A Stitch in Haste

The Massachusetts Legislature has passed a bill that would make health insurance compulsory in that state:

Gov. Mitt Romney (R) supports the proposal, which would require all uninsured adults in the state to purchase some kind of insurance policy by July 1, 2007, or face a fine.
...
Romney said the bill, modeled on the state's policy of requiring auto insurance, is intended to end an era in which 550,000 people go without insurance and their hospital and doctor visits are paid for in part with public funds. "We insist that everybody who drives a car has insurance," Romney said in an interview. "And cars are a lot less expensive than people."

This is, of course, utter nonsense.

The states that require auto insurance require liability insurance, in case you harm others. Health insurance by definition is to provide coverage for yourself. Health insurance and auto insurance are actually polar opposites.

The proper analogy to the Massachusetts proposal is not liability insurance, but collision insurance — which, to the best of my knowledge, no state requires. If you want to take your chances with your vehicle, then that's your choice. Why should the government force you to do otherwise? What's not your choice is taking chances with my vehicle if you collide with it. You are required to have insurance to protect me, not yourself. (So-called "no-fault" insurance doesn't change the underlying analytical framework either — the point of auto insurance is to reimburse for damage you cause to others, even in a no-fault regime.)

So should it be with health insurance. Insurance for your body should be strictly voluntary, just like collision insurance is for your vehicle.

The externalities you impose on me by crashing into my car are your own doing. The externalities the government creates by the current swamp of publicly-subsidized health care is the government's own doing — exactly the opposite of the auto insurance paradigm. And now the Massachusetts government is "coming to the rescue" by making people pay through premiums for what they're already paying for through taxes, to correct a gap that the government itself created? This is somehow a noble, efficient or brilliant central-planner solution? Why doesn't the Massachusetts Legislature simply outlaw diseases and be done with it?

Any legitimate attempt at health care finance reform has to start at the beginning — the perverse practice of giving favorable tax treatment for health expenditures to employers rather than to employees. Get employers out of the health care benefits business altogether, raise worker pay by the value of the benefits now provided, make all healthcare expenditures — whether directly to providers or indirectly to insurance companies — tax deductible or perhaps even tax exempt. And then have health insurers start directly competing for policyholder dollars (rather than competing indirectly for employer dollars). That last point is, perhaps ironically, the real way that health insurance should be "just like auto insurance."

More thoughts from Coyote Blog, Rolling Doughnut, Below the Beltway, Marginal Revolution.