How Does Free Insurance for Healthy People Pay for Sick People's Medical Care?


According to a recent analysis by the consulting firm McKinsey and Company, about 7 million Americans will qualify for free health insurance policies under the Affordable Care Act once federal subsidies are taken into account. That includes about 6 million people who are currently uninsured and about 1 million who have policies purchased on the individual market. All of them have incomes that are too high for Medicaid but low enough to receive subsidies that will fully cover the cost of a "bronze" or "silver" plan on a government-run exchange. The New York Times says this free medical coverage is not only a boon to the recipients but also a shot in the arm for Obamacare, since "the availability of zero-premium plans may make the deal especially enticing to the healthy young people the marketplace needs to succeed."

Wait a minute. It's true that younger, healthier policyholders are supposed to subsidize medical care for older, sicker policyholders, especially now that it's illegal to charge people based on how much covering them is expected to cost. But that works only if the younger, healthier policyholders are paying for medical coverage they rarely or never use; if they are not putting any money into the system, how can they possibly improve its financial condition?

Instead of paying for the premiums of the young and healthy, the government could directly subsidize coverage for people who really need it. Wouldn't that be cheaper? More generally, Obamacare seems like an unnecessarily complicated way of forcing some Americans (the ones who do not qualify for subsidized premiums) to pay for other Americans' medical treatment. The mandates, the exchanges, and the individual insurance requirement combine to transfer resources from richer, healthier people to poorer, sicklier people. This hardly seems like the most straightforward or efficient way of helping people who cannot afford health care, but it does serve to conceal what is actually going on, to the point that a leading news outlet claims each healthy person covered at taxpayers' expense is somehow saving taxpayers money.