"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Thursday, February 14, 2013

Moral Hazard and Reality Versus Obamacare

The WSJ has a good primer on the problems Obamacare faces in implementation.   The first they mention seems key to me -- whether the "uninsured," who are largely healthy 20- and 30-somethings, will actually go out and buy health insurance under the individual mandate:
The challenge is to prompt one group of consumers to change: the 18 million 20- and 30-somethings who don't have health insurance. The arithmetic of Obamacare depends on getting more Americans to buy health insurance. If the young and healthy don't show up, the math doesn't work—and the cost of insurance for those who do shop in the new exchanges will be higher.
The answer to this problem is clearly no.   To anyone who has eyes to see, the 20-something and 30-something generation is both relativistic morally and strapped financially.   That's a bad combination when the whole plan depends on positing the fantasy of a world where moral hazard doesn't exist.   Obamacare assumes that young healthy people, when confronted with a choice of paying a small fine in the hundreds of dollars range (because they are at the beginnings of their careers and making relatively lower wages or salaries), or else spending perhaps $10,000 for health insurance, will somehow choose to do the latter.   It posits that they make this decision against their own immediate financial interests at the same time that the One Big Thing that the proponents of Obamacare have touted is that you can't ever be turned down for insurance if you get sick.   Obamacare posits that, despite the fact that there is thus no downside to going without health insurance, young healthy people will somehow choose to spend $10,000 for health insurance rather than make their car payments, make their student loan payments, make their credit card payments, go out, pay for their weddings, go on vacations, buy a house, etc.   And Obamacare makes these assumptions despite the fact that these same young people are having very hard times finding jobs.

In the vulgate:  no f'in' way.   Moral hazard exists, and the generation of people born in the 1980s -- the MTV generation -- is peculiarly unsuited to making decisions against their own economic self-interest.  

What that means for Obamacare is that the entire model of insurance where healthy people (primarily younger) pay premiums to support health care for unhealthy people (primarily older) must inevitably fall apart.   The cost of insurance will become too high, and more and more people will choose not to be the one left holding the bag.   What we'll be left with is single payer, where the government steps in to pay people's healthcare costs.

As if that was the plan all along.

No comments:

Post a Comment