The invaluable Megan McArdle is back from her honeymoon and blogging up a storm over at The Atlantic. Her latest is on health insurance, in which she notes that one of the problems with the Massachusetts system and with Obamacare is that “it’s not enough to have a mandate; unless the penalty costs at least as much as buying insurance, people will game the system by dropping coverage, and then buying it when they need something done.”
In other words, non-sick people will pay a small penalty, say $600, to avoid buying a health insurance policy that might cost, say, $7,000, and then if they get sick will sign up for a policy at a premium cost that doesn’t reflect their now preexisting condition. The result is that insurance will cost more—possibly a whole lot more—for people who maintain it.
McArdle’s post is spot on, but she leaves out one argument against this regulatory scheme. And that is a moral argument. It encourages people to game the system by breaking the rules—the rule that says you’re mandated to buy insurance—by imposing only a light penalty for breaking the rule. As a general proposition, we should make laws and rules that predictably result in widespread noncompliance, because that diminishes the moral opprobrium for law- and rule-breaking.
Consider another example: let’s say the District of Columbia has no parking zones in downtown Washington but tickets for parking in them cost only $5. As a result a lot of people park in no parking zones because it costs $8 or $12 to park in an adjacent parking lot for even a few minutes—and if you’re only going to park for a few minutes, you probably won’t get a ticket anyway. Non-compliance is hugely less expensive to compliance. That seems to be the case as well with Obamacare. If so, it threatens to strengthen a culture of non-compliance—not a good thing, whatever you think about the health care issue generally.