Purchasing Health Insurance: A New Angle on Supply and Demand

July 18, 2007

Here’s an interesting and thought-provoking study. A RAND project finds that cutting insurance premiums by as much as 50% wouldn’t significantly increase the number of Americans with health insurance. This USA Today article doesn’t go into details about methodology, so a lot of questions remain unanswered.

Presumably, even half of today’s high insurance rates represents a daunting number for many of today’s uninsured. If this study is correct, only 2% of those currently without coverage would purchase insurance after a 50% premium cut.

This study will provide fuel to both sides of the health policy debate. Those who support mandates to purchase private health insurance will use it to argue that many of the uninsured are simply irresponsible. Others (like me) will say that universal access to coverage should be either very affordable or free, and that requiring lower-income Americans to give private health insurers a large chunk of their income isn’t a fair solution.

Single-payer advocates can also use this report to reinforce their position, since it suggests that pricing private health insurance to fit middle-class budgets may be impossible.

Len Nichols, an economist USA Today describes as a “centrist,” said this:  ” “The humane thing to do is have subsidies for the low-income, and they’ll buy, and then mandate coverage for the immortals.”  By “immortals,” he’s referring to people who don’t believe they’ll get sick.  That sounds reasonable, except that policymakers in Massachusetts and elsewhere have shown a certain disregard for the real-life financial pressures of the middle class.  The people Dr. Nichols pejoratively calls “immortals” may, in fact, simply be worried about making ends meet.

Until more research is conducted, this study may have something to please – or discomfit – people on all sides of the health reform question.

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