We Pay for 'Free' Health Care, Obama Gets the Thanks
As the 2012 election approaches, the mainstream media is crawling back into the tank for their guy. How do I know this? Because of a new round of articles touting the "unappreciated benefits" of President Obama's health-care law. It is an obvious attempt to build support for the unpopular legislation and rehabilitate Obama with the independent voters who have abandoned him.
Exhibit A: the Los Angeles Times just published an op-ed by a lady with the improbable name of Spike Dolomite Ward. She's a California artist (which explains the name, I suppose) who offers her apology to President Obama because she was dissatisfied with ObamaCare until she benefited from one of its provisions, a federally funded program to provide health insurance to people with pre-existing conditions.
Apparently, this is the kind of person Nancy Pelosi had in mind when she said we had to pass the bill so we could find out what's in it. Ward is already being touted as proof that "the public's opposition to the Affordable Care Act is almost entirely the result of a misinformation campaign."
Really? Here's a little bit more information to put Ward's story into its proper context.
What struck me about Ward's article is that she is a lot like me. She is in her forties with two kids. Me too. She and her spouse are both self-employed and long ago stopped having their health insurance paid for by a big, beneficent employer. Same here. She has gone without health insurance for years, taking the risk that her medical bills would be less expensive than the high monthly premiums she was paying. Been there, done that. She and her husband have both seen their businesses hit by the recession. Ditto.
There is only one really big difference between us: I'm paying for her health care.
How am I paying for it? Because I'm one of the suckers who has kept on paying his health insurance premiums, making provision for my medical needs before I get sick.
The medical bills for Ward's cancer treatment are being paid through the Pre-existing Condition Insurance Plan (PCIP), a federal program to provide health insurance to people who already have serious illnesses. "Insurance" in this case is a bit of a misnomer, since that word is supposed to describe a financial benefit that you pay for before you need it. Insurance only functions if you have a lot of people like me paying into the system ahead of time and drawing our benefits later on. In effect, insurance is a form of savings: you put in money now in order to have it available when you need it in the future. Coverage for pre-existing conditions short-circuits that arrangement, because it allows people to avoid paying up front, allowing them to demand coverage only when they need it.
The PCIP is funded by federal subsidies for now, but it will be phased out by 2014, when Obama's health-care law will make it universal, mandating that all insurers provide coverage to people with pre-existing conditions. But it's simple economics that if insurance companies are forced to take on a lot of expensive coverage for people who are already sick, they will have to make it up out of the premiums paid by everyone else. So for now, we're paying for Ward's health care with our taxes, but by 2014 we'll be paying for people like her in the form of higher premiums. I suspect we're already paying for it now. The first thing that happened when Congress passed ObamaCare is that my insurance premiums went up by 50%, as my insurance company rationally anticipated the coming increase in its costs.
See what I mean about the context for this story? While Ward looks only at the marvelous benefit that has been bestowed upon her by a magnanimous leader, what she does not see is who pays for it.
It is a classic case of "What Is Seen and What Is Not Seen." That is the title of an indispensable essay written in 1848 by the French economist Frédéric Bastiat, who pointed out that when the government bestows its largess, we tend see only the benefits coming down from above: there are press releases and newspaper articles and a lady writes an op-ed in the LA Times. What we don't see is where that money came from and who it came from, and what else we might have done with that money.
Learning to notice "what is not seen" is a basic principle of good economics. Bastiat argued that it is the basic distinction between a good economist and a bad one. And if learn that habit, we can grasp another, related economic principle: the concept of "moral hazard."
Moral hazard is the recognition that when you bail out people who take risks, you encourage more risk taking, which will require more bailouts, which will eventually be unsustainable. It's like telling big Wall Street firms that they are "too big to fail," which gives them an incentive to bet the farm on mortgage-backed securities or European sovereign debt, knowing that the taxpayers will be there to make them solvent if things go wrong.
The folks in the Occupy Wall Street movement have been complaining that the banks got a bailout, but the average person didn't get his own bailout. They're completely wrong. The whole apparatus of the modern welfare state is a giant interlocking network of bailouts for various pressure groups. Federally mandated coverage for pre-existing conditions is just another bailout, and it carries the same moral hazard.
Some of the people reading the LA Times will conclude that they should vote for Obama, which is Ward's intended message. But some of them will draw a more practical conclusion and drop their health insurance. Why struggle on the treadmill of paying tens of thousands of dollars in premiums, when they have just been assured that they can wait until a serious illness strikes and grab government-subsidized insurance then? Ward says that by dropping her health insurance, she took a gamble and lost. Now that she is advertising how she was bailed out, how many other people will be encouraged to take the same gamble?
The only way this kind of system can survive is if relatively few people take advantage of it. If everyone follows Ward's example, dropping their insurance and waiting for government subsidies or mandates when disaster strikes, the system will collapse. The only reason it hasn't yet collapsed is because people like me keep paying our premiums. That's what I mean when I say that I am paying for her health care. Chances are, you are paying for it, too.
Ward admits that she didn't do enough of her own research to understand what was in ObamaCare. But she still hasn't; marveling at the fact that you just got free stuff does not count as "research." From Ward's myopic and frankly self-serving perspective, it seems to her that a benevolent political leader has saved her from financial ruin. From our perspective-the perspective of those unseen folks who pay the bills-it looks an awful lot like President Obama just bought her vote with our money.
I don't begrudge Ward for taking the benefits that were offered to her. In dire circumstances, she has to do whatever is necessary for her health and for the good of her family. But she might want to take a closer look behind the politicians' press releases and figure out where the money for her treatment is really coming from. Instead of giving the credit to Obama, she might consider offering us an apology and some thanks for continuing to pay our premiums so that she didn't have to.
And she should pray that we keep on doing it.