Monday, October 26, 2009

Cowen on Mandates

Tyler Cowen has an article on the problem with the individual mandate. I think his point is valid but without a mandate you have a significant free rider issue. I have been going back and forth on which is better: buying across state lines or setting up a national exchange. The principal concern I have with a national exchange is that it will increase the prospect of regulatory capture by the AMA. If it is the only means of purchasing health care there is a risk that doctors will lobby congress to mandate benefits ultimately causing an increase in premiums. That said, a national exchange is better equipped to deal adverse selection since you could conduct an ex post risk adjustment on all providers on the exchange to ensure that insurers do not select only good risks.

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