Nov 03 2009

Sometimes it’s cheaper to just pay the fine

Category: government,healthcareharmonicminer @ 9:44 am

Here is a young man who currently buys his own health coverage, who saysWhat He’ll Do If We’re Forced To Buy Health Insurance.

If the Max Baucus iteration of health care reform eventually becomes law, then as soon as the federal mandate for individuals to carry health insurance goes into effect, I will very likely defy the mandate, cancel my health insurance, and pay the $950 annual fine. It will not be done out of protest, but out of sheer rational cost-benefit calculation.

And so it goes.

The primary fallacy of government (and most other bureaucracies) is that when they create a policy to try to make a certain group of people act a certain way, they change the circumstances for everyone, not just the group that is targeted by the new policy.

When a national health care program along lines currently proposed by Democrats gets enacted, we will see floods of people changing their behavior to get the most they can from the new situation.   That’s why Obama’s promise that “you can keep your coverage if you like it” is laughable when the government has created incentives for business to stop offering coverage and simply dump employees into the government plan.

And in the meantime, a lot of young people are going to simply pay for the fine for not being covered and then use the free government health care, right up until they start having age related issues that the government plan won’t manage so well, at which point they’ll take advantage of new laws requiring private insurers to take anyone, regardless of previously existing conditions.  In other words, they’ll game the system.

Bureaucracies are always beset by unintended consequences when they try to get people to do something that they don’t want to do for other reasons.  That’s because when you change the rules, everyone will act out of self-interest, and no one is smart enough to foresee all the creative ways people will have of doing that.

The classic model of this is the IRS code, which is so huge and complex because of attempts to try to “game the system” by tax payers when the code was simpler.  The Social Security code and regulations isn’t much better.

Prediction:  if health care is nationalized, we’ll see a whole NEW profession.  It will be the profession of people who help other people navigate the health care system.  It will be modeled after the tax preparation industry.  Expect to see TV ads for services to help you get the “health care your entitled to.”  And expect lawyers to make a lot of money “fighting the government” to get them to pay up.

And expect a lot of creative people to find all kinds of ways to game the system.

5 Responses to “Sometimes it’s cheaper to just pay the fine”

  1. dave says:

    a lot of young people are going to simply pay for the fine for not being covered and then use the free government health care

    What free government health care?

  2. harmonicminer says:

    Dave, I wrote poorly… sorry. What I mean is the subsidized government healthcare that costs less than it’s worth, because it’s tax payer funded. And then there’s the other, bigger problem… young people who will just pay the fine and take their chances until something major turns up, then force an insurance company to take them on when their likely costs will be very high, since the “previous condition exclusion” will then be illegal, and companies will have to take on pretty much whoever applies.

    Did you read the article I linked? It’s all described there.

  3. dave says:

    Yes, I read the opinion piece.

    And the “subsidized government healthcare” a) doesn’t exist in any of the different legislations, and b) what I assume that you are referring to (the public option) will not actually be subsidized. It actually will pay for itself with the premiums that people pay to receive it.

    Now… the feds will also subsidize health insurance for low- and moderate-income individuals and families. But that is separate and distinct from the public option.

  4. harmonicminer says:

    Dave, you don’t really believe that, do you? Of COURSE it is subsidized. If it could “pay for itself”, private companies would have lined up to attract the same clients years ago.

    I’m glad for one thing: it looks more and more like the whole thing is going to crash and burn, especially after the recent election gave lawmakers a serious hint about the futures of those in tenuous districts who vote for Obama/Reid/Pelosi-care. So that means I won’t have an opportunity to say “I told you so” in 10-20 years….. but I can live with that.

  5. dave says:

    If it could “pay for itself”, private companies would have lined up to attract the same clients years ago.

    Sure… you are probably right, as soon as you can point out those non-profit insurance companies out there.

    The public option will be designed so that premiums cover the cost of the insurance. That is actually why some (the CBO, for example) have said that the public option will actually be more expensive than some private plans.

    And this week’s election results will have nothing to do with whether health care reform passes or not.

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