Monday, June 09, 2008

On Mandates in Health Insurance

Barack Obama's health insurance proposal includes mandates for children, meaning that all children must have health insurance, but no mandates for adults. The reason why the latter are missing is probably that people don't like the idea of the government telling them what to do. The seat belt debate a decade ago went along those lines, too: Why should the government be able to determine if I buckle up inside my own car?

I can sympathize with that. But there's an intricate problem in any health insurance proposal which includes these two things:
a) no individual mandates
b) no denying insurance based on pre-existing conditions

Can you figure out the problem? Yup. A rational calculation will suggest to a young and healthy individual that it's ok not buy insurance. You can always buy it when you get sick. That way you save lots of money.

If enough healthy individuals think like that, what will happen? There will be less money in the insurance pool and more of the people covered by that pool will be spending it. All this makes it much more likely that the whole plan will fail.
Added later: Of course Obama's plan is a zillion times better than McCain's plan which is to go on doing what we have been doing to get into this mess in the first place. But should the Congress ever somehow gather the courage to actually try to do something about getting universal health insurance for all Americans that problem about mandates on the one hand and the pre-existing condition on the other must be addressed.