To believe Obamacare (the Affordable Care Act) benefits society, you must accept several false assumptions. The legislation encourages everyone to get health care insurance by punishing those who don’t. Anyone who refuses to buy health insurance must pay a fine of 2.5% of their income or $2,085, whichever is larger.
Businesses with at least 50 employees are required to provide health care for their full-time workers or pay a fine. The premium costs and health care coverage of these insurance policies are regulated. The insurance of the poor is subsidized.
Proponents of Obamacare claim that health care is a human right. But rights are actions you are either protected from others doing or protected to do. You have a right to self-ownership and are protected from others taking your life. You have a right to freedom of speech and are protected from others silencing you. You have a right to the pursuit of happiness and are protected from others deciding the use of your life.
But health care is not a right. It is the service of a doctor. You cannot have a right that obligates others to serve you. Medical personnel have the right of self-ownership and therefore a right to choose who they labor for.
The presumption that health insurance is a right fails similarly. Insurance is the service of another’s capital property. You cannot have a right that demands another’s property be taken from them.
You need many things in life that you don’t have the right to require others to provide for you. All of us need food and water, clothing and shelter. If we’d like to make headway in life, we need an education and a job. Most of us want love, companionship, entertainment, and purpose. However, none of these are rights. They are just human needs. You have a right to the pursuit of happiness, but you do not have a right to burden others to ensure your happiness.
So health care may not be a right, but is it a basic need we should try to meet?
Most people need coverage for a catastrophic illness or accident. But Obamacare doesn’t cover this need, at least not exclusively. Instead, it provides a whole array of routine health care coverage, ranging from doctor visits to treat the common cold to contraception.
U.S. health care costs are 18% of gross domestic product. A year’s worth of health care events are above average when they cost more than 18% of a family’s income. If Obamacare were to succeed at meeting this kind of need better than the current health insurance industry, it would have to provide premiums less than 18% of a person’s income.
For a family of five earning $50,000 a year, 18% would mean annual health care costs of $9,000. Because Obamacare covers so many routine medical expenses, the premium to cover these costs for that same family is projected to be $20,000. With the cost to the family already higher than the average cost of a catastrophic event, Obamacare doesn’t come close to meeting the goal to cap catastrophic expenses at $9,000.
Obamacare mandates that everyone, even healthy college graduates, either buy health care insurance or pay the fine. To make Obamacare supposedly fair for the higher risk customers, the legislation mandates that no premium be more than three times the least expensive premium. Thus young people are forced to pay premiums that are a third the cost of the dying.
For a healthy young person with little chance of catastrophe or even illness, a premium at even the average health care cost of 18% is much too high.
In a free market, most health care for such low-risk people would be quite affordable. But with Obamacare, it is better for them to forgo the expensive coverage and pay the fine.
The same goes for the poor. Because the premiums are so high, it would be better to go without insurance. However, since their coverage is subsidized, the other customers in the system are paying for that person to have the privilege of coverage not worth the cost.
Economists call this phenomenon “dead weight loss.” For example, when you’re given a gift that cost $20 for which you would only have paid $5, there is a dead weight loss of $15. That’s $15 worth of value lost for both the recipient and the purchaser.
If these health care beneficiaries would have only paid $2,000 a year but the government provides services costing $20,000, there is a dead weight loss of $18,000. That’s a substantial sum lost from both the taxpayers who provided it and the beneficiary, who doesn’t even receive much value from it.
That gift would have been better as cash. It would be more helpful to write the poor a check for the $20,000, giving them the freedom to decide how best to spend it, than to purchase health insurance for them.
It doesn’t benefit the poor to give them value where they don’t need it. Gouging struggling healthy youths to pay for rich sick seniors is hardly fair.
We would typically say the free market of health care will correct this problem on its own. But health care is one of the most highly regulated industries in America. It is not a free market because the government tries to set the prices, services provided, products sold and customers serviced. Most of the problems are a result of years of such regulation.
Fortunately, daily health care services don’t need such regulation. Socializing the treatment of the common cold or the distribution of contraceptives is highly inefficient and adds little in meeting people’s real needs.
We already have the law that no hospital can turn away a patient. We also permit any individual to file bankruptcy. So people who either have health insurance or can pay are already subsidizing those who can’t pay. Normal routine visits cost a bit more so individuals in need can receive care.
This equates to taking money from those who can pay, via high premiums, to provide insurance for those who can’t pay. It just does the exchange via the market. As a result, we already have a rudimentary catastrophic event safety net for the needy.
These stories of medical bankruptcy are heart wrenching. Imagine a young middle-class family without health insurance whose child suddenly needs thousands of dollars of medical care. They can’t qualify for assistance, but their child’s future depends on getting expensive treatments immediately. They have debts above their net worth and go into bankruptcy, losing everything. That’s the poster child for universal coverage.
Americans are generally compassionate and often try to help others pay their medical bills after the fact. But if Americans were generous enough for this system to always work, we wouldn’t need the health insurance industry in the first place. For everyone’s debts to be paid, everyone must be required to buy coverage ahead of time.
However, providing an entitlement program with coverage that pays for the first aspirin purchased is overkill. We are building a safety net, not a hammock.
One solution may be Health Savings Accounts (HSAs), which provide coverage for annual expenses over $6,000 for a tiny fraction of the cost of more complex coverage. With an HSA, you can save money in a special account for your medical bills pre-tax.
If any insurance could be mandatory, it is this type of coverage. However, Obamacare regulations both make such coverage illegal and require the cost to be prohibitive to young people.
Even requiring medical catastrophe insurance infringes on the rights of individuals to take charge of their own affairs. Mandating that everyone do what is good for many or even for themselves is still an infringement of their rights.
Only with free-market capitalism do individuals have the liberty to manage their own affairs free from obstacles and threats of the state. In freedom, you have the right to choose what you believe is in your best interest even when I believe you are wrong.
In freedom, you have the right to not purchase health care.
This blog post is part of “The Economics Of Healthcare series“.