Perverse incentives run counter to mandated health insurance

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Recently CNN moderator Wolf Blitzer was involved in an exchange with U.S. Rep. Ron Paul that involved primarily a misunderstanding. Later, Paul Krugman of Princeton University decided to join the discussion by increasing the misunderstanding.

IN OUR ATTEMPT to unravel the confusion, we stumbled upon some factors that surprisingly contributed to the current swelling of the number of uninsured, a frequently cited argument in support of the urgent passage of Obamacare. It is a pleasure to share this experience with the reader.

In a Republican presidential primary debate, Blitzer asked Paul: If a young man (say, Mr. A) opted not to purchase health insurance yet later found that he needed six months of intense care, should society let him die? Paul responded: “That’s what freedom is all about – taking risks.” Upon reflection, however, perhaps Paul should have replied “choosing your risks.”

Meanwhile, noninsured Mr. A enjoys benefits of consuming the premium that was not spent on health insurance. When this choice was made, presumably it was an optimal decision. A possible consequence of exercising his freedom to choose might be a need to pay uninsured health bills. While in hindsight Mr. A may have chosen to forgo his pleasures from consumption and purchased the policy instead, the freedom-to-choose doctrine requires that he be responsible for his decisions, including mistakes.

Prof. Krugman now wants to re-label Paul’s “freedom to choose” principle with the “free to die” notion (New York Times, Sept. 15). The emptiness of this gesture is noted when it is recognized that each individual takes that risk numerous times each day. For example, if I elect to drive my car I am accepting the risk of a fatal auto accident. In doing so, I am literally, as Prof. Krugman would put it, exercising my choice of “freedom to die.”

BUT WHY DO some people forgo health insurance? The overwhelming reason, it is argued, is because they cannot afford it. Hence, they turn to friends and relatives, or to charities and public welfare agencies, which Messrs. Blitzer and Krugman pretend to be unaware of, and become burdens to society. Let us examine this argument.

It is natural that individuals seek the best use of their resources. In this endeavor, they are said to economize. Should a desired object of purchase cost too much, they search for a lower-priced product, or perhaps forgo it until their resources permit its purchase.

While this sounds familiar, what does it have to do with health care? Just as we may not need a Cadillac, we may not require the most costly insurance. We can consider a less expensive policy until our resources permit a more costly one. Of course, this describes the behavior of hundreds of millions.

Consequently, when people say, “I cannot afford health insurance,” they usually mean they prefer using their resources to purchase something other than insurance.

In this context, the word “afford” certainly has become the most widely used euphemism in the English language. But since virtually everyone is attracted to acquire services or items other than health insurance, it is easily understood why about 50 million citizens have chosen the non-insurance option.

PEOPLE WHO rationally forgo insurance also must rationally accept the risks from being uninsured, and are intensely aware of the fallback of private charities and public welfare – which, of course, adds further incentives to the decision to forsake insurance. This increases the number of uninsured.

It is ironic that the availability of health welfare of all forms (city, county, state and federal), plus private charities, accentuates the perverse incentive to forgo health insurance, and adds to the rolls of the uninsured.

This becomes an interesting dynamic: Access to rapidly expanding public health services, such as Medicaid, leads to forgoing the purchase of health insurance, which swells the number of uninsured and, in turn, leads to the mandating of universal health insurance!

And mandating its purchase is a devastating violation of the citizen’s cherished right to choose.

(The writer is a professor emeritus of financial economics at the University of Georgia. he lives in Aiken, S.C.)

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DaveHowey
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DaveHowey 03/11/12 - 02:18 am
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This is surely Republican

This is surely Republican logic at work. They feel the minimum wage ought to be under $7.25 and hour, allow workers to work part-time only so they do not qualify for benefits, and expect them to pay for a retirement program, all the necessities of life for their families and if they "can't afford" helath insurance, well that was an economic choice.

KSL
105945
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KSL 03/11/12 - 02:33 am
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And that would be because

And that would be because they feel that minimum wage jobs should be held by part time student workers. They feel you should not start a family until you can support them without help from taxpayers who are already supporting their own families. Why should under achievers be rewarded for their lack of achievement?

KSL
105945
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KSL 03/11/12 - 02:43 am
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Dave, are you in favor of

Dave, are you in favor of girls dropping out of school to have babies they say they don't even know who the father is?

faithson
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faithson 03/11/12 - 02:48 am
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Your right to choose versus

Your right to choose versus the public health. Now if I get this right, In America, we should allocate Health Care resources ONLY to those who PAY for them. And the 'logical' result as this economist suggests, is that after a few people around you die or suffer from non-treatment, the individual will be 'motivated' to BUY insurance. This gentleman is all over the place with this column. The editorial board could do much better in arguing its points against Universal Health Insurance than this.

KSL
105945
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KSL 03/11/12 - 02:56 am
1
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I have never understood why

I have never understood why people have accepted the requirement to pay for car insurance, the requirement to pay homeowner's insurance if you have a mortgage, but the reluctance to pay for health insurance. I guess it's the government mandate to emergency rooms. Get rid of that mandate and make people responsible again.

KSL
105945
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KSL 03/11/12 - 02:59 am
1
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Why is your health care not

Why is your health care not like other necessities? It certainly was one of those things you had to have and pay for when I was growing up.

KSL
105945
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KSL 03/11/12 - 03:08 am
1
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Actually yes. What is the

Actually yes. What is the difference between that and top priced foods, great housing, designer clothing, etc? Oh, I forgot about the cars, but then they generally belong to side beneficiaries of the recipients of public largess.

KSL
105945
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KSL 03/11/12 - 03:21 am
2
4

Obama's health care is going

Obama's health care is going to make certain that is exactly what will happen to those of us who are just reaching Medicare. That has actually come straight out of his gross looking mouth.

Techfan
6461
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Techfan 03/11/12 - 05:30 am
3
0

"Obama's health care is going

"Obama's health care is going to make certain that is exactly what will happen to those of us who are just reaching Medicare." What is going to happen? It's somewhat difficult to decipher from all of the off topic rantings.

Martinez
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Martinez 03/11/12 - 09:22 am
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Whether you rent or own, you

Whether you rent or own, you should have tenant or home owners insurance. Mortgage companies and decent (key word) landlords require it. If you drive a car, the State requires that you have insurance. I agree with the writer in that it's a matter of priority. How many medically uninsured have cell phones, cable TV and internet service? Those are luxuries that should never come before your own health. Using public hospitals as primary care has become an "out" for those who would rather spend their money elsewhere. Why should tax payers be left holding the bill? I fully support the mandate. If someone is very low income, there are programs already in existence today like Medicaid. In addition, Obamacare will penalize companies for charging employees over a specific percent of pay for insurance. The less you make, the less your employer can charge. The plan is not perfect but it will protect those who don't make it a priority to protect themselves as well as make sure that there are affordable options available. Ironically most of the people I have heard complain about the plan have negative tax obligations (receive back more then contributed) and aren't the one's paying the bill for their unnecessary emergency room treatments. The rest of the complainers, Republicans, liked the plan when implemented in Massachusetts by Romney.

carcraft
20672
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carcraft 03/11/12 - 09:33 am
1
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Ah Obama health care, yes we

Ah Obama health care, yes we have to pass it so we can know what's in it. Have you read about the Great Louisiana purchase? NO,no,no not the Thomas Jefferson deal the bribe for Mary Landrieu. Louisiana was supposed to get 200 million to fix her states Medicare needs. Well because of stupid working in the bill Louisiana is now getting 3.4 billion. The cost of Obama care has ballooned by hundreds of billions of dollars and is not fixing the increasing costs of health care...Brought to you by the people who brought you Fisker Motors. BWAHAHAHAHA We take risks every day. I am 63 years old and climb on my roof to clean gutters. Should the government mandate ever home owner subscribe to a gutter cleaning service when you reach say 52? I treat a lot of elderly patients who have fallen trimming tree limbs. Should the government order us to subscribe to a tree service when we reach, say 50 years old? I can go on and on with this type of thing. Health insurance is just one aspect, never mind that America is bankrupt. A good question should be "Should America risk death so people who don't want to buy health insurance should be forced to?"

Martinez
154
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Martinez 03/11/12 - 09:35 am
2
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All I am saying is if you

All I am saying is if you fall off that roof and break a hip, tax payers shouldn't have to pay for it.

carcraft
20672
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carcraft 03/11/12 - 09:51 am
2
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The great Louisiana Bribe,

The great Louisiana Bribe, here you go http://investmentwatchblog.com/the-new-louisiana-purchase-obamacares-4-3... Lets pass it so we can know what's in it, SURPRISE!

Martinez
154
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Martinez 03/11/12 - 09:37 am
2
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And if you decide not to have

And if you decide not to have insurance, the law should be changed to allow public hospitals to refuse you service. We are already paying for the uninsured today, just in a different way.

carcraft
20672
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carcraft 03/11/12 - 09:44 am
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3
carcraft
20672
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carcraft 03/11/12 - 09:52 am
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3

Costs of medicare and health

Costs of medicare and health care under Obama care are increasing.. http://www.foxnews.com/politics/2010/04/22/health-care-law-increase-cost... but hay, with America bankrupt who cares if we speed over the cliff a little faster... Never mind if Obama lies, it's OK folks, people that don't want to buy health insurance should be forced to..so when Amereica is broke NOBODY CAN GET HEALTH CARE

KSL
105945
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KSL 03/11/12 - 09:51 am
1
2

I agree, Martinez. It is way

I agree, Martinez. It is way too easy for people to be irresponsible.

freeradical
825
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freeradical 03/11/12 - 09:55 am
3
2

That is the beauty of

That is the beauty of Obamacare , all those currently traveling from

point A to point B in "Cadilliacs" will still get from point A to point B

in government issued Obamamobiles .

Of course it may take a little longer getting there in an Obamamobile,

but that it is only "fair".

And since we know how unfair it was that they could "afford " a cadillac

to begin with while others were forced to spend their limited funds

on the bare staples, cable tv , illicit drugs , cigarettes , booze ,

porterhouse steaks , they will be bankrolled by those going nowhere in their

new Obamamobiles at Cadillac prices.

carcraft
20672
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carcraft 03/11/12 - 10:05 am
2
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KSL- You can't stop

KSL- You can't stop irresponsiblity, even among people that should know better- Watched a little bit of American Greed on MSNBC last night. Guy worth over a Billion dollars doing insider trading on the stock market..Look at the supid Lawyer and his wife with the 18 year old girl..Look at the Columbia county Governmet dude and his adopted daughter. People will be irresponsible reguardless of what you try to do. Let's make America bankrupt so we can protect irresponsible people from themselves in ONE SMALL AREA OF LIFE!

carcraft
20672
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carcraft 03/11/12 - 10:14 am
2
2

Freeradical-The Obama mobile

Freeradical-The Obama mobile has run into problems-The rich person version , (Fisker motors $100,000) version ran into trouble when being tested. It went 182 miles and died when a proto type was being tested. http://orangepunch.ocregister.com/2012/03/09/fisker-the-car-of-the-futur... That was the model going to the porter house steak crowd on food stamps after winning a million in the lottery, because Uh, er, ahm, well they deserve it. The Car for the working tax pay Americans, the Volt has stopped being produced by Government Motors (GM) and 1,300 workers have been laid off because of poor milage and it is such a stupid car that even the Obamabots won't buy it... Don't worry though because Cho has the battery for you, even though it doesn't exist yet.. now that is being responsible...

freeradical
825
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freeradical 03/11/12 - 10:16 am
2
2

carcraft, Not to worry. The

carcraft,
Not to worry.

The Obamamobile is currently being retooled as we speak.

All for only hundreds of billions more taxpayer dollars that would have

been unfairly squanderd on cadillacs , had not the government stepped

in to do what is only "fair" anyway.

dichotomy
26674
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dichotomy 03/11/12 - 10:24 am
2
3

The first premise of

The first premise of Obamacare is a lie. "Most people who do not have health insurance do not have it because they cannot afford it. Now we will require them to buy it."

If they could not afford to buy it before, they certainly cannot afford to buy it now that Obamacare has raised the cost. The lie of Obamacare is that they will require those people to buy insurance. If those people could not afford it last year, they still cannot afford it next year. What they are requiring is that YOU pay for a full service insurance policy for SOMEBODY ELSE.

They claim they are "mandating" that everyone BUY insurance or pay a penalty. THEY ARE NOT. They are mandating that YOU pay for a full service health insurance policy for someone else. And right now everyone is embroiled in silly little battles about what must be covered, like the recent squabbling over birth control. But what they have not told you, because it has not been fully implemented yet, is what WILL NOT BE COVERED that used to be covered. When millions of Americans are dumped into the "government insurance pool" because their employers figure out that it is cheaper to pay the "fine" than actually provide insurance, that is when you will find out what is NOT COVERED. Yes, 30 somethings will get their birth control, but if your 60 something don't be looking for that heart transplant or hip replacement.

Get use to the phrase "managed care". That literally translates to "we can't manage to care for you old folks with our shrinking budget".

carcraft
20672
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carcraft 03/11/12 - 10:25 am
3
3

Whew-I was worried that I

Whew-I was worried that I might not get an Obama mobile, Thanks free radical, I can go about the rest of the day with that burden lifted.

Martinez
154
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Martinez 03/11/12 - 10:40 am
5
3

Love fear mongers. Obamacare

Love fear mongers. Obamacare was modeled after Romneycare. The people of Massachusetts, poll after poll, after happy with it. There aren't mass reports of seniors being refused service or employers stopping coverage. But I guess if you yell the sky is falling loud enough and long enough, you may actually start believing it.

carcraft
20672
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carcraft 03/11/12 - 11:30 am
2
2

http://politicalticker.blogs.

http://politicalticker.blogs.cnn.com/2009/10/28/romney-massachusetts-not... I don't have tto yell the sky is falling that is apperant enough from the above article about Romney care!

freeradical
825
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freeradical 03/11/12 - 11:44 am
2
3

Martinez, Citing "Poll, after

Martinez,

Citing "Poll, after Poll" without naming even one, is typical liberal

deception.

Not even very creative deception at that.

Let me give a fact.

The last national reapportionment of congressional seats resulted in

a net loss of seats for MA.

That is how you quote a fact Martinez.

Write that down.

The reason MA suffered a net loss of congressional seats is because

people are "polling" with their feet , and getting the heck out of liberal

wastelands.

And if you wan to try coming back with a specific "poll after poll" for

MA , don't try giving the Beacon Hill Crier 's poll and infer that it

represents the other 99.8% of MA people are fleeing in droves.

carcraft
20672
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carcraft 03/11/12 - 11:38 am
0
1

http://abcnews.go.com/Politic

http://abcnews.go.com/Politics/mitt-romney-defends-massachusetts-health-... Here is a little bit about what Romney care has done for the great State of Mass.

carcraft
20672
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carcraft 03/11/12 - 01:31 pm
3
2

President Obama is reelected

President Obama is reelected in 2012. In May of 2012 President Obama realizes that elderly people are being hurt falling off roofs cleaning gutters. Obama orders the Senate Commerce Committee to convene a special panel to discuss gutters and cleaning of gutters. They recommend all new houses use a special Kevlar coated, stainless steel lined copper covered baked enamel gutter be used with an aircraft quality corrosion immersed aluminum cover. The gutters to be installed are only produced by Guttermister incorporated of Chicago Illinois owned by Frank Guttermister a long time Obama buddy. The GASP act is passed, Gutter Assigned Special Production act. Obama claims the GASP will provide hard woring Americans jobs and is need to help the elderly. Cost of building a house increases $10,000. The gutters are hard to install. The Government then passes the GET act Gutter Education and Training act to certify gutter specialist in how to install gutters. One must be an SEIU member to attend the training programs. Cost of building a house increases $5,000 dollars. The EPA reports that roof run off is responsible for the demise of the tiny blue gilled salmon nosed house carp in the Great lakes. These tiny fish are abundant and not threatened in the south but rare in the Great Lakes. The Congress then passes the GUTTER REINSTALLENT UPDATE PROGRAM the GRUP act. This then puts gutters on every home and provides billions of dollars in funding for people who can’t afford gutters. It will be paid for by Home insurance and a special tax on new home construction. The cost of a new home is now increase by $25,000 dollars per home for gutters. Some of the Gutters installed aren’t working properly and clogging, elderly people are still falling off roofs. The Gutter inspection and realignment act (GETRAL act ) is passed with a special surcharge and tax on new gutters of ten percent. Cost of a new home now increases to a total of $30,000 per home and the housing contruction industry collapses leaving hundreds of thousands with out work. Obama immedialty blames George Bush.
Elderly people are still falling off of roofs. A majority of these falls are occurring in Georgia. A review of medical records reveals a high incidence of falls in Georgia is related to Grandparents climbing on roofs to retrieve Children’s toys. Obama convenes a special panel to recommend changes to toys and Roof Shingles and roof slopes. An investigation by Republicans reveals that the falls are due to that fact that many elderly redneck folks climb on roofs and party naked. The toys story is to avoid embarrassment. The study is presenterd on Fox News. The study is immediately hammered by the press and Democrats as being funded by the Koch brothers. Republicans are accused of not caring about the elderly and kids and shoving old people off roofs! Liberals immedialty claim the News story is bias because it was on Fuax News! The Democrats present the Roof Shingle Coefficient of Friction and Truss Realignment and shingle modification and toy recovery act…

carcraft
20672
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carcraft 03/11/12 - 12:17 pm
4
2

President Obama is reelected

President Obama is reelected in 2012 and realizes old folk are being hurt trimming trees so he convenes a special panel of scientists to look at chain saws, pruning shears and tree maintenance …

faithson
4601
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faithson 03/11/12 - 02:05 pm
1
1

So... instead of throwing

So... instead of throwing the baby out with the bathwater as so many republican zealots would suggest, how about improving the decision making body that initiates these ordinances. Even good democrats just want 'reasoned' regulation. But, without getting the 'special interests' and their money OUT, on both sides, WE THE PEOPLE are always going to get the short end of the stick. It's all about the money honey... to bad so many republicans can't see that.

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