Michael Tanner lays out most of the problems with Arnold Schwarzenegger’s disastrous healthcare reform plan. But I want to point out a problem Tanner doesn’t mention. Aside from the bad economic incentives created by the plan, we should also pay attention to the bad political incentives.
Any healthcare plan that requires people to buy health insurance (whether individually or through their employers) has to define a minimum set of benefits a qualifying insurance policy must cover. Ideally, the benefits package would be spare, covering only catastrophic care with a high deductible. But politically, that won’t happen. Health care providers of all varieties will have a strong incentive to make sure the services they provide will be included in the mandatory package. Psychotherapists will lobby for the inclusion of mental health services. Cosmetic surgeons will lobby for the inclusion of hair transplants, tummy tucks, and liposuction. Pharmaceutical companies will lobby for the inclusion of erectile dysfunction drugs, weight-loss drugs, oral contraceptives, ad infinitum. The list of benefits will grow longer and longer, inevitably driving up premiums – thereby encouraging more people to defy the mandate and go with no insurance at all.
This is not just a nightmare scenario – it is reality. Healthcare providers already lobby state legislatures to pass mandated benefits laws, which require that any health insurance policy sold must include certain benefits. There are literally hundreds (maybe thousands) of such laws on the books now; that’s one of the reasons health insurance is already so expensive. The incentive to push for more mandated benefits will only be exacerbated by a law that requires everyone to buy health insurance and commits both employers and the state to subsidizing it.
See here for more (including links to lists of currently mandated benefits).