Medical insurance is not like auto insurance
April 18th, 2008 | by Brian T. Schwartz |Earlier this month the Denver Post editorial board has supported Senate Bill 217, which would make it a crime not to buy politician-approved health insurance. The bill, the editors say, is "patterned after the path blazed by Massachusetts under Gov. Mitt Romney by mandating health insurance for citizens who now lack it, just as motorists are required to have automobile liability insurance."
For now, let’s overlook how the Massachusetts plan is blazing into failure, as summarized by Dr. Paul Hsieh’s guest commentary in the Post. It’s time to blast the analogy of mandatory health insurance to mandatory car insurance to pieces.
There are several reasons why this analogy is false.
1. Mandatory auto insurance isn’t a permission to live
Fred Barnes of the Weekly Standard points out that the auto insurance analogy
collapses at the outset because it’s not a universal mandate. No one is forced to buy auto insurance. Only those who drive are required to. Many of them don’t bother or can’t afford insurance and drive anyway.
(Hat tip: FreeMarketCure.com )
2. Health insurance insures against harm to you own body, not others.
Greg Scandlen of Consumers for Health Care Choices writes that for mandatory auto insurance,
"the only part of the coverage mandated in most states is the damage you might do to other people and their property. You are not required to insure for the damage you do to yourself or your own car.
In a letter published on the Denver Post’s website, Jeffrey McCoy of Boulder expresses the same idea.
3. State regulations on health insurance drive up costs.
Barnes continues :
Unlike health insurance, there’s a national market for auto insurance. You can buy a cheap policy from an out-of-state company. You can buy only liability and not collision. If you have a history of safe driving, you get a large discount. This flexibility isn’t the case with health insurance. A healthy young man in Kentucky could pay $960 for a policy that would cost $5,880 in New Jersey. The company couldn’t sell the cheaper policy in New Jersey.
The Congressional Budget Office reports that these and other mandates can increase premiums by "ten percent or more." State Representative Cory Gardner recognizes this, and proposed House Bill 08-1327 to remedy at the state level. Unfortunately, it’s "postponed indefinitely " in the House Committee on Business Affairs and Labor.
4. What if auto insurance were like our health "insurance"?
If auto insurance were like car insurance, politicians would require auto-insurance policies to cover the installation of life-saving anti-lock brakes — just as they want to force health insurers to cover life-saving vaccinations. As in medical care, customers wouldn’t care about price, so garages wouldn’t need to keep prices down. Just as doctors may not know the cost of their procedure, neither would the mechanics!
If auto insurance were like car insurance, most of us would buy it through our employer. Why? Our tax code allows employers spending on employee insurance to be tax deductible, but you can’t make the same deduction yourself if your employer offers insurance.
Don’t like your employer’s car insurance? It’s easy now: just go on-line and find a new one. But if car insurance were like medical insurance, and you got it from your employer, tough. You’re stuck with it unless you change jobs, or buy it your own and take a tax penalty. The car insurance companies would know this. Because they wouldn’t be competing directly for your business as they do now, quality would plummet.
My first published article on health insurance was a satire on this subject.
5. And if for whatever reason you still like the analogy of car insurance with health insurance, how effective are mandatory auto insurance laws? Consider what the Cato Institute’s Michael Tanner has written on the subject.
But government’s record of enforcing insurance mandates has not been an overwhelming success. For example, 47 states have laws mandating that drivers purchase automobile liability insurance. Yet roughly 14.5 percent of drivers in those states are uninsured. In some states, such as Texas, the uninsured motorist rate runs as high as 18 percent. As many as 25–30 percent of Los Angeles drivers are uninsured. By comparison, in the three states without mandatory auto insurance, roughly 15 percent of drivers are uninsured. Thus, it would appear that, despite penalties that can run from loss of license to fines as high as $5,000 or even the impounding of vehicles, millions of American drivers have chosen to ignore the mandate.16 In fact, millions of Americans purchase “uninsured motorist” coverage to protect themselves in an accident in which the other driver is uninsured. It is also interesting to note that the percentage of drivers uninsured despite a mandate is roughly the same as the percentage of Americans who don’t have health insurance.
