With all the talk about the “crisis of the uninsured” that led to ObamaCare, one would be tempted to think that people without enough money to buy health insurance would just need a little help to convince them to do so. But they don’t: If you expect them to use any of their own money, they need a huge dose of others’ money to make them buy health insurance. Maybe this is why so-called single-payer health systems appear to be popular: People think lots of money should be spent on health care, but we should pretend it’s all other people’s money.
This has pretty serious implications for the success of ObamaCare, which offers significant subsidies to people earning up to 400 percent of the federal poverty level (FPL, approximately $90,000 for a family of four). One problem is that even middle-class American households are not wealthy: Although they have big houses and cars, they are in debt to the hilt. So, they don’t need insurance to protect their assets.
The latest evidence comes from a study of people’s response to the 2009 stimulus act (ARRA), which offered a 65 percent subsidy of premiums for COBRA coverage to people who lost their jobs in the recession:
We find that the ARRA subsidy is associated with a 15.2-percent increase in the continuation of employer coverage. This translates into a price elasticity estimate of -0.24, which is towards the middle range of elasticities in existing studies. We also find evidence that part of the increase in the continuation of employer coverage was offset by a decrease in non-group insurance. (A.S. Moriya & K. Simon, NBER)
In other words, a one percent decrease in premium is associated with just one quarter of one percent increase in uptake of health insurance. (And, with respect to ObamaCare, few enjoyed a reduction in premiums.)