Imagine if the government passed a law requiring that any automobile sold in the United States had to be outfitted with a GPS navigation system, satellite radio, heated leather seats and a gasoline-electric hybrid engine. Such a scenario would mean that only the wealthy would be able to afford cars.
Sound far-fetched? In the lunatic world of America's health insurance market, though, this kind of political micromanagement is a troubling reality. And it is a primary reason many people can't afford health insurance.
Across the country, every state requires insurers to cover certain medical services and providers. They vary from the essential — such as emergency room visits — to the relatively less so — such as acupuncture, massage therapy, and pastoral counseling. And the number of these requirements — known as "mandates" — runs from a low of 14 in Idaho to a whopping 63 in Minnesota. (Michigan is below average with 26 mandates.)
When a state government requires all insurance policies to cover non-essential services such as "chiropodists" and "naturopaths," it drives up the costs for everyone — by as much as 50 percent, according to some estimates.
In the 10 states with the greatest number of mandates, it costs a family about $2,100 more a year to purchase insurance than it does in the 10 states with the fewest.
Consequently, low-income Americans get priced out of the market, just as they would if the government required everyone to buy high-end cars.
Forcibly expanding the scope of basic insurance plans might be a great deal for special interest medical professionals, but it does so at the cost of forcing millions of people to pay for procedures they wouldn't otherwise use.
In Massachusetts, for example, a pre-retiree struggling to buy coverage must nonetheless insure against the need for a bone-marrow transplant, even though the medical value of this highly expensive treatment is disputed. In California, men are required to carry insurance that covers breast reconstruction, mammograms, and maternity stays.
Scaling down these mandates would lower the price of insurance and give millions more people the option to purchase coverage.
The rules fall hardest on those least able to afford them, particularly small businesses and individuals buying health insurance in the open market. Big companies and other firms that have the resources to "self-insure" can escape these state mandates.
In addition, firms that can't self-insure are subject to many other regulations that over-eager state legislators have passed that drive up costs, particularly rules that tell insurers they must sell policies to people even if they wait until they are sick to buy coverage.
One way to escape all of these expensive mandates and regulations would be for Americans to be allowed to purchase health insurance policies from insurers in states that have more sensible health policy regulation. For years, Congressman John Shadegg (R-Ariz.) has been promoting legislation that would allow Americans to do just that, but his proposal hasn't generated much support so far.
That's a shame. With Shadegg's bill, Americans would have the freedom to shop around for the plan best suited to their specific health needs — as opposed to being stuck with an expensive one-size-fits-all policy dictated by local lawmakers.
Plus, creating a national insurance market would increase competition among insurers for customers. That could mean better policies for lower prices.
Allowing individuals to purchase insurance across state lines would also enhance competition among states. All states regulate health insurance, so consumers would still have protections. But states would have a greater incentive to balance their regulatory regimes against costs.
Calling for a reduction in the number of health insurance mandates will never grab quite as many headlines as a promise to deliver "universal coverage." That's why presidential contenders avoid this commonsense proposal.
But as Sen. Barack Obama recently explained, "The reason Americans don't have health insurance isn't because they don't want it, it's because they can't afford it."
In other words, the way to get people to buy insurance is to lower costs. It's the same way with cars. Lawmakers know that not everyone can afford a Lexus or a Prius, but state legislators have locked them into buying high-end health insurance — or going without.
When they look for solutions to the rising number of uninsured in their states, lawmakers might first consider undoing the damage they have done to make health insurance so expensive in the first place.
Grace-Marie Turner is president of the Galen Institute, a nonprofit research organization focusing on free-market solutions to health reform in Alexandria, Va. Reach her at email@example.com.