Update: I overlooked an important fact. Dutch residents who opt out of insurance mandates are required to deposit only payroll taxes (income-related contributions) into a health savings account. They are not required to deposit also the amount that they would otherwise spend on basic health insurance (around 100 euros a month for an individual). Remember that health insurance premiums are community-based, and do not vary with health conditions or age. A healthy young person could opt out of the system, opt back in when (or if) she becomes unhealthy, and come out ahead financially. Even without a bequest motive, there is a strong incentive for young, healthy adults to select the self-insurance option. If the Dutch do not game the system in this way, it could be because they are principled, or because non-financial costs – regular church attendance! – are high. Or, the Wikipedia article could be wrong: perhaps Dutch authorities do require additional contributions to health savings accounts. I have searched in vain for more information on the ‘opt out’ option of the Netherlands. Readers, can you help? I am curious.
Tyler Cowen’s NYT column has provoked varied comments at his Marginal Revolution blog. I would like to share just one more thought that came to mind on reading the column. Professor Cowen does not like the idea of government forcing anyone to purchase health insurance. This is a key message of his column.
Right now, many Americans take the gamble of going without insurance, just as many of us take our chances with how much we drive or how little we exercise.
The paradox is this: Reform advocates start with anecdotes about the underprivileged who are uninsured, then turn around and propose something that would hurt at least some members of that group.
Tyler Cowen, “Economic View: How an Insurance Mandate Could Leave Many Worse Off”, New York Times, 25 October 2009.
The Netherlands, which has mandated purchase of insurance since 2006, has an interesting opt-out provision that I learned about from a Wikipedia article:
Specific minority groups in Dutch society, most notably certain branches of orthodox Calvinism and Evangelical christian groups, refuse to have insurance for religious reasons. To take care for these religious principled objections, the Dutch system provides a special opt-out clause. The amount of money for health care that would be paid by an employer in payroll taxes is in those cases not used for redistribution by the government, but instead, after request to the tax authorities, credited to a private health care savings account. The individual can draw from this account for paying medical bills, however if the account is depleted, one has to find the money elsewhere. If the person dies and the account still contains a sum, that sum will be included with the inheritance.
When a person with a private health savings account changes mind and want to get insurance, the tax authorities will release the remaining sum in the health account into the common risk pool.
The set of rules around the opt-out clauses have been designed in such way that people, who do not want to be insured, can opt-out but not engage in a free ride on the system.
“Healthcare in the Netherlands”, Wikipedia, accessed 26 October 2009.
The opt-out is limited to members of designated religions, which may not please libertarians, but it is interesting nonetheless. The payroll taxes (income-related contributions), by the way, are currently set at 7.2% of wages, up to a maximum of €2,248 per annum.
Anyone who opts for a health savings account can later choose the insurance option, yet the article asserts that the rules “have been designed in such way that people … can opt-out but not engage in a free ride on the system”. This is strictly true only if there is no bequest motive, no desire to leave an inheritance for children or grandchildren. After all, if a person enjoys good health and requires few health care services, he or she could build up a large savings account that can “be included with the inheritance”.
This provision could be described not unfairly as ‘smoke and mirrors’, since the opt-out is more apparent than real. Any uninsured Dutch resident who suffers a costly illness can always abandon the savings account and opt into government-mandated insurance. The only loss will be any accumulated savings, savings that would not exist had the person never opted out of the scheme in the first place.
Politically, though, ‘health savings accounts’ are appealing. They could make mandated insurance palatable to those who would otherwise object on religious or ideological grounds. US reformers might consider mandatory savings as an alternative to their proposed levy of a tax on the uninsured.
