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Testimony in Favor of SB 397

Kevin Waterman

Ladies and Gentlemen of the committee, thank you for your time. I am here today to
speak in favor of the Healthcare Freedom Act.

This proposed amendment to the Maryland constitution is not simply a good idea, it is a
vital one. There are few elements to the proposed healthcare reforms that offer as much
risk and as little gain as the health insurance mandate and therefore it is incumbent upon
the state of Maryland to do everything it can to shield its citizens from it.

While it is a significant issue, I will mention only in passing that luminaries in

constitutional law, such as legal theorist and Georgetown law professor Randy Barnett
have argued a ban on economic inactivity is far outside the clear meaning of the
Commerce Clause and is likewise unsupported by the Enumerated Powers listed in the
Constitution1. My primary focus in speaking today is to focus on the economic and health
impacts of a health insurance mandate.

First, we must look to Massachusetts, where such a mandate is already in place and has
served as a guide for national proposals. While it has been lauded by some, the reality is
that its effect has been sadly disappointing.

As is detailed in the Cato Institute study The Massachusetts Health Plan: Much Pain,
Little Gain2, the impact on insurance rates has been consistently misstated. Notably, the
Commonwealth reports of only 2.6% remaining uninsured is an understatement and that
the reality is the lower bound for the uninsured population is in fact 3.8% and the number
of the uninsured is quite possibly higher due to people hiding their status to avoid
penalties. Apart from this, Cato also estimates that Massachusetts overstates the number
of people newly insured as a result of its reforms by as much as 45%.

Clearly we should be skeptical of the efficacy of any mandate. But that is not all we must
be skeptical of. There are two primary claims for mandating the purchase of health

The first of these claims is that everyone already pays for the uninsured through their
visits to the emergency room. As Peter Suderman of Reason Magazine has noted3, this
claim is weak at best. Uncompensated care makes up only about 2.8% of healthcare
expenditures. And beyond that, due to subsidies for the low income uninsured, a mandate
doesn’t solve what free-rider problem does exist, it simply shifts how and when society
pays for it.

The second claim is that expanding the number of people covered by health insurance
saves lives. This claim is also weak, if not completely unsubstantiated.

In a recent article4 in The Atlantic, prominent economics journalist and blogger Megan
McArdle reveals that the studies used by reform advocates to push for expanded and
mandatory coverage are highly suspect, either failing to control for multiple significant
factors or relying upon too small a study group to be useful as a policy guide.

In fact, there are some studies, such as one by Richard Kronick of the University of
California at San Diego’s Department of Family and Preventive Medicine, finding that
after controlling for relevant factors and using a suitably large sample there is no
significantly elevated risk of death among the uninsured.

This position is backed up by other experts, such as Tyler Cowen, a George Mason
University economist, and Michael F. Cannon, director of Health Policy Studies at the
Cato Institute. All emphasize that the net marginal benefit of health insurance is zero due
to the fact that insurance leads to people over-consuming healthcare and therefore end up
receiving care that causes for harm than help.

Even if the net marginal benefit is greater than zero, the fact that statistical evidence is so
lacking strongly suggests that the benefits of health insurance are small as to prevent
measurement. On the other hand, all of us here know how large the costs of health
insurance are.

When health insurance offers such minimal benefits and high costs, and the efficacy of
mandating its purchase is questionable at best, it only makes sense to shield Marylanders
from misguided efforts to force them to spend their hard-earned income on its purchase. I
urge all of you to support this bill.