Mar 12
31
Mandates Vs. Free-Riders
Is a requirement for every individual to buy health insurance a good thing?
Put aside the Constitutional question for a moment. The Obama Justice Department is also arguing that a mandate is needed to make health insurance work. Are they right?
The basic idea behind their argument concerns the “free rider” issue. Suppose other people spend part of their income on health insurance every pay period so that insurance will be there if they have a serious medical problem. I, on the other hand, choose to remain uninsured — using all of my income for personal consumption.
By choosing to remain uninsured, I am making a gamble. If I bet right, I will stay healthy and be able to enjoy a higher standard of living than people with incomes similar to mine. I will have been able to consume more goods and services than others because none of my income will be sent off to insurance companies.
But suppose I bet wrong? Then I will need medical care I cannot afford. Are the rest of you going to heartlessly allow me to go without care? Or will you take pity? Because we are a generous and caring society, we don’t want to see people go without medical care even if their predicament is the result of their own irresponsible decisions. But if you provide me with the care I didn’t insure for, you allow me to become a free rider on your generosity.
Everybody else had to pay for their care by having less take home pay each pay period. I got my care for free. And if I get away with taking advantage of the system, won’t a lot of others copy my behavior and try to become free riders themselves? Not only does such behavior seem unfair, it is argued, it could undermine the whole health insurance system…
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