Mandates vs. Single-Payer, Taxes vs. Subsidized Premiums

January 10, 2007

Ezra Klein writes “I’m hearing a lot of hating on the individual mandate — and I don’t get it.”

Ezra quotes some heated rhetoric about mandates as “criminal penalties,” then adds: “Single-payer health care is an individual mandate. The enforcement mechanism, in that case, is taxation.” That’s a good point, and he’s right that the language on this issue has gotten somewhat inflamed. On the other hand, he doesn’t address the more substantive objections to the mandate approach.

Although proponents of single-payer cover don’t always put it in these terms, I would say they have two main problems with mandates:

  1. Mandated coverage is a form of regressive taxation. The “mandated coverage” approach provides premium subsidies for low-income families and individuals, but it’s capped in all cases at a multiple of the poverty level. Above that point the premium will be relatively insignificant for high earners, but those at the lower end will bear a burden that’s proportionately much higher.
  2. Mandates use private insurance plans. Mandated coverage requires everyone to buy insurance from private health plans. Single-payer proponents argue that this is, in effect, forces lower-income Americans to subsidize for-profit health insurers. They would further argue that private health plans are costlier and less efficient than public programs.

Ezra suggests that plan critics focus their attention on the level of subsidy offered by each of the mandated-coverage plans. It’s a reasonable point, but it won’t satisfy those who use the regressive-taxation argument, or those who want a single-payer system because they believe it will be less costly.

Would the regressive-taxation argument be addressed by a plan for sliding-scale premiums based on taxable income? And is a plan like that practical?

As for the argument that public systems are less costly, there’s evidence to support that position. But – there is also reason to believe that a single-payer system in this country would have a number of unintended consequences, including an even more dramatically two-tiered health system than we have now. The economic relationship between private and public insurance in this country is more complicated than many people realize, and that part of the debate hasn’t gotten enough attention.

There may be an opportunity for a hybrid approach that integrates the public health financing system with some elements of “mandated coverage” and the private health sector, in a better way than has been done to date. I’ve been pondering that for a while and will write more shortly.

In the meantime, Ezra’s piece is well worth a read.

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