Massachusetts made news and history Wednesday when its governor signed into law a bill making it the first state in the nation requiring everyone to obtain health insurance. The real breakthrough will come if it ever figures out how to pay for it.
Universal health coverage is a tempting notion. It's so tempting that the whole country, including Montana, would already have universal coverage if it really made economic sense. But it's kind of like the proverbial free lunch - it sounds better to most people before they find out what it really costs.
The health care system in America is a mess: Most people have insurance provided by employers, with coverage, deductibles and co-pays all over the map and changing constantly. Government employees generally enjoy some of the best coverage, paid for by taxpayers - many of whom can't afford insurance for themselves. Some 45 million people have no insurance. Those who can't afford to pay their bills directly wind up shifting their expenses to others, driving up the cost of insurance and making insurance unaffordable for ever more people. Tens of millions of other Americans have extensive coverage through tax-funded Medicare and Medicaid, the cost of which is controlled by government limitations on payment for medical services, often resulting in cost shifts - you guessed it - onto those with private insurance. The Rube Goldberg nature of the American system surely makes most people amenable to alternatives. But there's such a thing as going from bad to worse.
The fundamental reason people don't buy insurance on their own and why employers don't provide it is cost. It's just too expensive for some. Legislatures or Congress could mandate insurance coverage, but they can't make it affordable.
America has universal health care, just not universal coverage. That is, anyone who seeks medical care generally gets it. If people can't pay the bill, someone else winds up paying it. The seductive idea of universal coverage mandates is that, when everyone has insurance, the inefficient cost-shifting will end and health care supposedly will become more affordable.
But the reality is that people without health insurance generally self-ration. That is, most don't go to the doctor or hospital unless it's absolutely necessary. This actually increases the cost of health care, since by the time they make it to the doctor, they're sicker and harder to treat.
If everyone has insurance, some of that inefficiency and added cost might disappear. But there's almost certainly going to be an increase in utilization as well. One of the downsides of health insurance is that it creates the illusion that somebody else is paying. In the case of Massachusetts, somebody else may well be paying. It's just human nature to spend more freely with somebody else's money than with your own. This is where the car-insurance analogy used in Massachusetts falls apart: People have great incentive not to get in auto accidents, even though their liability is insured. However, people who have health insurance actually have greater incentive to obtain health care.
Americans now spend about $1.9 trillion a year on health care. That works out to nearly $6,300 annually for every man, woman and child in the country or 16 cents out of every dollar in the economy. According to the National Coalition on Health Care, that cost is projected to rise to $4 trillion a year by the end of the coming decade. That's the cost under the current system, where people with no insurance and high deductibles limit their use of the system.
The only way mandating insurance could work without costing more would be to make it a zero-sum proposition. That is, provide insurance for everyone but also ration access - forbid people from obtaining certain health care services. That's a can of worms nobody in America seems to want to open.
It'll be interesting to watch how Massachusetts' grand experiment unfolds. Frankly, health care is a such a complicated, expensive headache that we'd love to be proved wrong in our doubts. But it seems a safe bet that the more affordable health care seems to people, the more they're going to use.
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