Last week, I wrote about a study by David Hogberg about the question of the “young healthies” and whether they (or, more properly, the very small group of young healthy eligible individuals with decent incomes but no employer-linked insurance) would sign up for the Affordable Care Act exchanges. I called Hogberg’s claim that “a young person who gets a serious illness in June only has to wait until October to sign up for insurance and then wait until January 1 of the next year to receive coverage” the worst thing out there.
Since Hogberg and Philip Klein replied today, I’ll return to the issue. I’ll start with something Klein said which I agree with: Ultimately, this question will be settled one way or another. Either people will or won’t sign up. From this point of view, speculation about what will happen may be interesting, but we’ll find up soon enough what people will really do.
However, there are a couple broader points.
One is that Hogberg and Klein both focus on what Klein points out: “Purchasing health insurance, in aggregate, is a bad deal for younger Americans.” What I think that means is that an insurance policy for young healthies has an expected negative return. That’s true, but it’s true of all health insurance! What’s harder to establish — and I’m no economist, so I have no idea how to go about this — is the value of the insurance itself (not just in direct benefits, but also peace of mind and avoiding downside risk), something that Matt Yglesias pointed out but that Hogberg simply ignores. Since benefits will change with the onset of the Affordable Care Act, it sure seems to me that any study of costs and benefits really should take that into account.
Moreover, as Danny Vinik argues today, establishing a stable, working health insurance system is very much a good deal for young healthies in the long run. Indeed, because some of those young healthies have a financial stake in health care costs for their parents and other family members, it may even be a good deal for them in the short run.
Vinik is also correct about the collective action problem this establishes. Because even if it would be a good idea for every young healthy to chip in so that the system would work, without a stronger mandate it’s unlikely that individuals will chip in if it doesn’t make immediate financial sense for them.
What Hogberg (and I think Klein) miss is that this is all inherent in the basic nature of health insurance; it’s not that, as Hogberg claims, “decades of government regulations have increased the price of insurance to the point that many young invincibles no longer see it as a good investment.” Paul Krugman has it right: “Claims that somehow unleashing the magic of the marketplace can make health care so cheap that everyone can afford it” are “fantasies.”
What’s not as clear is whether the particular regulations in the ACA will encourage young, healthy, consumers to enter that market. But whether they’ll be better off if the system works? That’s an easy call. And that’s why those acting in good faith who believe the current incentives get it wrong should be arguing for tweaking those incentives to make it work — not, as congressional Republicans and many conservatives have been doing, trying their best to undermine the system.