My mind is at war with itself. What to do when Paul Krugman and Dean Baker disagree? These are guys that normally know what they’re talking about. In this case the specific area of disagreement is about Obama’s health care plan. Unlike Hillary, it does not mandate that you purchase health insurance, but it does provide for a penalty if you choose to enter a plan after you have lived out your young, healthy years.
Krugman says:
An Obama-type plan would also face the problem of healthy people who decide to take their chances or don’t sign up until they develop medical problems, thereby raising premiums for everyone else. Mr. Obama, contradicting his earlier assertions that affordability is the only bar to coverage, is now talking about penalizing those who delay signing up — but it’s not clear how this would work.
Baker’s not exactly clear how it would work, either, but he seems to feel it could work:
[Obama] has suggested that we can have a system of default enrollment, whereby people are signed up for a plan at their workplace.
People would then have the option to say that they do not want insurance, so they are not being forced to buy it. However, they will then face a late enrollment penalty if they try to play the “healthy person” game. When they do opt to join the system, at some future point, they will have to pay 50 percent more for their insurance, or some comparable penalty for trying to game the system.
A system of default enrollment will ensure that people do not remain uninsured due to inertia. A system of late enrollment penalties will ensure that people don’t try to game the system.
I think Krugman, and by extension, Hillary, wins on this one. Suppose, for instance, I decide at the age of 20, secure in the knowledge that I will live and stay young forever, to forego insurance. Suppose further that at the age of 40 I suddenly realize that I am not an exception to the rule and that I am, in fact, going to grow old. Believe it or not, this is not an uncommon scenario. I have gone 20 years without paying insurance premiums. If I choose to get insurance now, by all rights my penalty should be equivalent to about 20 years of premiums. If it is appreciably lower than that, then I am still gaming the system But unless I’m very rich I will probably not have that kind of ready cash around. So I will either (along with my also aging peers) make a demand through the political system to let me in without paying, or go without insurance because I can’t afford it. Either way, the system is undermined.
Of course, the fact is that a single payer system makes the most sense, but they have both apparently concluded that the choice favored by a vast majority of American citizens is politically impossible to attain.
On a related point, when the cost of health care came up in the recent debate, why did neither candidate 1) point out that their systems could be fully funded by transferring the money we are spending in Iraq (with enough left over to educate most of our kids), or that we are already inefficiently funding a health system, and that if you want to use meaningful numbers you have to factor in the amounts saved to other parts of the economy. For instance, if GM is no longer paying $1,500.00 a car for health care, then that has to come off the overall cost. Efficiency saves money, and the cost of health care is coming out of our collective pockets whether it’s paid in taxes or in bloated premiums to insurance companies.
Update: Krugman response to Baker here.
