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Why Health Insurance Isn’t Broccoli, It’s Mega Millions

At the same time as millions of people raced to buy Mega Millions tickets in the hopes of striking it big last week, the Supreme Court was taking a gamble with the lives of millions of Americans in their deliberation over the constitutionality of the individual mandate that is the cornerstone of Obama’s signature health reform law.

The coincidence of the health reform hearings happening at the same time as the biggest mega millions pot in history got me thinking about the ways that health insurance more closely resembles the lottery than broccoli as Justice Scalia suggested in one of the hearings.

The central debate over the constitutionality of the so-called individual mandate concerns whether Congress, under its constitutional power to regulate interstate commerce, may compel individuals into engaging in commerce by buying health insurance.

First of all, the term “individual mandate” is a misnomer and trope that has been trotted out by conservative opponents of the reform. The individual mandate is not a mandate at all. Individuals are more than welcome not to purchase insurance. They will simply be asked to pay a fine if they do not (and a rather too small fine by many accounts). Auto insurance works in a similar way.  Failure to have car insurance can result in stiff penalties, even imprisonment, and for the most part people comply with this “mandate” without too much complaint.

On to why health insurance is more like the lottery than broccoli.  The case against the individual mandate rests on demonstrating that health insurance is a “product” that people are being coerced into buying. Conservative Justice Scalia posed this as a slippery slope- if the government can force you to buy health insurance, what’s next?  The response to this argument made by more liberal justices is rather weak – the idea that health care is something we all pay for eventually so it is not a product. And yet other items, like food and potable water, are things we need to live and use eventually, and they are in fact products, not unlike broccoli.

Like the lottery, the more people contribute, the bigger the pot of money that can be distributed. Unlike the lottery, here the money is not distributed to one person, but to all who eventually need the system.

Health insurance is more like a lottery where everyone gets a winning ticket, because the more people that contribute, the lower the cost of premiums for everyone else, including yourself. Healthy people not paying into the system have made health insurance more expensive for everyone paying into the system. Not buying health insurance is also a bit like playing the lottery with your life and financial future, because you gamble on not needing to use it.

As the lottery jingle goes, “you can’t win if don’t play”. In other words, you can’t get reimbursed if you don’t contribute. The lottery is also a means of the government to raise revenue to pay for public services, so although this is not usually what people have in mind when they play, the revenue from ticket sales not disbursed in prizes goes towards the public as a whole.

Thus what the conservative and liberal justices were arguing over was not so much whether or not insurance is a product, but whether it is a special kind of product, one that economists often refer to as merit goods. Merit goods are goods that that individual or society should have on the basis of some concept of need, rather than ability and willingness to pay. These goods are different because they have intrinsic value. Under these conditions, market forces fail to optimally provide these goods. In these instances of market failure, government intervention is generally deemed appropriate even by staunch free market advocates.

In sum, think of insurance like a social lottery where we all contribute and we all get back. We never know exactly when we will need it, but eventually we will and then we’ll be glad we had it.

P.S. This is how people in other advanced industrial countries have thinking about it for decades.

Ashley Fox is an Assistant Professor at the Mount Sinai School of Medicine, Department of Health Evidence and Policy.

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About Ashley Fox

Ashley Fox, Ph.D., is an Assistant Professor at the Mount Sinai School of Medicine, Department of Health Evidence and Policy. Learn more about Ashley here.

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