Wednesday, November 11, 2009

Schemes: Unintended Consequences

The Socialized Medicine Scheme as proposed and passed by the US House of Representatives is full of unintended consequences. That is, when you create a Scheme (1990 pages of Scheme) to replace a Free Market you immediately face the phenomena of unintended consequences and cascading unintended consequences.

This article merely looks at one immediately known unintended consequence regarding fines for not purchasing Health Insurance.

Take a look at the article below regarding "uninsured motorists" in regards to auto insurance. There is little new information in the article for the exception of Web Based Tracking Pilot Programs. There has been a zillion articles written on the topic of uninsured motorists. However, please keep in mind the gist of this article is enforcement and fines regarding the uninsured motorist.

Also keep in mind that when arguing for the Socialized Medicine Scheme, proponents like to compare Compulsory Auto Insurance to Socialized Medicine. That argument is invalid. The non-validity of the argument is explained here:

Martin Feldstein of Harvard University recently wrote an article stating that the Socialized Medicine Scheme, as proposed and passed in the US House of Representatives, creates an incentive for paying the fine and skipping the purchase of Health Insurance. Please see that article below:

Now, think about Martin Feldstein's recent article regarding people being incentivized to pay the fine and avoid buying health insurance under the Socialized Medicine Scheme. You pay the fine then buy coverage when you are sick as the Preexisting Conditions clause is invalidated.

Feldstein's article makes the assumption that HomoEconomicus makes the rational decision to pay the fine as outlined in his article.

What if Feldstein's assumption of paying the fine is replaced by the decision not to pay for anything at all. In other words, just like the phenomena of "uninsured motorists" you have the "uninsured and non-fine paying" health insurance non buyer.

Will the "uninsured and non-fine paying" phenomena occur in the Socialized Medicine Scheme? Absolutely. Hence that takes you back to the discussion in the uninsured motorist article (above) regarding "enforcement and fines".

"Enforcement" costs money. Who pays? Lets look around. Yes, you pay! If one is going to enforce the payment of fines, one must create a mechanism to collect the fines. More Bureaucracy? Of course!

Lets say we develop an Enforcement Bureaucracy and they track down and fine a non-insured and non-fine paying person. What then? Suspend their privilege to have health insurance? They, by definition, have no health insurance. If you suspend their privilege then they are part of the uninsured which supposedly is the reason for the Socialized Medicine Scheme (cover everyone). Gets murky does it not?

OK, we collect back fines as the enforcement. We further fine the back fines (a fine on a fine). However, the vast majority of Uninsured Motorists are uninsured as they can't afford insurance. It would be the same phenomena in non-insured and non-fine paying in the Socialized Medicine Scheme i.e. non-insured and non-fine paying people can't afford the fine or the insurance in the first place. What are the chances of collecting a fine on accumulated non paid arrears fines from a person that can't afford the fine or the insurance in the first place? Gets more murky does it not?

Can't pay the fine on the fine and the back fines? We throw the person in jail. Ops! The jails are already full! Ah, the evil of it all!

It should become clear that replacing a Free Market with a "Scheme" is absolutely full of unintended consequences. The phenomena mentioned above is merely one of hundreds and perhaps thousands of unintended consequences of the Scheme known as Socialized Medicine. Any good unintended consequence worth its salt will interact with other unintended consequences causing Cascading Unintended Consequences. Schemes generally end up a messy proposition.

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