Some Preliminary Political Economy of the Senate Bill
By Bryan Caplan
My favorite passage from Ezra Klein’s pro-Senate bill blogging:
Someone who puts off purchasing coverage and then tries to buy Aetna’s plan the first time they collapse unexpectedly will not be sold a plan...
Under reform, these people get the chance to come back into the
system when they need coverage. They can’t be discriminated against.
Indeed, you can argue that these folks, the ones willing to game the
system, are the most advantaged of all the groups. It’s why the
individual mandate should be stronger, not weaker, than it is now. This
isn’t the biggest deal at the outset of the plan, as there’s fair
evidence showing that people overvalue insurance and will buy it even
though paying the penalty is a better deal. If that turns out to be
wrong, you can strengthen the mandate down the road.
My question: What’s going to happen “down the road” in practice? I’m willing to believe that people overvalue insurance now. But once the government makes it unambiguously better to pay the penalty, I think consumers and especially for-profit employers will catch on. As a result, the adverse selection problem will become severe. And once it does, the politically attractive solution won’t be to strengthen the mandate. It will be the Medicare route: pick up the tab, and pay for it with higher taxes and deficit spending.
At risk of sounding conspiratorial, I think this the whole point. Consider: Isn’t the median Democrat’s first choice just Medicare for all? They can’t get it openly, but a multi-kilo-page stealth strategy just might work.