More response to California Gov


Free market advocates speak
David R. Henderson doesn't like Schwarzenegger's health care proposal either. He tells exactly why it won't work.

Why doesn't increased government power tend to solve the problem of the uninsured? There are two main reasons. First, when government provides health insurance, many people who take advantage of it drop their own privately provided health insurance. In a 1996 article in the Quarterly Journal of Economics, Harvard economists David M. Cutler and Jonathan Gruber found a 50% "crowding-out effect." As the federal Medicaid program expanded, for every two people who gained insurance through Medicaid, one dropped private health insurance. Although this is a net addition of one, the costs to taxpayers are much higher than expected because now half of the newly covered, instead of paying their own way as they previously did, become wards of the state.

Second, of the 46 million or so people without health insurance at any given time, about 45% will have health insurance within four months. This is one of the main findings of a 2003 study by the Congressional Budget Office, "How Many People Lack Health Insurance and for How Long?" That shouldn't be surprising in a country where most private health insurance is employer-provided and most unemployment spells last 11 weeks or less. Solutions that involve government mandates on employers or employees will, therefore, miss connecting with about half of the people who are uninsured at a given point in time.

But what if the governor could solve some of the problem by making health insurance cheaper? He can--not by regulating more, but by deregulating.

I am amazed that anyone is taking this seriously. Who knows, maybe Schwarzenegger is a better politician than I think he is and his goal is to totally discredit any plans that would come from California's legislature.

As it stands, this plan would bankrupt the state and drive most of the population elsewhere.

— NeoWayland

Posted: Wed - January 10, 2007 at 04:25 AM  Tag


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