Obamacare creates a new class of free riders

Rituparna Basu and Yaron Brook Analyst, Executive Director, Ayn Rand Institute
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Welcome to Obamacare, land of skyrocketing premiums, cancelled insurance policies, and a website that is exhibit A of government incompetence. If Republicans are serious about stopping this destructive law, they must criticize more than its rollout troubles, which are fixable. They must expose the law’s fundamental problems, which its supporters are determined to hide.

For example, Obamacare creates a new class of free riders in America. This is the purpose of the individual mandate, the law’s central provision, which requires most Americans, starting this year, to carry health insurance coverage or else pay a fine to the government.

Supporters portray the mandate’s function as the opposite. “We’re not going to have other people carrying your burdens for you,” said the president in 2009. “If you don’t have insurance and you need to go to the emergency room or unexpectedly get diagnosed with cancer, you are free-riding on others,” said Ezekiel Emanuel, a former Obama administration adviser, last year; “Insured Americans will have to pay more to hospitals and doctors to make up for your nonpayment.”

Now, not everyone without coverage has the intention to free ride — government distortion of insurance has priced people out of the market for decades. But even so, who are Obamacare supporters kidding with their feigned aversion to pawning off one’s medical expenses onto others? Free riding is the name of the game in American health care.

Why, for example, can someone walk into an ER expecting to free ride on the insured? Because federal law requires these facilities to treat him even if he has no intention of paying. Medicare (its mythical “trust fund” notwithstanding) and Medicaid similarly entitle more than 100 million seniors and lower-income Americans to free ride on younger generations and those of higher income. Employer-based coverage has also long been rigged by government so that older, less healthy workers free ride on younger, healthier employees, who are charged higher premiums to lower the costs of the former.

If Obamacare supporters were really offended by free riding, they’d call not for a law forcing people to buy coverage, but for the phasing out and eventual repeal of the government programs that allow it in the first place.

In reality, Obamacare’s proponents have no problem making one person’s medical bills the responsibility of another. Their real objection is that some people are not shouldering enough of others’ burdens, which is what the individual mandate actually enforces. Here’s how.

Recall a core goal of Obamacare: to make care cheaper for people with preexisting conditions. To achieve this, the law requires insurers to accept them and charge them the same premium they charge healthy people. But it’s a fact that someone who has diabetes, for example, has, on average, more than double the medical expenses of someone who doesn’t. Since insurers can’t charge higher-risk customers for their higher costs (the way auto insurers charge higher premiums to less safe drivers), insurers must pass on those costs to younger, healthier policyholders. Accordingly, 30-year-old nonsmoking men have, on average, seen their premiums more than double to pay for the various redistribution ploys in Obamacare.

How do you get people to buy a policy whose costs have been artificially raised? Enter the individual mandate. Its actual function is to coerce younger, healthier Americans into paying for other people’s health care. (This transfer is not, as Obamacare supporters say, inherent in insurance. If it were, we wouldn’t need Obamacare.)

If there were any doubt that this is the mandate’s purpose, the government’s recent actions have put that to rest. The penalty for not buying coverage in 2014 is the higher of $95 or 1 percent of your income, and for many the fine is negligible, compared to spending thousands of dollars on an Obamacare policy (the penalty increases in future years). Amid rising concerns that younger people won’t buy coverage this year, the government launched last summer a propaganda campaign to convince them to sign up. This media blitz, which enlisted sports teams and celebrities and even the mothers of these young people, was initiated because, if too few younger and healthier Americans choose to buy Obamacare’s overpriced policies, the law’s fundamental scheme will fail.

Obamacare’s individual mandate, far from ending free riding in America’s health care system, institutionalizes it on a national scale by force: the old and sick free ride on the young and healthy.

What does this say about Obamacare’s proponents, who continue to claim the opposite? That they think the American people can and must be fooled into accepting their policies. This fact alone should raise serious suspicion about Obamacare.

Rituparna Basu is an analyst at the Ayn Rand Institute and most recently the author of The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government DistortionYaron Brook is executive director of the Ayn Rand Institute.

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Rituparna Basu and Yaron Brook