WSJ: Why The Individual Mandate May Cost You More


With many things in economics more is better. More food, more production, more profits — generally all good. But when it comes to health insurance more might actually be worse.
In June the Supreme Court ruled that the health-care law requiring us all to have health insurance was constitutional. A lot of people cheered saying it would pave the way to solve the nightmare problem of health-care costs in the U.S.
Not so fast. Insurance may actually be the root of the problem with our health-care costs. Or in other words, more people having insurance could actually make things worse.
The exact issue is that insurance divorces the true cost of the heath care from the purchasing decision. When you go to the doctor and pay $20, that represents a tiny fraction of the true cost. The insurance company pays the rest, likely another $200 or maybe even more.
So what? Well because you don’t pay full price you’ll likely consume more than you otherwise would. Maybe you go to the doctor when really you needn’t have. The result is that the increased demand drives up the cost of health care for everyone.
Having more insurance actually means we’ll see even higher prices. Thus, the problem of costly health care will be exacerbated.
What we actually need is a return to a time when few had health-care insurance that covered pretty much everything including routine office visits. Instead, insurance should be just that: For catastrophic events that might otherwise sink us financially.
I know that’s not popular, but the laws of economics don’t generally change after a ruling from the U.S. Supreme Court.
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