Thursday, December 12, 2013

Adverse Selection v Moral Hazard

Winner: Moral Hazard.

What the heck am I talking about?  ObamaCare.  Specifically, we're discussing the fact that ObamaCare requires that the young and healthy make up a significant portion of enrollees.  For ObamaCare to "succeed" in any sense of the word (right now, it's failing in every sense of the word), young, healthy people must sign up in droves, paying much higher premiums for much worse coverage than they could have gotten just a year ago.  Those who already had insurance will often look at the new numbers and say, "never mind."  Those who didn't already have coverage are not suddenly going to think it's a great idea to pay yet more than they'd already rejected.

The choice to do something against your own good is called "Adverse Selection."  ObamaCare relies heavily on Adverse Selection by Millennials.

On the other hand, we have "Moral Hazard."  Moral Hazard is a situation in which one makes different decisions based on the "rules" in order to gain the maximum benefit at the minimum cost.  In the world of D&D we call this "min-maxing."  With ObamaCare the idea looks like this- insurance companies cannot reject me because of any health reason, and preexisting conditions must be covered.  Given the high premiums for substandard benefits compared to the low level of "punishment" that is the Penalty (or Tax, if you're CJ John Roberts) for non-compliance with the individual mandate, it makes far more sense to go without insurance and the penalty.  If you *do* happen to get sick (in a way that costs more than your premium and deductible combined) then you can sign up for insurance at that time and, poof, you're covered.

This is a no brainer.  Why would a healthy Millennial buy insurance through the exchanges?  Pay higher prices for less coverage just so some geriatric patient in Walla Walla can afford their meds?  Obviously the people who wrote this law don't understand human nature (except they do- more on that in a minute).  Oh, certainly some will buy.  Some will think it's a "hedge against disaster" (but, by the current rules, it's not).  Some will think it's "the moral thing to do" (really?  I'm morally obligated to buy insurance so some other guy's insurance will be cheaper?  Wouldn't it be cheaper for me just to send him 50 bucks a month?)  But the vast majority will look at their ever-diminishing buying-power (thanks ObamaNomics!) and make the practical decision to forego insurance.

If this were a boxing match, Moral Hazard would win in 1.2 seconds.  Or would be ejected for hitting below the belt.  One or the other.

Now, previously I stated that the people who wrote ObamaCare don't understand human nature.  That was what we call "dramatic license" or "a lie."  Of course they understand human nature.  In fact, they're counting on it.  Remember what Obama himself said- ObamaCare would be "a first step" to single payer.

Never forget that is their end goal.  They PLAN for ObamaCare to fail.  They want Medicaid overloaded so that the states can't cope.  They want private companies that sell through the exchanges to go under.  They want everything to collapse so that the American People will yell "Save Us!!!!" and then they can implement single payer.

In response, we have two options.  The first is to try to overcome human nature and go all-in on ObamaCare.  Make it work despite itself.  The problems with that plan don't even bear investigating, but let's just say they're myriad.

The second option is to make sure everyone knows that A) ObamaCare is a complete failure, B) Democrats own it completely, and C) that it is those same Democrats who will come in with "single payer" to make it all better.  That is, we have to expose the ploy now, not wait until Democrats are already calling for single payer.  Just as we called out all of the flaws in ObamaCare starting 3 years ago, now we ALSO have to call out their next move.

Conservatives (and coincidentally Republicans) have a lot of credibility on this right now.  Everyone knows Conservatives were saying exactly what has happened would happen.  Even the MFM has to admit it- albeit in terms of "they sabotaged the law!!!!"- so when Conservatives are challenged about single payer being the next step, it should be fairly easy to rejoin, "Just like we were wrong about you not being able to keep your plan or your doctor?  Just like we were wrong about premiums going up and benefits going down?"

If we don't use that credibility now- if we don't establish it as firm fact- then the Democrats will win on the issue.  Single Payer- and all its nightmarish horror- will become law in the United States of America.  Possibly in my lifetime.

1 comment:

  1. To expand on your last paragraph, if we are able to win on this issue, we might succeed in discrediting the entire idea of government intervention in healthcare for a generation or more. If that happens, we can effectively stop dealing with this threat completely and move on to other intrusions into the private sector.