Bryan Caplan  

Some Preliminary Political Economy of the Senate Bill

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My favorite passage from Ezra Klein's pro-Senate bill blogging:
Someone who puts off purchasing coverage and then tries to buy Aetna's plan the first time they collapse unexpectedly will not be sold a plan...

Under reform, these people get the chance to come back into the system when they need coverage. They can't be discriminated against. Indeed, you can argue that these folks, the ones willing to game the system, are the most advantaged of all the groups.  It's why the individual mandate should be stronger, not weaker, than it is now. This isn't the biggest deal at the outset of the plan, as there's fair evidence showing that people overvalue insurance and will buy it even though paying the penalty is a better deal.  If that turns out to be wrong, you can strengthen the mandate down the road.
My question: What's going to happen "down the road" in practice?   I'm willing to believe that people overvalue insurance now.  But once the government makes it unambiguously better to pay the penalty, I think consumers and especially for-profit employers will catch on.  As a result, the adverse selection problem will become severe.  And once it does, the politically attractive solution won't be to strengthen the mandate.  It will be the Medicare route: pick up the tab, and pay for it with higher taxes and deficit spending.

At risk of sounding conspiratorial, I think this the whole point.  Consider: Isn't the median Democrat's first choice just Medicare for all?  They can't get it openly, but a multi-kilo-page stealth strategy just might work.


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COMMENTS (9 to date)
anonymouse writes:

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Andrew writes:

I don't mean this to be an ad hominum attack on Klein, but why are his opinions taken so seriously by an academic like Caplan?

Klein is 25 years old with a B.A. in Political Science from UCLA. In contrast, Kaplan has a Ph.D. from Princeton and a tremendous CV.

If the answer is just that Caplan spends time debunking Klein just because lots of uneducated readers are persuaded by Klein's rhetoric and Kaplan feels compelled to provide the public good of debunking him, well, that's just depressing. There are clearly gains from trade to be had by handing that unfortunate job off to someone at a lower pay grade.

E. Barandiaran writes:

Bryan, you're right that Medicare for all is the first choice of Dems and that for now they take anything that may lead to that end. Let me add, however, that for Obama this is personal--his only objective is to claim victory on something that well-known Dems failed. He's going to sign anything that looks like a reform regardless of its cost to the country.

Andrew, I fully agree with you. It's depressing.

Joe Cushing writes:

I have felt that way from the beginning. The whole point of the current health care bill is to screw up health care worse than it already is, so the socialists can finally say that capitalism failed and install their government takeover. Why do the people let the government blame its own failures on the free market over and over again?

Wilmot of Rochester writes:

What I want to know from people who argue that we can't just let people lose on their gamble for not paying for health insurance is... Well... Why not?


Because hospitals - which are largely not for profit - have to take the patients in regardless? OK. Well, reform the incentives for hospitals to declare themselves for profit - still exempting them from taxes. Problem solved.

Unless, of course, this really wasn't their actual concern, which seems more than likely as the price that we pay for those who don't use insurance but receive medical care anyways is still pretty slim.

Matthew writes:

It's time for a Galt strike to destroy the economy and put all the parasites out of work, permanently.

We're at the end of the line for the Leviathan American state and its crushing burden on everyone and everything. Time to start over, "reboot".

SP writes:

Andrew,

Credentialism is a double edged sword. Klein might not have the same credentials as Caplan, but many on his side, saying the same things, do.

wm13 writes:

I'm with Andrew above. One of the great things about the internet is that you can have access to law professors at top schools (like Volokh and Balkin) discussing current legal issues, econ Ph.D.s (like DeLong or Mankiw) discussing current economic issues, etc. I understand that, in the old days, writers for political magazines (like the New Republic or Mother Jones) were a specialized class, who, ideally, interviewed the Mankiws and Balkins of the world and distilled their views on real world current issues for non-specialist readers. But there seems to me no need for that sort of intermediation anymore, so I can't imagine why anyone bothers reading Ezra Klein or Matt Yglesias (or their conservative counterparts).

Bill Conerly writes:

"I'm willing to believe that people overvalue insurance now."

I suggest a reluctance to characterize "people" quite so broadly. Some do, some don't. Perhaps on average they do overvalue insurance, but certainly many undervalue it. And those who undervalue insurance will shift costs significantly onto all insurance payers, meaning those who pay for their own insurance plus all taxpayers.

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