Couple of Thoughts on Health Care

So, in a bizarre twist of fate, John Roberts joined a Kennedy-less Supreme Court majority to uphold the Affordable Care Act ("Obamacare").  Didn't see that coming.

The argument that the court majority stood behind was evidently that ordering everybody to get health insurance was basically like a tax.  The government can order you to pay for services through taxes, so why not "tax" you by telling you to get your own health insurance.

This makes a lot of sense.  The individual mandate is a solution to a collective action problem (Emily is rolling her eyes as she reads this).  This is because we all would rather not pay for our health care and get it for free (which we usually do by buying insurance).  And nobody (least of all doctors) are willing to let you die in the waiting room, even if you can't pay.  But if I don't buy insurance and then I get sick, you pay for it.  The cost is externalized on everybody else in the system that does have insurance.  

Basically, these externalities make health insurance a (impure) public good.  You all benefit when I'm healthy (and not just because you get to look at my luxuriant moustache all the time), and you all benefit when I have health insurance (because then you don't have to pay for me to stay healthy).  There are other reasons why health care is a public good, too, like the fact that healthy workers are more productive and make our economy productive and make us all richer.  But I don't want to get into that here.

Normally, when there is a public good, it's hard to provide in a market.  That's because the nature of public goods is such that I still benefit if I don't pay for the good.  Radio is a good example.  I can still tune in, so I don't have a really strong incentive to kick in for it.  That's why NPR pledge drives take so long.  Often, when there is a public good that everybody will benefit from, the government gets around this "free rider problem" by forcing everybody to pay taxes, then providing the service with that revenue.  It's not a perfect system, but it works better than the alternative.

In the case of health care, what a lot of countries do is treat it exactly like a public good.  The government collects taxes and provides health care services.  What we're going to be doing under Obamacare is only different in that individuals get to pick what level of insurance coverage we want.

This system has some problems, too, but it is probably a pretty good solution to the free-rider problem.  And I'm sure that it can be made to function much more efficiently than our current system (which is pretty much the worst case scenario).  The individual mandate probably won't help address escalating costs in healthcare--probably there needs to be government regulation to fix that--but it will solve the free-rider problem and make it much more affordable for everybody to get health insurance.

So, yeah.  Health insurance is a "tax".

One wonders if this all occurred to Roberts, and if he decided that the individual mandate was better than the obvious alternative, which is a Canadian-style single payer system.  I don't have a single payer system, though I suspect with some hybrid we can do better.