How the housing collapse predicts the future of health insurance

Dec 7, 2013 by

By Dean Kalahar

December 6, 2013

In economics incentives are everything. Take the housing collapse for example. When home values plummeted a massive number of owners, who were in over their heads with home loans they could not afford, simply walked away from their obligations and stopped paying their mortgages.

Many continued living in their homes for years because they knew the banks and bureaucrats were overwhelmed with foreclosures and could not possibly follow up with any speed in holding them accountable. Others, who did not buy into the housing craze and paid their mortgages on time, watched deadbeats game the system and pocket thousands of dollars a month while living comfortably. At some point defaulters may have lost some credit or had to relocate, but the pain of personal responsibility and contractual obligations was dulled by easy savings, excuses, and blame shifting.

The health insurance system is in a similar disturbance and the same human nature we saw in housing will mirror itself once again. Let’s take a look.

You have your health insurance canceled. You’re unable to buy health insurance on the exchange. You’re overwhelmed by the cost of the health insurance offered. And the systemic healthcare debacle in Washington has all but locked up the system we call capitalism. These realities provide all the incentives necessary to simply walk away from purchasing insurance. The Affordable Care Act may mandate that everyone has insurance, but human nature is a greater force than idealistic utopian dreams.

Americans are smart enough to know that the hyper-bureaucracy that is Obamacare creates a situation that all but guarantees people decide to go without coverage. After all, if you get seriously sick you can always show up at the emergency room for care and the penalty for not signing up for insurance is more joke than deterrent. If we add the fact that pre-existing conditions are covered, and subsidies are given for those who “can’t afford” insurance; rolling the dice to not pay a healthcare premium comes up a winner every time.

Bleeding heart liberals who demanded “universal care” are not going to kick you when you’re sick and most vulnerable. Remember, they want to protect you from any accountability the “evil” private insurance industry could bear. And once again, just like we saw with housing, if people have shown they can walk away from personal responsibility and abuse the system once, what’s the big deal of if they default on a few medical bills. It’s a perfect storm of incentives that will drive behavior in the opposite direction of what was intended.

With deductibles sky high, unless you are given a platinum plan from your employer, there is no financial benefit for purchasing full health coverage. In reality, most healthcare plans only kick in after a severe event anyway; because as average American’s can attest, the normal day to day doctor’s visits never quite seem to meet the yearly deductable amount. How odd?

The President was actually right when he said you can keep your doctor. Just because you don’t have health insurance will not stop people from seeing their primary care physician and pay as they go with the extra cash they have saved from not purchasing health insurance. Funny thing is, at the end of the day it’s hard to control that pesky problem of progressives called the free market.

What could be better: keeping your doctor for basic care, pocketing a boatload of cash, and in the slim chance you have a catastrophic health event let the government figure out how it’s going to be paid for. That’s priceless.

Obamacare is the quintessential example of how command economy theories are dead wrong in practice. A law designed to have everyone sign up for health insurance will end up driving people away from signing up. This will lessen the care people receive. In short, the “Affordable Care Act” is a health insurance plan that will make you sick. Talk about your unintended consequences!

When it comes to healthcare, American’s understand that we have the best system in the world and that nobody is going to be turned away in their time of need. In the end, the risk reward calculus for most American’s will have little to do with getting well when they are sick. It will, however, have everything to do with saving thousands of dollars and untold headaches by deciding to not get involved in a system that is only going to hurt them, medically, emotionally and financially.

Prepare yourself for the second wave of people who choose to just walk away from the costs of freely made choices. Just like the housing collapse, the health insurance system is a house of cards facing a hurricane; the collapse of which will devastate the fitness of the nation.

Education News
by Education News
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