08.31.2009 0

The Barstool Economist: The Economics of Mandated Health Insurance

  • On: 09/30/2009 09:25:31
  • In: Economy
  • The Economics of Mandated Health Insurance

    By Justin Williams

    The status of health care reform, since Congress went on recess, has captured every columnists, pundits, and even economist’s rants and raves. Now that Congress has reconvened, the speculation of what will and will not be in the bill is coming to a close. But one thing is for sure: Congress does not want to leave without some type of government growth.

    The public option quickly became unpopular due to the massive amounts of debt and government intrusion that many were proposing. Senator Max Baucus (D-MT) thought that he could garner bi-partisan support with his mandated insurance plan, but right now it has been lost in a fight over the details.

    Whether or not the plan “cuts too much out of Medicare benefits,” as Senator John Coryn (R-TX) stated to reporters, is salient. But, it’s really the core principle of the effects of a mandated insurance plan will have on the American people is what needs to be in front of the debate.

    Mandates for certain types of coverage are not new, but mandates requiring citizens to buy health care insurance are. Many states have already passed plans, containing some sort of mandates, including Massachusetts under former Republican Presidential Candidate and Governor Mitt Romney.

    So it is no surprise why the Democrats have taken the mandated health insurance route over the public option route, as of late.

    Mandated health insurance is an escape route that government takes for an indirect tax on people’s income. Without raising the income tax, the government mandate will reduce the employee’s wages by the amount it costs for the employer to offer it.

    Lawrence Summers, economist and current Director of Obama’s National Economic Council, wrote in 1989 that after a mandate was put in “A new equilibrium level of employment and wages is reached, with lower wages and employment…” because (unlike government) business cannot just print new money to make up for new costs.

    And that’s not all.

    Paul Hsieh, MD, and founding member of Freedom and Individual Rights in Medicine (FIRM), found in Massachusetts that once mandates were in place the cost to get an insurance plan rose rapidly. This is because the government decides what must be covered in an insurance plan and special interest groups make sure the politicians include everything under the sun. Hsieh states:

    “For example, Massachusetts currently requires insurance plans to include forty-three mandatory benefits, including in vitro fertilization, blood lead poisoning treatment, and chiropractor services – whether or not customers want them. Residents must purchase alcoholism therapy benefits, even if they are teetotalers. These mandated benefits have raised the costs of health insurance in Massachusetts by 23 to 56 percent.”

    Economically, mandated coverage lowers “wages and employment,” while not even controlling cost. It puts more red tape and burden on the small business with penalties possibly including jail time.

    And with Barack Obama’s commitment to eventually getting the United States on a single-payer plan, this individual mandate “compromise” will be nothing but a facilitator of that very plan.

    Justin Williams is the Senior Commentary Editor of ALG News Bureau and, as always, he accepts questions and comments at [email protected]


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