Wednesday, April 18, 2012

Health insurance and broccoli: A mismatched comparison

Vijay K. Mathur

Published in Standard-Examiner, April 4, 2012, Ogden, Utah

Recently, the U.S. Supreme Court heard arguments for and against the 2010 Affordable Health Care Act. Justice Antonin Scalia, a skeptic of the health insurance mandate in the law, raised the question to the government attorney, Donald Verrilli, that if the government can mandate to buy health insurance, why can't it mandate to buy broccoli?

The question implied that broccoli is good for a healthy diet and hence good for healthy outcomes; hence if the federal government is allowed to mandate buying of health insurance, it can overreach by mandating consumption of food products like broccoli.

Let me examine Justice Scalia's broccoli example and compare the mandate for broccoli consumption with the mandate to buy health insurance.

First, health insurance is not the same type of product as broccoli or cabbage or cauliflower. If a person does not consume broccoli, he has many close substitutes to improve his health.
In addition, if an individual does not consume broccoli he will not get sick and die. However, if a person does not have health insurance and faces serious illness or injury, he may face the choice between not seeking medical care and suffer debilitating health consequences or even death, or showing up in an emergency clinic for medical care. The 1986 law (Emergency Medical Treatment and Active Labor Act) mandates that emergency clinics provide medical care to all who show up. I wonder why Justice Scalia and some other justices are skeptical about a health insurance mandate on buyers but have not raised any questions about the mandate on the suppliers of emergency medical care.

Second, health insurance insures against risk due to the randomness of illness or injury. Most risk-averse people buy health insurance. However, many others who are young, healthy and are willing to take more risk may prefer to free-ride on insured persons. The uninsured are passing part of the cost of risk on to insured people, knowing that they can depend upon emergency clinics. In fact, those who are uninsured may engage in more risky behavior and hence consume more emergency medical care because they have reduced the cost of risk by passing it to others. On the other hand, higher premiums will lead to under-consumption (less than optimum) of medical care by the insured.

Mandating broccoli consumption, or even a healthy diet and lifestyle, will not insure against random illness and injury. Hence, given the mandate in 1986 law, mandating broccoli consumption is inconsequential in its effect on cost of medical-care providers and hence others' insurance premiums.

Third, the insurance system works when the pool of insured consists of people with varied health status. The diversified pool of healthy and relatively sick people keeps the premiums low, since premiums are affected by average risk. However, if the insurance pool consists only of sick people, the price of insurance will skyrocket and hence will drive most people out of the insurance market. This adverse selection problem causes market failure, where insurance providers may not survive due to losses or if they do survive, the premiums may be so high that many people may not be able to afford insurance or many with pre-existing health conditions may not be able to get insurance.

Broccoli market does not face adverse selection problem. There is no need of a pool of consumers -- healthy and sick -- to lower the price of broccoli. Mandating health insurance with penalties (or user charge for risk) forces all, especially healthy and young people, to join the insurance pool to lower the premiums based on average risk of the pool.
Fourth, health insurance, as opposed to broccoli consumption, enables a person or household to use a variety of medical services, including drugs, in case of illness or injury. An uninsured broccoli consumer who shows up in the emergency clinic will not be able to get the most efficient combination of medical services and drugs to treat illness or injury. Therefore, quality of health outcome will suffer and cost will rise over a period of time due the increased frequency of use of emergency clinics by uninsured broccoli consumers.

Fifth, given the mandate to emergency clinics in the 1986 law and the fact that insurance companies cannot refuse to provide insurance based on preexisting health status, according to the Affordable Care Act of 2010, mandating health insurance for all Americans is a least-cost strategy to deal with 30 million uninsured. This policy, with guidelines provided by the FDA for healthy diet and lifestyle, will go a long way in solving the escalating cost of medical care, which is expected to rise from a little more than 17 percent in 2010 to 26 percent of the Gross Domestic Product in 2035.

I hope the Justices of the U.S. Supreme Court are familiar with distinctive features of the health insurance market and broccoli market and are not persuaded by arguments advanced by ideologues and constitutionally challenged people.

Mathur is former chair and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He blogs for the Standard-Examiner at

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