Is mandate for all to buy health insurance crucial?

By Robert I. Field, a law and public health professor at Drexel University

The most intense flash point in health reform debates is the mandate that requires everyone to have health insurance starting in 2014. Its constitutionality is the central issue in most lawsuits challenging the law. It is also the act's least popular element in opinion polls, and the one that raises the most passionate opposition.

Supporters say the mandate is essential to health reform's overall structure, and that without it, the system of coverage for all through insurance exchanges won't work. But, is it really so crucial? Many observers believe there are alternatives that could accomplish the same goal.

The insurance mandate for individuals is one of three legs on which reform of the insurance market rests. Leg number one is the requirement that insurance companies accept everyone, regardless of preexisting medical conditions. Leg number two is subsidies for those with low incomes so that financial pressures won't pose a barrier, even when medical status does not.

The mandate is leg number three. It guards against what economists call "adverse selection," which could be caused by the first two legs. If insurance is guaranteed to be there when you need it, many may wait until they get sick or injured to enroll. If enough people do this, insurers won't be able to spread the risk widely enough, and policies will become unaffordable. Hence the need to force everyone into the risk pool, both healthy and sick.

Guaranteed issue and subsidies are the carrots that get people into the risk pool, and the mandate is the stick. Without all three, it is argued, the system of guaranteed coverage through private companies would collapse.

However, there are other sticks that are not as big or as obvious. One is used in the Medicare prescription drug benefit. No one is forced to enroll, but if you don't, premiums go up by one percent for every month of delay for the rest of your life.

Another is used for employment-based coverage. There are no preexisting condition restrictions when you change jobs and get new coverage, unless you have let more than two months elapse since you were last insured. Both of these rules are meant to discourage people from waiting to enroll until they get sick, and both seem to work.

Critics claim that alternative sticks such as these will be less effective than a mandate. They point especially to healthy young adults, who may need a special prod to obtain coverage.

However, the mandate by itself will be far less than fully effective. For many people, the penalties for noncompliance will seem low relative to the cost of coverage. Estimates are that more than 15 million will choose to remain uninsured.

Even if mandate alternatives gather fewer people into the insurance net, they have a major advantage in being less intrusive. The public is more likely to accept them, since they let the system retain an element of voluntariness. And they render many of the legal challenges to health reform moot. This seems like a trade-off worth making in the interest of shoring up reform's long-term prospects.

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We pay a steep price for marginally better drugs

By Daniel Hoffman, pharmaceutical-industry consultant

This week an industry contact asked me why a new antipsychotic medication was planning to charge each patient $14 a day for therapy, when his analysis showed the new brand is no more effective than currently available competitors that cost substantially less. In fact my caller told me that around the office, he and his colleagues use a distorted version of the brand's name that incorporates several letters from the actual name and combines them with a slang term for feces.

While I am not privy to the drugmaker's pricing and marketing deliberations, the increasing frequency with which unremarkable, new drugs use exorbitant pricing invites some informed speculation here. As many new drugs lack substantial superiority over older, cheaper medications, the marketers naturally despair of capturing a large share of the therapeutic class in which their new brand will compete. The insurers and other, third-party payers will constrain most patients to use the less expensive medications. Consigned thereby to small, niche patient segments, the new-product marketers reason that if they can demonstrate some clinically meaningful advantage for just a small number of outlier patients, they can then charge an arm and leg to those patients and their insurers. The exemplar category is oncology, where drugmakers feel comfortable charging $50,000 to $100,000 for a drug that will extend the lives of a few patients by an extra three months each.

Some pharma companies justify the steep price premiums by claiming the costs of developing their howling-dog products have grown so steeply. The fact remains, however, that a major reason for the higher development costs lies in the fact that in order to show even the marginal differences needed to justify the steep prices for a small fraction of patients, the developers have to enroll tens of thousands of patients in their late-stage clinical trials. Enrolling 25,000 patients in a Phase 3 trial, at an average total cost of $25,000 per patient, amounts to a $625 million bill.

In 2004 Fred Hassan, then the CEO of Schering-Plough (since acquired by Merck), said Americans should accept health-care costs rising from 13 percent of GDP, as they were then, to 18 percent or even 20 percent. Apparently in his view, the good society is one where average citizens willingly redistribute upward any wealth they possess to enrich the fiduciary officers of large drug companies. Paying $90,000 a year for medications with tenuous benefits is one way of making people do exactly that, especially when such money goes for . . . solid waste.