A well-said defense of Obamacare

[muon2]

The worst cross-subsidy is how public universities were nearly free for the boomers but kids these days have to rack up huge debts to pay for the same education because the Boomers won't support the kinds of taxes their parents paid. That's a more pernicious cross-subsidy.

The parents didn't pay any more in taxes, and probably less overall. Those high marginal rates were paid by almost nobody. The cost of higher education is however a scandal. Something is terribly dysfunctional with that market. I (well my parents) paid about $2000 a year in tuition for eight years from 1969-1977 (college, business school and law school, all at elite institutions), maybe about $10,000 now in inflated dollars. But the cost of tuition is now around $40,000, which means a quadrupling in tuition costs in real inflation adjusted dollars.

Something is rotten in Denmark. Probably the government pumping money in, had something to do with it, but it would be great if someone directed me to some intelligent paper on the subject, that has been peer reviewed and sustained that review.

The biggest secret in college tuition (particularly for private schools) is that since the 70's it has been a mean-tested affair. In 1975 I was admitted to a number of fine liberal arts colleges and when one was done adding up the different scholarships and grants, the actual payment by my parents was about the same for all of them. It's no different with my daughter's tuition today. Everything is ruled by the FAFSA form, and scholarships adjust annually to reflect the previous year's income. The secret emerges because tuition isn't described as mean-tested with the cost for a given income level listed, instead just the top figure for highest income earners is quoted.

[muon2]

Torie, the base of the plan is than young people will eventually old and get sick.

Properly priced insurance should take that into account. It's like setting up a retirement plan, where if you start at an earlier age you don't need to put in as much per month. Similarly, if you wait to pay for insurance later in life it would be more expensive. Ask any life insurance agent.

What continues to mystify me is the talk of young free riders. As I talk to hospital administrators I find that young people who are working without health insurance do not get a free ride. They may get care to deal with a life-threatening situation, but the hospital will chase them for payments using the usual entourage of letters, calls, collection agencies, and attorneys. The poor may indeed get a free ride, but any plan was going to subsidize their care.

[muon2]

As I say, young people aren't crazy.  They intelligently choose not to buy health insurance because it is -- as currently inflicted on them by government regulators -- a bad bargain.  Let the insurers design plans specifically geared to young people and they WILL buy them.

Young people don't buy insurance because in most states it's a bad bargain - because insurance companies assume only sick or expensive young people buy it and price it accordingly.

Individual insurance is ridiculously expensive in most states where insurance actually has value because of the adverse selection problem. If insurance were available for $250 a month when I was 22, I'd have bought it. But it was more like $1,000 when it was even available, and with high co-pays. An employer pays a fraction of that for a 22-year old employee because of their bargaining power and because requiring employment has the same effect as a mandate - it brings healthy people into the pool.

I posted this on the US Gen Disc board. The link at the end gives a pretty good idea of a typical set of state mandates on insurance coverage. This is a big barrier to low-cost policies designed for young people.

A person who can afford health insurance, but chooses not to buy it? Does such a person exist? I'm sure out of 300,000,000 people that applies to somebody. Not a common circumstance though.

Well I obviously exist, so that answers that question. I do have accident insurance though (that would cover an ER bill in something like a car wreck).

I don't have it because it's cheaper to pay $80 the one or two times a year I have to visit a clinic than to pay a $20 co-pay plus a monthly premium (though my job started offering a cheap plan that would only deduct $25 a paycheck it's still not enough for me to come out ahead.)

Are you going to get health insurance in 2014 or pay the tax?
Also, what if you get a serious medical issue that isn't a car wreck?  Are you OK with bankruptcy?

This illustrates one of the problems in the health insurance market. We've folded wellness care such as regular checkups with major medical. With car insurance I can buy a cheap policy to cover large claims only with a high deductible. It's hard to find an equivalent health insurance policy that only covers high-cost procedures with a high deductible. Part of that is due to state mandates on health insurance coverage that set a minimum standard for a policy.

At the end of the day, assuming someone has the means, what difference does it really make if they are substantially self insured up to a point (i.e., a high deductible) and have lower premiums, or with a low deductible and higher premiums?  I hear a lot of chat about how youngs should just be forced to get catastrophic coverage, but if they are not cross subsidizing others (an aspect of Obamacare I still find execrable), the additional cost in premiums of broader coverage should be very small, since their actuarial risk is so low. The main advantage of a high deductible regime for those with means, is that their will be more pricing policemen out there, but that hardly seems central to a viable health care structure to me.

It shouldn't be central, but portions of the public expect certain services for their health care. They go to the state and push to have those services mandated on all policies. Before long it becomes impossible to get a simple, cheap policy because there are so many required add-ons. here's the IL list as an example.