The Free-Rider Problem

During the 2009 run-up to the passage of Obamacare, supporters often invoked the numbers of uninsured as sympathetic figures to compel support for further government encroachment in health care. Today, as the law finally gets underway amid considerable uncertainty that the uninsured will even sign up for insurance plans, their treatment in the media has shifted. Rather than the sympathetic figures of a few years ago, now they are being called “free riders,” or people taking advantage of the system and passing on their costs to the rest of us.

The thinking goes that ever since the Emergency Medical Treatment & Labor Act of 1986, which requires hospital emergency rooms to treat patients regardless of their ability to pay, people have chosen to go without insurance and instead use expensive emergency rooms for their medical needs. Since they don’t have the means to pay these bills, the hospitals and doctors pass those costs on to the insured in the form of higher prices. This logic is the impetus behind the individual mandate within Obamacare, which requires every person in America to purchase insurance.

The problem with this argument is that, frankly, it’s not true.

The uninsured incur about $100 billion in medical bills per year. They pay for almost half of that themselves. Another $40 billion or so is paid by government programs and private charity. That leaves an estimated $10 billion of unpaid bills which would theoretically raise prices for everyone else. $10 billion is a lot of money, but health care is a trillion-dollar industry, so that unpaid amount is a drop in the bucket – it simply isn’t big enough to increase prices. In fact, a Kaiser Family Foundation report found that there is no correlation between price increases and the uninsured at all.

Rapidly rising health care costs is a problem, but if we’re going to solve it we need to focus on what’s really causing it. And so-called “free riders” aren’t.

Dig Deeper:

Study: Covering the Uninsured

Legislation: Emergency Medical Treatment & Labor Act (EMTALA) 

Podcast: Cogan on Improving the Health Care System