With all the pre-convention rhetoric on both sides of the aisle, the topic of health care reform for now has temporarily taken a back seat to terrorism and other issues. But the ultimate fate of the Affordable Care Act and American health care in general will come under continued debate, whether we talk repeal of the ACA or even more fundamentally whether health care is a right or a privilege. Although I have tended to stay clear of the political debate, I would like to address the role of the coverage mandate. There are three basic tenets with insurance that must be considered in this context:
1. Long term successful pooling and managing of risk requires that all participate. In all forms of insurance over time, the unafflicted wind up paying for the afflicted. For example, I have had homeowner’s insurance for over thirty years and never made a single claim until last year. There was a severe hailstorm and my roof and back yard had significant damage. Put generally, those who purchased home insurance and who did NOT have roof damage paid for mine. It is these unafflicted that contribute to the risk pool and allow the coverage to be ultimately affordable for everyone by spreading the aggregate claims over a large population. The same is true in health care. I have paid for health insurance for over 30 years. For 29 of those years, my only claims were for routine physicals and minor matters. One of those years I required a major surgery and hospitalization. Had I only opted out of insurance for all of the years except that one, think of how much I would have saved! The obvious problem, of course, is one cannot predict when the catastrophic year would occur. There is no crystal ball. All must participate.
2. In the long run, purchasing insurance is a money-losing proposition. In effect, purchasing insurance is betting against oneself. The reality is insurance companies are profitable. By definition, this profit must come from the aggregate premiums exceeding the aggregate claims. So overall, it would be cheaper in the long run for the individual to self-insure. But since the liability for a major medical illness in a given year far exceeds the assets of all but the most wealthy Americans, there is no choice but to pay a “premium” to have this protection. In other areas of liability, for example a piece of jewelry, one could not pay for the insurance and simply hope that the item will not be lost or stolen. However, self-insurance in health care, though economically ideal, is rarely possible for the individual.
3. Not having personal liability insurance can effect others and has social implications, particularly in health care. I suppose I could have opted not to purchase homeowner’s insurance the year my roof was damaged. I would have had to cover the entire repair myself and worst case scenario, I would lose my house. I could go live with a friend. That’s my problem. But sometimes liabilities can have much more far-reaching implications and effect others. As an example, almost all 50 states require some sort of liability insurance in order to drive a vehicle, recognizing the social responsibility of protecting others if they are damaged through someone else’s accident. This is even more true in health care. A catastrophic illness can easily lead to six-figure expenses. If the individual does not have insurance, the care would be provided anyway, and the expense ultimately paid by society. This results in even higher premiums. So like automobile liability issues, the population at large would be effected if I do not have insurance and suffer an illness for which I could not pay. Society ultimately bears my burden.
Bottom line, all three of these issues leads me to support mandated health care participation. The low risk population must continue to participate. If only the sick purchased health care, the premiums would skyrocket and become essentially unaffordable. Likewise, as opposed to my homeowner’s loss, the public would ultimately be responsible for a health claim I incurred but could not pay.
Personally, I believe the most practical approach is to mandate some sort of catastrophic care coverage. That would put any maximal loss into a manageable corridor for the individual patient and at the same time keep everyone’s participation into the risk pool and premiums more manageable. Vehicles like HSA’s could be used to over time build up cash to minimize the risk for the individual in a bad year.
So is health care a right or a privilege? Regardless, it ultimately becomes a societal responsibility, and we must take appropriate ownership.
