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Tuesday, March 27, 2012


With the US. Supreme Court hearing of oral arguments concerning legitimacy of "Obamacare" or health care reform bill, signed into law by president Barack Obama two years ago, I'll talk about whether or not healthcare insurance market had a market failure, consequently forcing government to step in and provide healthcare insurance to the public. The subject of health care is very broad. I'll touch only some aspects of this question.

Maybe for the first time, reading an article in POLITICO about heath care reform, I began to analyze the meaning of the words that were used by its author Tom Daschle, and framing tequiniques that he used to sell his perverted logic about legitimacy of mandating every american to buy a health insurance.

First of all, we'll have to figure out, whether health care insurance industry has one of the following properties:
1. is a public goods
2. has positive or negative externalities associated with it
3. has monopoly power.

If we can positively answer to any of those questions, then, we might consider exploring the possible market failure in this industry that forced government to provide these services.

1. It's clear that health insurance is not a public good because it's excludable and it's rival (if government will not make it non rival by policies).
2. I cannot think of any non-market, unintentional positive or negative interdependence between me or for that matter any other individual, and another person who has or does not have a heath insurance.
3. Since we have more than one heath insurance companies, it's safe to assume that there is no monopoly in this case.

Answering negatively on the questions above, according to market failure criteria, we can assume that there is no market failure in health insurance industry and that government should not intervene.

However, Mr. Daschle, the former senator, sees the failure, or the "issue," as he called it, in the fact, "that not everyone wants to pay for health insurance. Those of us that have spent decades trying to improve the private insurance market have struggled to find a solution to this central dilemma."

The fact that not everyone wants to pay for heath insurance is a simple correlation to a fact that not everyone wants to have a health insurance. That's exactly what constitutes a free market of voluntary exchange. It's so simple and obvious that I don't know how former senator missed it. If government thinks that everyone should have heath insurance, that means that government is concerned about its citizens' heath condition. Does it mean that very soon government will require every one to visit a doctor every so often regardless of whether they want it or not?

"Those" people, like Mr. Daschle, who have spent decades trying to improve the private insurance market have actually made it worse. The only think they should do is to leave the PRIVATE industry alone and it will fix itself. There is no "dilemma," unless freedom itself, to be able to chose whether or not to have a health insurance policy, is a dilemma for a former senator As soon as government tries to "fix" something it should not have touched, it actually makes it worse.

In addition, insurance means pooling the risks of many people in hope that the bad event will not happen. If government wants to "insure" people so they would have a greater access to doctors, it's the same as saying that insured auto owners have greater access to accidents. We have to keep in mind, that auto traffic is highly regulated, which reduces the risk of bad events taking place. Does it mean that government will regulate our lifestyle habits (exercise, food choices, rest, etc.) to reduce risk of getting sick? At the end, most people die because of age related sicknesses, which means that there is no way to escape the "bad" event of sickness in its broad definition as it's defined right now. It's probable not to have cancer, heart attack, stroke, broken bones, and many other medical issues. However, it's not probable to escape some minor illnesses and at the end to die, which means that it does not make sense to insure against an event that we know will happen.

In my opinion, there are no economic or legal grounds for government to mandate, to force individuals to buy a heath care insurance or to run a government based insurance company.

I really like the fact that you write about Obamacare in terms of externalities. Though, I think little differently from you. I am writing an essay about it for my econ class and love to hear advice. This is what I think " 3. The Affordable Care Act conveys positive externalities because it increases public safety by reducing potential social problems. For example, when poor people become sick, they can not cure themselves because they can not afford medical expenses. Thus, they might create social problems, such as drug issue, and crimes. Then, the government has to spend more budgets on the police department. However, if they can cure themselves using health insurance and work, their income will be guaranteed. When the poor who could not work before starts working, they add some units on the nation’s economic activity and also there will be less social problems, and thus the government can spend budget on something else, such as investment." - Soyoung Lee
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