The Voluntarily Uninsured
I always enjoy reading anything Isaac Ehrlich writes. In an NBER Working Paper with Yong Yin, he models the decision to buy health insurance. Since health insurance regulations prevent risk from being priced accurately, it turns out that self-insuring or relying on free care from safety note institutions is often optimal:
Our calibrated simulations [] indicate that self-insurance and self-protection account for 31.3% of the uninsured by the baseline model, or 28.2% by the extended model. Jointly with the safety net system, these alternatives account for 50.3% and 45.5% of the uninsured, respectively. […]
HT: Austin Frakt.
“it turns out that self-insuring or relying on free care from safety note institutions is often optimal”
This is not surprising.
Shockingly, people prefer things that are free and require no effort on their part? This is silly. It’d be interesting to see how many people genuinely need a safety net and how many rely on it due to laziness or other external factors.
Ultimately, if someone chooses to remain uninsured that’s their decision and they can certainly choose to do whatever best fits their needs. However, if these individuals decide to stay uninsured, they shouldn’t count or rely on free care, and nor the government or any insitution should provide care to all of those who have willingly decided to not have insurance coverage. You get what you pay for. If you don’t pay for anything, don’t expect to get anything. Tough love.
I was uninsured for all of my childhood and a couple years while I was in grad school. I was not free-riding on the health care system. My father paid cash for my delivery (a very substantial sum, since I was delivered premature). When I was a child, my parents paid cash for my routine physician care, and for a brief hospital stay for a tonsillectomy. The few times I went to the doctor while an uninsured adult, I did what people always do when they shop for services — I pulled out my wallet and paid for my care out of pocket. The U.S. Health Care System would be a better place if we all had to do that. Access to care would improve; quality of care and amenities would also improve.
isn’t relying on free care one incentive to get young people to get insured so that risk can be spread in the market?
Perhaps their real intentions when offering “free care” is to bring people in and, once they have their attention and disposition, start charging them for what they thought was a “free” service.
Hold on, I take that back. They are already doing that.
Great analysis by the NBER
This was startling. Especially they’re conclusions about incentives for people to overconsume remedial service, and that the policy actuarially unfair.
Anyone happen to have links to forecast models supporting the ACA?