Doing Good for Free

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When it comes to telling people what to do, Republicans are not much different from Democrats. The latest effort to instruct the public on proper behavior is the push to mandate coverage for contraceptives in all health plans. This proposal is sponsored by Sens. Olympia Snowe (R-Maine) and Harry Reid (D-Nev.) and Reps. Jim Greenwood (R-Pa.) and Nita Lowey (D-N.Y.).

Contraceptives are precisely the kind of benefit that should not be coveredby insurance. The need for, and cost of, contraception is eminentlypredictable, affordable and budgetable. It is a routine expense that womenand their partners should be able to pay for directly.

Processing the bills for contraceptives through an insurance mechanismwouldprove wasteful and inefficient, adding to the mounds of paperwork alreadyswamping doctors' offices and pharmacies. Every time a claim is filed,proof of coverage is required. Insurers would also need to assess that thepatient is not buying more contraception than needed and possibly passingiton to a friend who doesn't have coverage.

The insurer would have to check to see if the pharmacy where the sale ismade is "participating," and if so, how much of a discount the pharmacyprovides. If there is a cost-sharing provision, the insurer would need tomake sure that the patient paid her $5 or $10 co-payment. That all addscosts that are related not to actual health care services but just toadministrative activities. Those costs increase premiums well beyond theactual cost of the service provided.

Then what's the rationale for such a proposal? It may be the idea that itis fun to force employers pay for stuff -- it feels like you're gettingthings for free. But you aren't. Employers calculate how much they canpayout in total compensation. If they have to pay more in benefits, they willpay less in wages. That was one of the primary causes of "wage stagnation"in the 1980s. Employers were paying more to retain workers, but most oftheadded expense went to cover soaring health care costs, not directly to theemployees.

So, employees who would get "free" contraceptives from their employer wouldactually be paying for them twice. First, it is more expensive to pay forroutine costs through insurance than it is to just slap the money down onthe counter. Second, every dollar paid by the employer for insurance is adollar taken out of wages.

The fact that Republicans are supporting the plan belies the GOP's concernfor "unfunded mandates." Republicans may resist mandating how state andlocal government spend our money, but the private sector is still fairgame.It's a chance for Washington politicians to "do good" without touching thefederal budget.

Of course, the Washington politicians are just picking up where the statepoliticians left off. For years, every time a state legislator got anotion -- "Golly, Aunt Emma's massage sessions ought to be covered by herinsurance plan. Let's pass a law!" -- they would quickly introducelegislation that would make insurance companies pay for it. The statespassed more than one thousand mandated benefits covering everything fromtreatment by social workers and chiropractors to alcoholism and wigs forpeople suffering from alopecia areata.

Most of these benefits don't do any harm and may do some good -- if theconsumer freely chooses to purchase them. But having such benefitsmandatedin all insurance contracts eliminates freedom of choice and raises costsforall consumers. If you want to buy an insurance plan, you must pay for allthe benefits mandated by your state legislature. By some estimates, theadded costs have increased by 25 percent the number of people who can'tafford insurance.

So, doing good for free can be pretty costly. Not surprisingly, that partof the equation is usually omitted from the politicians' press releases.

Greg Scandlen

Greg Scandlen is a fellow in health policy at the Cato Institute.