According to an article in today's New York Times, a new law in California will require private insurance companies to pay for routine tests to screen patients for the human immunodeficiency virus (the HIV). Routine HIV testing may well be very valuable, but this may be one of the stupidest laws ever.
The law requires private insurers -- but not the state’s MediCal program, which provides health insurance to the poor -- to cover the cost of the test. The test costs less than $30. Since the law only applies to those with private insurance, it forces insurers to pay for the test on behalf of those who are most able to afford it themselves.
Importantly, Sacramento politicians are happy to force insurers to pay for routine HIV testing for middle- and high-income residents. But the politicians declined to require coverage for the poor, because the politicians would have to come up with the money themselves. As Cato adjunct scholar David Hyman writes:
When regulators internalize the costs of their decisions, they suddenly become more sensitive to the associated trade-offs… most state legislatures displa[y] concern for the plight of [patients] only as long as state governments did not have to foot the bill to fix the problem.
There may be an externality argument here, which may or may not be persuasive. But an externality argument would apply more to the poor than the non-poor.
Why do doctors support this law? Do they not find the test valuable enough to provide it gratis? Why can’t they persuade their privately insured patients to cough up $30? Do they not want to be bothered? If doctors can’t do so, what right does the state have to force those patients to pay for the test through higher insurance premiums? According to the article, doctors routinely get around insurance-company limitations on coverage for HIV tests by fudging the records. Should we be rewarding doctors -- who admit to defrauding insurance companies -- with the power to force those insurance companies to do things they don’t want to do?
And why didn’t the Times ask the insurance companies why they sometimes refuse to cover some HIV screening tests? Insurers often have very good reasons for denying coverage.