Tuesday, March 13, 2012

Tyler Cowen

Economist tells joke...

But ...conveniently forgets punch line.

Come 2014, the Affordable Care Act will prevent insurers from discriminating based on pre-existing conditions: cancer victims and stroke survivors will be able to buy insurance at the same price as otherwise similar applicants. Insurance companies may take a hit to profits, but part of the cost will surely be passed on to the lower-cost counterparts to this high-cost pool. Healthy people might be tempted to opt out, but under the new law, they’ll be required to have insurance. This individual mandate is a natural fix to the problem of adverse selection in health insurance: It keeps the lowest-cost participants from opting out, and as a result the market doesn’t unravel. Perhaps unsurprisingly, these solutions rankle the likes of Ron Paul and other libertarians who see the heavy hand of government at work here.