insurance plans that subsidize those who receive extensive medical treatments. I might even have less incentive to keep myself out of the hospital under the new system.

I found the initial proposal by Governor Romney more palatable. Originally, a patient who entered an emergency room and did not have insurance would be signed up for a state-based program with paycheck withdrawals, unless they could pay the bill themselves, thus preserving people's free will to decide whether or not they want to participate in an insurance scheme. In the current plan, that remaining element of free will has been wiped out. Frankly, I find it despicable that a REPUBLICAN governor positioning himself for a presidential run would impose a socialist insurance system, seizing people's rights to make their own decisions on how they want to plan for their future health care needs and imposing mandatory participation in an insurance scheme controlled by profit-making private actors.