What is the Case for a Health Insurance Mandate?

The center piece of the Obama administration’s case for an individual health insurance mandate is the argument that people with private insurance pay for care for the uninsured through “cost shifting”—higher prices charged by doctors and hospitals to recover losses from uncompensated care.

So how much cost shifting is there? John Cogan, Glenn Hubbard and Dan Kessler reviewed the evidence the other day in the Wall Street Journal.

There are, surprisingly, few peer-reviewed studies of the magnitude of alleged cost shifting at the national level. A study conducted by George Mason University Prof. Jack Hadley and John Holahan, Teresa Coughlin and Dawn Miller of the Urban Institute, and published in the journal Health Affairs in 2008, found that “Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurance.” For the typical insurance plan, this amounts to approximately $80 per year.

[A]nother recent peer- reviewed study by Massachusetts Institute of Technology economists Jonathan Gruber and David Rodriguez and published in the Journal of Health Economics, found no evidence that doctors charged insured patients higher fees to cover the cost of caring for the uninsured.

Comments (7)

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  1. Devon Herrick says:

    Cost shifting is one of those concepts that sounds intuitively simple but in reality is far more complicated. If cost-shifting (i.e. raising prices on one customer to cover losses from another customer) were easy, then arbitrarily raising prices for other reasons (e.g. such as to merely boost profitability) would also be easy.

    What is sad though is proponents of the ACA attempt to solve a non-existent problem (e.g. cost-shifting) with another type of forced cost-shifting (cross-subsidies).

  2. Joe Barnett says:

    The mandate is to pay for other people’s health insurance coverage, not to provide for one’s own health care needs.

  3. Mike Ainslie says:

    If Obamacare and the individual mandate are allowed to stand, won’t that make the “cost shifting” worse? Because payments will be less to physicians, they will make it up in trying to recoop their losses with other insurance. Or they may leave the obamacare system all together. We are headed to a 2 class system.

  4. Brian says:

    I can see the cost-shifting problem becoming worse as well though Obamacare. Eventually, Obamacare could result in more and more private insurance coverage and other health coverage (i.e. Medicaid) buying less care and/or buying care of less quality.

  5. Jeff says:

    Austin Frakt normally argues that there is very little cost shifting. He seems to have lost his tongue during the Supreme Court hearing, however.

  6. Anne Alice says:

    From what I’ve seen, doctors and hospitals already bill huge amounts to insurance companies, with the understanding that only a percentage will be paid. What would happen if providers billed actual costs???

  7. John R. Graham says:

    I have never heard a politician accuse a Medicaid or Medicare patient of being greedy or cost-shifting or not carrying his or her fair share, yet these folks are an effectively infinitely greater burden on taxpayers than the uninsured are.

    Besides which, high-income uninsured voluntarily pay extra taxes which finance the safety net. By taking more money wages instead of health benefits, they have higher taxable incomes.