Mandatory Purchase

In a piece in Saturday’s Washington Examiner, I examine the parallels between auto insurance and health insurance, and, for the most part, find that they’re not that great. Here’s one point I make:

To begin with, borrowing the most talked about feature of auto insurance—mandatory purchase—won’t actually provide coverage to all of the 47 million Americans who lack it. While over 95 percent of American motorists live in states that mandate auto insurance purchase, about 13 percent of accidents involve drivers without coverage. Countries like Switzerland, Israel, and Germany that require individuals to buy private health insurance, likewise, find that not everyone complies. Mandatory purchase would decrease the number of uninsured, but, alone, nobody can seriously contend that it would actually result in universal coverage.

So I think mandatory purchase is a bad idea? Right? Actually, even though it will never work perfectly, I think mandatory purchase is a generally good idea in both health and auto markets. A variety of social policies transfer uninsured costs to others (mostly taxpayers and people who do have insurance). These policies are sometimes very deeply embedded in the systems that exist. Medical ethics, for example, mandate the treatment without regard to ability to pay. Bankruptcy laws, likewise, limit everyone’s liability for their on-road behavior.

Unless we start locking up doctors who treat the uninsured and reopening debtors prisons for Hyundai owners who destroy Lexuses, people without insurance will not pay their own way under any circumstances. Instead, they will end up on “welfare by default.” This results in government-mandated wealth redistribution just as surely as taxation or direct regulation. In health care, we’ve seen this cascade through the system with every player trying to pass the buck to somebody else.

Mandatory auto insurance has helped establish the principle that drivers are responsible for their own on-road behavior. The system isn’t perfect in part because many states tend to force insurance companies to cover people who should really face severe driving restrictions or lose their licenses altogether. The system isn’t perfect and the presence of large numbers of illegal immigrants challenges both systems in some parts of the country. Mandatory health insurance (with people able to opt out by posting a substantial bond against future health care costs) would similarly emphasize responsibility in health care markets.

In both health care and auto markets, mandatory insurance will solve some — although not all-problems. In both markets, I’d prefer to have the government require insurance, enforce the requirement, and, otherwise, get out of the way to let the free market work.