Sometime this month, the U.S. Supreme Court is expected to decide whether the "individual mandate" under what is called Obamacare for individuals to purchase health insurance or face a steep penalty is constitutional or not.
The basis for the individual mandate is that some people decline to purchase insurance and show up at hospitals (usually emergency rooms) and receive services for which they do not pay. In economics, this is called the "free rider problem" in which some get a "free ride" at the expense of others.
It is argued that the individual mandate would eliminate the problem and significantly lower medical costs. I would like to show by a facetious suggestion that it would likely do neither.
Just for fun, let's require everyone to purchase funeral insurance. I understand from friends in the funeral business that a number of clients do not pay for their services after they are rendered.
Do the children of the funeral home owners go shoeless because some deadbeats stiff the funeral home owner? (Sorry I could not resist.) Of course not. The owners simply charge a high enough price per funeral so that they cover their costs, including those who do not pay.
The same thing happens in hospital care. The rates we pay include the extent to which the hospitals provided services for which they are not paid.
We, as a society, have every right to be proud of our behavior. We honor humanity by providing medical care - even those who do not pay for it. I do not see people being turned away from hospitals because they lack insurance. Recall that most hospitals started as charitable institutions.
Society also found a way to give people dignity in death - even though they did not pay. We do not have pauper graves anymore. This was achieved without government directive.
Now let's turn to the claim that requiring the purchase of insurance would make things cheaper. The insurance premiums would need to be large enough to cover the cost of the deadbeat funerals plus the administrative cost of distributing the insurance.
However, the cost of the deadbeat funerals is already included in the cost of your funeral. We can pay premiums for funeral insurance over our lifetimes (and bear the extra administrative costs) or pay at the time of our own funeral. As this facetious suggestion shows, there are no cost savings - and more likely a cost increase - by requiring everyone to purchase funeral insurance.
The same analysis applies to health care. We get the same answer; we shouldn't.
Admittedly, we do face a challenge of rapidly increasing demand for medical services. Scientific advances have increased our life expectancies and hence the period over which we will need medical care. Also, the baby boomer generation, which is quite large, is beginning to retire and require more medical services. As a result, we need to find ways to dramatically increase supply of medical services available. The individual mandate, whether it is constitutional or not, does nothing to address this need.
Christopher Gable lives in Altoona.
