The Hidden Effects of the Public Option

Author’s note: For the purposes of this discussion, the term “health insurance” will refer to all health care plans.  True health insurance is nearly impossible to find.  Most people actually have “health maintenance.”  For expediency, the term “health insurance” will cover all health care plans.

One of the most important aspects of economics is the concept of incentive:  Give people an incentive to do something, and by and large they will do it.  Give them an incentive to not do something, and generally people will not do that thing.  This concept has ruled the interaction of creatures since the first multi-celled organisms began eating each other to survive:  The organisms that developed the sense to get away from the carnivore creatures survived, and the rest were consumed.  Incentives can be both positive and negative:  Positive incentives encourage us to do something.  The sweetness of an apple encourages us to eat it, while the oily, three-leafed appearance of some plants tells us to stay away!

This concept of incentive drives us in our everyday lives:  We avoid committing crimes for fear of punishment and work jobs for the incentive of salaries so that we can obtain the necessities and comforts of life.  We wait to shop until products are on sale or rebates are being offered.  Incentives drive the actions of individuals and, in aggregate, entire societies.

This concept of incentive is one of the important factors to consider when examining the health care “reform” proposals.  One of the most talked-about but least understood parts of these proposals is the requirement of employers to offer health insurance to their employees, or to pay a penalty to help fund the government-offered “public option” plan.  Let us examine the effect of this one aspect of the current health “reform” proposals.

Filed under: economics, health care, insurance, socialism, taxes, economics, incentive, insurance, penalty, public option