How Government Failure Leads to More Government Failure: Another ObamaCare Example


Should have bought health insurance

Government failure is an outcome of policies enacted to regulate trade which create systemic inefficiencies and economic costs that adversely affect a product's manufacture or sales. Unfortunately, the usual way to address a government failure is to pile more government failures on top of the original one until the whole industry has been regulated into a complete clusterf*ck. The current primary example: health insurance and health care. 

This comment in a segment on NPR's Morning Edition today provoked this meditation on government failure: 

"I could get struck by a bus tomorrow or have a heart attack today and show up in the emergency room," says former Solicitor General Neal Katyal, who argued the health care cases for the Obama administration in the lower courts. "If I don't have insurance, it's the other American taxpayers who do have insurance that are effectively footing the bill for that."

Indeed, Congress found families who do have insurance right now shell out on average $1,000 a year more than they would otherwise, in order to subsidize the health care costs of the uninsured. Put another way, when the uninsured show up at a hospital and are unable to pay, federal and state laws require those individuals to be treated, and the costs are passed on to those who are insured and to the taxpayers.

So just why do families have to "shell out on average $1,000 a year" to cover people who fail to buy insurance? Oh, that's right: because the government mandates that hospitals and physicians treat the uninsured. Hospitals and physicians then, in turn, jack up their prices in order to get compensated for the "free" care which then feeds into higher insurance premiums for people who buy health insurance. 

This particular government failure (systemic inefficiency caused by regulation) has many consequences, one of which is that some people who could otherwise purchase insurance don't do so because they know that they will receive "free" treatment if anything goes wrong.

I doubt that Americans would allow too many bodies to pile up at emergency room entrances (commendable charitable instincts would kick in), but if a few did, that would be a far more powerful inducement to buy insurance than the piddily tax penalties that will be imposed by ObamaCare.