Various pundits and Democratic candidates for President have been arguing about ways of bringing health insurance to those who currently lack it. One idea is health insurance mandates—require people to buy health insurance, and subsidize the cost for those who have trouble affording it.
Greg Mankiw today says what I’ve been thinking about this: “a mandate is only as effective as the penalty backing it up.” Auto insurance mandates have not solved the problem of uninsured motorists, and there are penalties for driving without auto insurance and checkpoints for auto insurance coverage (e.g., state motor vehicle inspections) that have no obvious analogy with health insurance.
Imposing penalties for lack of coverage, moreover, would have perverse effects. People who are likely to be fined for seeking medical care without insurance will either try to apply for insurance coverage after they get sick and realize they need medical care or try to avoid seeking care altogether. Now, uninsured people seek care in emergency rooms of public hospitals—an inefficient way of providing them care, to be sure—but, in a system with significant mandates and penalties, they are likely to avoid seeking care altogether. Moreover, if they can’t afford insurance, they probably can’t afford penalties. What then?
There are, no doubt, many people who could afford health insurance but do not have it simply because they are young, healthy, and willing to take the risk that they will not face significant health care costs in the near future. Mandates would incline some of them to buy insurance. But it’s not clear that this effect would be strong enough to outweigh the negatives.