Sunday, July 29, 2012

Free Riders?


Congratulations on your recent ward work and your service to those less fortunate than ourselves.

It seems to me there has been a lot more talk on "free riders" recently but I just wasn't sure how I could quantify this. Fortunately, Google does that for us.

Search "Free rider" AND "health care" and limit the results by year and you'll get something like this

Year      Number of results
2008       1,230
2009       1,900
2010       2,680
2011       4,880
2012       6,790

The results supported my impression there has been more talk of free riders now than there was before and during the debate over the Affordable Care Act. Why is this? My favorite hypothesis is this is a post hoc justification for the Act rather than a driving justification for the Act during its genesis and passage. Maybe it's Mr. Obama trying to tell a better story?

I'm also not convinced the Affordable Care Act solves a free rider problem. The free rider problem in theory is solved by the mandate. But, generally speaking, if you are poor or unemployed, you are exempt from the mandate. So the free riders we are trying to catch are the employed and wealthy who choose to use emergency room services as their primary means of health care. Is it really that large a population?

I've seen numbers thrown about regarding emergency room care usage by the uninsured, but I have at least two questions with these numbers. First relative to free riders: will the Affordable Care Act result in any savings? If a big chunk of the uninsured are exempt from the Act's mandate, there are no savings and free riding is institutionalized, not solved. Second are the estimates of the cost of emergency room care the list price or the discounted price a hospital charges to insurance companies. We both know the list price can be two to three times the negotiated price, so the estimates of the cost savings can also be vastly over-stated.

 I wish I shared your insouciance regarding bright people entering medicine. I think the reason more physicians have become specialists is because that is where the money is. I may be wrong since the AMA exerts a massive distortionary influence on the supply of doctors.

My industry is dying. I read a story last week that suggested the number of professionals in my space is down 30% over the past 10 years. It's a rather simple explanation: Wages have fallen, workers have exited. (I hope Krugman and the Keynesians don't read this; they suspect the Koch Brothers and a vast right wing conspiracy every time a Chicago grad points out people respond to incentives). One solution the Affordable Care Act offers to health care costs is limiting doctor wages. I really don't see how that will result in a better outcome for patients or doctors.


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