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InsiderOnline Blog: August 2013

Now We See the Solipsism Inherent in the System

Ezra Klein thinks he’s found the solution to what may be the biggest challenge now facing ObamaCare: Healthy and wealthy “young invincibles” choosing to pay the ObamaCare individual mandate penalty rather than sign up for coverage from one of the ObamaCare exchanges. If too many of the wealthy/healthy opt out, the system can’t deliver the cross-subsidies that liberals consider a feature of the program. Klein advises us:

[E]ven the small group of people who are young, healthy or too rich to qualify for subsidies and don’t have employer-provided insurance have a compelling reason to purchase insurance: They will not be young and healthy – or even necessarily rich – forever. Young people grow old. Healthy people get sick. Rich people become poor. The people overpaying to keep costs low today are the people underpaying 10 or 20 years from now. It’s a terrible mistake to believe your health-care needs won’t change over time.

Those young, healthy rich people will need a functional system in the future when they become older, sicker or poorer. So even for those least in need, health-insurance premiums are an investment – not in someone else’s future, but in their own. Only a cramped and narrow view of self-interest assumes that the status quo lasts forever. [Bloomberg, August 16]

Some people can do back flips and then make it seem like they didn’t move at all; just the rest of world changed positions. Liberals used to believe that self-interested taxpayers would not support explicit transfer programs for the poor or voluntarily buy health insurance that wasn’t a good deal for them. Their solution to unbridled rationality was to embed cross-subsidies in the health insurance system by prohibiting risk-based ratings, coverage denials, and coverage exclusions; and then mandate that everyone join the risk pool. Now Klein tells us individual self-interest is really the solution to lawmakers botching ObamaCare’s incentives. He advises: Save ObamaCare in order to save yourselves!

Meanwhile, Jonathan Bernstein analyzes the opposition to ObamaCare this way:

But that refusal to accept any of the substance of Obamacare has run Republicans right into a brick wall. Thanks to the way that the ACA was put together — it really is a mammoth omnibus bill which incorporated practically every plausible policy idea out there — it turns out that practically everything you can do to provide health insurance is now tainted by Obamacare. […]

If everything — even the whole concept of insurance — is tainted by association with Obamacare, then the only safe ground for conservatives (safe, that is, from cries of “RINO”) is to oppose insurance altogether. [Emphasis added.] [Washington Post, August 20]

If you start with the assumption that only liberal ideas are plausible, then it’s pretty easy to arrive at the conclusion that the choices are only liberal ideas or nothing. But the choices aren’t just ObamaCare or no insurance system. The real alternative to ObamaCare is something that hasn’t yet been tried in health insurance: free markets. Many think tanks have proposed plans along those lines. One recent example is the American Enterprise Institute’s “Best of Both Worlds, Uniting Universal Coverage and Personal Choice in Health Care.” Among the major elements of the AEI plan are allowing private insurance companies to use individual risk ratings and offer multi-year contracts, and providing government assistance to help the poor pay for insurance premiums. That sounds like a plan that will let consumers choose the insurance that provides the best combination of price and protection against the unforeseen, while also making sure everyone has access to some basic level of services.

It’s also a set-up that won’t break every time government officials don’t get the incentives just right.

Posted on 08/20/13 05:32 PM by Alex Adrianson

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