Freedom to freeload

The lead plaintiff in the anti-Obamacare lawsuit went bankrupt, stiffing a variety of medical providers for more than $5000. That’s why we need a penalty for “going naked” in the health insurance market: otherwise, those who don’t buy insurance get to gamble with other people’s money.

Mary Brown, a small business owner, decided she didn’t want to carry health insurance, so she became the lead plaintiff in the anti-Obamacare lawsuit filed by the National Federation of Independent Businesses.  Why should the federal government impose a penalty on her for her decision not to buy a financial product she doesn’t want?

Then she went broke, in the process stiffing a bunch of medical providers for more than $5000. That money goes into the “unpaid care” accounts, which means in effect that it winds up being paid by those who do have insurance, plus those who pay out of pocket but don’t go bust.

So the freedom she continues to ask for is the freedom to freeload: to take risks with other people’s money. That’s the reason why – as a former Governor of Massachusetts said, back when he was in touch with primary reality rather than the realities of the Republican primaries – we need financial incentives, whether positive or negative, to generate universal coverage: to “encourage ‘free riders’ to take responsibility for themselves rather than pass their medical costs on to others.”

This isn’t very complicated.  Really.


Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

41 thoughts on “Freedom to freeload”

  1. Well, legally I agree with you, Mark. (Though single payer would still be my preference, paid for by taxes. I too would/will not be happy to be forced to pay a middleman large chunks of undeserved cash.)

    Thing is, when people are poor, I’m not sure it is called free-riding. The lady couldn’t pay because her business went under.

    Still doesn’t justify her lawsuit, of course. But it is not the same as if she were just cheap. She probably dumped her insurance to try to keep her business going.

    1. It’s free-riding because she is OK with it. If she was willing to repay her debts to her suppliers (and she has said she is/has), her unwillingness to pay her health-care bills defines her as a free-loader/rider.

      1. Well, depending on lots of details I don’t know, I think you *have* to say you’re “willing” to repay, to be allowed to file at all.

        My point is just that when you’re broke, you can be as willing to pay as ever you please, but you are unable. In which context, I maintain you aren’t really a freerider. Freeriders are those who could pay and just don’t want to.

      2. She FILED FOR BANKRUPTCY! Do you know what bankruptcy is? It’s a legal proceeding whereby the court relieves you of your obligation to pay 100% of the amount of your bills because you have no ability to do so. If she was “willing” to pay her bills and able to do so, she wouldn’t have filed for bankruptcy.

        1. Yes, she is unable to pay. That was my point, thanks. Did you want to stick her in a debtors’ prison?

  2. Having done CPA and consulting work for small businesses and health providers for several decades, I am somewhat amused at the people who think small businesses owners have bountiful cash flow and those who don’t buy health insurance are greedy or stupid.

    This usually comes from politicians, bureaucrats and professors who draw their paychecks from the government.

    Not to mention any names…..

    1. Well Rustbelt, as a CPA for small businesses for over 20 years you must have noticed that insurance premiums have escalated dramatically. Did you ever wonder why? In part it is due to selection practices used by insurers that make it difficult for small businesses. I am neither a politician, bureaucrat, or professor yet I do believe it is incumbent on everyone to contribute to funding healthcare. For exactly the reasons the story of Mary Brown exposes, there is a need for everyone robe able to access care when they need it and the only viable way to accomplish that is through an insurance mechanism.

      So not to mention any names, unless you are totally opposed to any effort to make health care available to all those who need it, then you should be supporting the reforms of th Affordability Act. By the way I includes financial supports for small businesses in case nobody told you.

      1. “incumbent on everyone to contribute to funding healthcare” – that is exactly the core issue, whether the contributions come in via taxes or an insurance mandate. Why is this so difficult to understand for so many?

        I would extend this to include long term care insurance too, because most of us will need some form of it sooner or later, and to expect it to be paid via Medicaid (and many “structure” their plentiful assets in order that Medicaid will fund their long term care).

        Employers who “prefer not to” pay for medical coverage for their employees are merely forcing all taxpayers to subsidize their businesses. If they can’t afford to pay the full freight to “maintain” their own employees, they should not be in business. I’ve worked for businesses large and small, public and private, thriving and just getting by, and in all cases the employers were far more interested in maintaining their mechanical equipment than in paying to maintain their personnel. That will probably never change, and is the reason forced funding of some kind is both necessary and most FAIR (eliminating the double payments made by those of us who have both insurance and pay taxes to pay for the care of others), assuming we don’t want to simply allow people to expire in the gutter instead.

        1. If Americans had guaranteed healthcare, say like Sweden, would that not unlock our entrepreneurial energies? How many ambitious, capable folks in their forties and fifties, at the height of their competency don;t start firms because they need to provide healthcare for their family?

          1. Yes, I think you are correct that with their health insurance covered, people would feel more inclined to take such risks. It would also free up people to simply change jobs more readily, rather than continue with an employer solely because you’re afraid of losing your health coverage if the new job doesn’t work out, too much risk for most people these days.

            Guaranteed healthcare would also provide some stability in an employer’s premium renewal costs, because the rates largely based on “utilization” and a small firm that has even just one employee with major expenses–like a cancer patient–can see their annual premiums skyrocket in response, providing a strong financial incentive for the employer to dump that employee right at their time of greatest need, even if the employee is able to continue working.

          2. I’m an example of this- an entrepreneur who put everything I had (and a lot I didn’t have) on the line to start a new business, in electronics, technical instrumentation design. Our designs are now being manufactured in the US, sold globally, and are creating jobs that would not otherwise exist.

            Like, I suspect, most actually successful small businesses, my wife and I started this because we had worked in the field for a long time and had an idea for a way to do something better. It took us twelve years to get off the ground, and we started at 50. At this age, and with a child, going without insurance is imprudent.

            The biggest roadblock to our enterprise was not regulation, or taxes (not a factor when you are not making money), or even capital, but health insurance. Insurance companies are absolutely not interested in dealing with individuals/ small businesses, and we pay through the nose for inadequate coverage- IF you can get it. Fortunately we are very healthy, and at our current age about 12K per year gets us a $5,000 deductible HSA plan. In 12 years we have never actually had this insurance pay a penny of our health care expenses. But insurance and routine care have averaged about 8K per year- without any extraordinary expenses. I often wonder how many productive businesses never got started because a sick spouse or child trapped the potential entrepreneur in a job that provided health insurance- insurance they could not obtain or afford on their own.

            My preference would be for expansion of the existing Medicare system to cover all- recognizing that this would make insurance company executives very sad, and deprive them of their private jets, and deprive politicians of the fat contributions the insurance industry provides. But the exchanges in the new law at least offer the hope that businesses like ours can shop for insurance on something like a level playing field.

            So yes, our business is an example of one that never would have gotten off the ground if I, my wife, or my daughter had any medical condition that compromised our ability to obtain insurance. And it only happened because we were financially able to pay the punishingly high cost (2X what large companies paid for comparable coverage).

    2. Well, just to stick up for Mark a little bit, it is a little shabby of the right wingies to hide behind people like the Browns. They straight up use them. They do nothing for people like her.

      1. And having said that, it is still kind of cool that she fights to hard for her autonomy. That shows gumption and dignity, even if legally she’s all wet, imho.

        1. Her autonomy ends where social assumption of her debt begins – doesn’t it?? This person is delighted to socialize her losses through the facility of bankruptcy, while fighting to keep others from doing the same through the facility of insurance. I can’t see where the dignity is.

        2. Well, she doesn’t have autonomy; her fate is first in the hands of the bankruptcy courts, and then in the hands of fate – she’s a filed businessperson, who might still be burdened with some debt. The world will not treat her kindly.

    3. Far as I can tell many small business folks (and I have been a small business guy for many years) who don’t buy health insurance can’t really do so because of preexisting conditions or because the available policies are way too costly. This will not be news to anyone who has shopped for health insurance recently.

      Fortunately, the President’s now being implemented plan will correct at least part of the problem.

      1. I’ve also heard anecdotal evidence that small businesses are much more reluctant to hire older workers because of fear of their premiums getting jacked up. And that’s where a lot of new jobs are supposed to come from (but I think that got debunked).

    4. I don’t think she was greedy or stupid. But the consequence of her decision was that other people wind up paying her bills. That shouldn’t be allowed, and allowing it has nothing in common with the principles of the free market.

      1. Thanks for actually saying this. So many others on the right try to hide who they really are.

  3. Huh. I have health insurance, but it would still be easily possible for me to run up $4,500 in medical bills, and if I lost my job (or owned a business that could fail), I could easily be stuck filing for bankruptcy too.

    But the medical bills didn’t cause her to go BK.

    1. In the La Times’ comment section, lat0001 makes a salient point regarding Ms. Brown’s bankruptcy.

      Note that the $4500 is for UNPAID medical bills. The article does not state the TOTAL amount that was incurred for her husband’s medical problem. If his problem required hospitalization, the TOTAL bill would have been much, much more. This implies that they paid the rest of the medical bills — which left that much less for their other debt and/or became part of their credit card debt.

      Thus the medical bills could well be a significant factor that caused the bankruptcy.

      1. Yes, it could well be. But she says her business failed, which has been an all too common occurrence the past few years. Is there any reason to doubt her?

        1. Who is doubting her? No where in the comment does it say that the failure of her business didn’t cause the bankruptcy. What the comment says is while the healthcare expenses were a contributing factor (as with 62$% of all bankruptcies) they may have been a much greater contributing factor than indicated.

          Please don’t try to make it seem like I’m impugning this woman’s word about her bankruptcy.

  4. I’m guessing that the people most likely to complain about having to purchase health insurance are the people who would be most angry if they were injured by an uninsured driver, particularly if said driver were dark-complected or otherwise appeared (to them) to be a shady character.

    A mandate to purchase health insurance (along with subsidies to make the insurance affordable) isn’t like the gummint ordering you to consume broccoli, it’s like the gummint ordering you to drink water. You may not like being bossed around by Uncle (in)Sufferable, but you’re going to drink the water, whether you like it or not. (And of course, you did like it, right up until the moment the government came up with a scheme to make sure everyone has water to drink.)

  5. It’s only complicated for someone like you, who repeatedly defended creating bigger banks and quantitative easing. Sometimes, I think you live on a hemp farm.

  6. Why should health insurance be tied to an employer? If it were provided through a separate entity (fill in the blank here) small businesses wouldn’t be at a disadvantage and employees wouldn’t have to worry about losing their insurance when switching jobs or becoming unemployed.

  7. It shouldn’t be tied to an employer, that’s only the case because of the special tax treatment, which makes insurance much more expensive if you don’t get it through your employer. The obvious, simplest solution, would be to extend that tax treatment to health insurance wherever obtained. As an individual, through your credit union or the Y…

    Then employers would be out of the health insurance business, they’d just end up paying their employees the money, for THEM to pick out the insurance they want.

    The ideal solution from a statist perspective, of course, is for the government to be the only source of health insurance, so that government can most expediently dictate the kind of health care people can get, and everybody becomes that much more dependent on government.

    1. Just to show how far off the rails this discussion has gotten nationally, such that the Heritage Foundation program implemented under Obama is being called “Socialism”- though to be sure, if it had been implemented ten years earlier when Republicans proposed much the same thing, it would have been the “Free Market Alternative”- just to show, I’ll quote from a leading saint of the libertarian right:

      “Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance — where, in short, we deal with genuinely insurable risks — the case for the state’s helping to organize a comprehensive system of social insurance is very strong.”

      Friedrich Hayek, “The Road to Serfdom”

      Have you ever tried to obtain private health insurance as an individual or small business? Do you have any idea how difficult to impossible this is for many people? Insurers have a market incentive to deny care and limit their costs. As a small entity or individual- not part of a large group- you are suspect. The market does not work for health insurance. And most don’t find out how bad their insurance companies are until they need them, and it’s too late to change anything.

    1. The reason to nationalize health care is to take the profit motive out of it, and to stop paying substantial amounts to middlemen whose job is to deny care whenever possible. When health insurance is a profit-taking enterprise, it bleeds off funds that could have been used toward actual health care.

      The article you cite is regrettable, to be sure, but do you really think things are so much better in the care homes here? Seriously?

      It has become commonplace to haul out the “expensive elderly” as being in the cross-hairs of any changes to be made to health care, but they are already in the Medicare system, and why would cuts to their care necessarily be made once we include all the rest of the “less expensive” citizens in the pool? If anything, average costs would go down, even before you factor in savings from not having to pay for corporate profits and outsized executive salaries.

      The real issue is that everyone needs to have coverage, and that everyone needs to pay in some manner for that coverage. Those who are young and healthy find this to be unfair, until they’re diagnosed with leukemia or they fall off a motorcycle or give birth to a premature child, whereupon they expect to be cared for even if they have never paid for any insurance.

      Whether it’s a mandate or funded by taxes, the simple truth is that everyone needs to be included because none of us knows when we will need the coverage. The present system of taxpayers paying the freight for uninsured is simply unfair, and pretending that the alternative currently available, to simply let uninsured people die as advocated by some Republicans, is humane or justifiable or even likely to occur, is absurd and not worthy of any advanced civilization.

      Regardless of what system there is in place, there will always be room for improvement, and pointing that out should not mean the wholesale rejection of that system, unless a better one is put into place. We know the weaknesses of our current system, and they are many, but reforming the funding mechanism would go far toward ensuring care for all, regardless of their pre-existing conditions, and that is something that should be favored by everyone in any humane society.

    2. ALL systems must ration- another way of saying they must decide how to allocate resources. Our current system rations by “targeting” working poor, lower tier wage earners without coverage, preventative “public” health care, and children. This has many bad long term consequences, and ultimately results in higher public costs overall. But it helps create high profits for the insurance industry. A public single payer system would have to decide on asset allocation based on a public process- given our history and who votes, that is very unlikely to disadvantage the elderly.

      No one is proposing “nationalizing” health care here, or creating a fully socialized system as in the UK- that is a world of difference from a single insurer system, like Medicare, the VA, or countries like France or Canada, where the health care systems are very popular.

      The rest of the industrialized world spends half what we do- or less- on health care, and has BETTER outcomes. Are we incapable of doing as well as France, Germany, Switzerland, etc.?

      1. To be frank, from a liberal perspective I would rather ration care to the working and non-working poor than to the elderly. While the former may have more years of life and quality years of life left to them, the latter are much more likely to die from rationing. Furthermore, a system which systematically rations the aged is one that makes growing old, an already miserable process, even more miserable.

        Having said all that, I do not really understand why the left even accepts *any* need for rationing. The rationale seems to be that we don’t have the resources to provide care. Is that true? I can believe that Cuba may have a need to worry about rationing, but the U.S.? The unspoken assumption seems to be that we shouldn’t cramp middle class lifestyles so that Grandma can live another six months. I find that cowardly (since many of us would never make that decision for our own loved ones) and morally bankrupt.

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