The uninsured cost-shift scam
May 5th, 2008 | by Brian T. Schwartz |When is it OK for someone to confiscate $400 from you each year, and claim that it’s the moral thing to do, because it saves you $85? Typically such scam artists would end up in prison. But in this case, the perpetrators are Colorado politicians and the backers of Senate Bill 217 (news ). This bill tries to smuggle compulsory insurance into Colorado, hence making it a crime for Coloradans not to buy insurance approved by politicians and the special interest groups they pander to.1
One of the popular justifications of compulsory insurance is the "cost-shift from the uninsured" and that forcing everyone to buy insurance (defined by politicians, of course) would make individuals "responsible ."2 The story is that the uninsured get medical care without paying, which increases premium costs for the insured. So why not simply force everyone to buy insurance?
First off, it’s a non sequitur. As I’ve written before ,
holding people "responsible" would mean punishing freeloaders themselves and allowing providers to prevent freeloading. … What if we applied this rationale to freeloaders who leave restaurants without paying the bill? This certainly increases prices, but forcing all citizens to buy "diner’s insurance" punishes the innocent.
And even worse, how much is this cost shift anyway? And how much is it compared to proposed health care reforms? As the following video shows, it’s just $85 annually per privately-insured resident.3,4 That’s just one percent of an average premium.5 Mandated benefits laws increase premiums by at least 6%, and possibly more than 10%!
Worse yet, as I write below the video link,6 health care reform plans to remedy this are budgeted to cost each insured Colorado resident at least $400 per year!
The compulsory insurance proposal (with tax-subsidized premiums) by Colorado’s Blue Ribbon Commission on Health Care Reform would cost taxpayers more than $1 billion annually. Senator Bob Hagedorn’s Senate Bill 217 is similar. It would cost taxpayers $1.23 billion per year, reports the Rocky Mountain News. This tax would exceed $400 per privately-insured Colorado resident.
References :
1 "…once politicians force you to buy something, special-interest groups will constantly fight to include their pet service as part of the forced package, whether you want it or not. The result will be continual pressure to expand the scope of the forced insurance and make it ever more costly." - Ari Armstrong . For the costs of these mandated benefits, see this post .
2 Examples of using the cost shift argument to support compulsory insurance: Bob Hagedorn (April 9, 2008), Representative Anne McGihon (1:46 in this video ), the Blue Ribbon Commission on Health Care Reform (Final Report , page 67-8)
3 Blue Ribbon Commission figures: Colorado Baseline Coverage and Spending , slide 20. (local copy )
4 Number of privately-insured residents of Colorado: about three million .
5 Average insurance premium in Colorado: see this spreadsheet .
6 See also: Linda Gorman and Ari Armstrong, "A Very Costly Health-Care Solution ," Rocky Mountain News , January 28, 2008.
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