Jeffrey Dorfman, Contributor
I use economic insight to analyze issues and critique policy.
Life is often unfair. Sometimes it is unfair against you and once in a while life can bestow undeserved favors upon you. A major failing of liberals, especially those in government, is the constant inclination to fix the unfairness of life and improve the cosmic justice in the universe. The Affordable Care Act (commonly known as Obamacare) is a classic example of this impulse and, just as always, it will fail to achieve the goal.
Thomas Sowell wrote a fabulous book, The Quest for Cosmic Justice, which everybody who wishes to understand the essential impossibility of creating a world of “fair” outcomes should read. The essential problems with trying to correct inequities of this sort are the enormous knowledge required to pull it off and the fact that the act of addressing the problem creates new inequities for other people. Using the situation of health care reform, we can examine this issue in depth and see why the Affordable Care Act will not create cosmic justice.
A good definition of cosmic injustice is an unfair outcome through no fault of the person who suffers the injustice. People do not like cosmic injustice, particularly Americans who like to think of effort and hard work as always being rewarded, of people having some degree of control over their own fate. The idea that people can do everything “right” and yet still be unlucky in life bothers people greatly.
Cosmic injustice is common in the health care arena because people randomly end up unhealthy, in many cases through no fault of their own. Whether due to a condition one is born with or a disease that develops later in life, nobody finds it fair that some people are burdened with poor health. A disease caused by voluntary behavior (such as smoking) is not a cosmic injustice, but a large share of people’s health problems is random as far as we humans can tell.
Health care is very expensive in the U.S. today, so the cosmic injustice of bad health can easily lead to the further injustice of financial hardship. If one does not have health insurance, medical bills can be overwhelming in case of a serious illness. Even a sick person with health insurance, once burdened with a pre-existing condition, used to face the likelihood of higher insurance premiums in the future. A central feature of Obamacare ended the practice of higher premiums for these unlucky people expressly to correct the cosmic injustice of charging people more for health care just because they happen to need more expensive health care.
The Affordable Care Act is not nearly so much an attempt to lower the costs of health care in the U.S. as it is an attempt to correct cosmic injustices. Relatively little, if anything, in the law will lower costs. Rather, the law is more about extending coverage to more people and spreading the costs out differently so that sick people do not have to pay much more than healthy people.
To correct the perceived injustices of lower income people being unable to afford health insurance and of sicker people being charged higher premiums and denied coverage for pre-existing conditions, the Affordable Care Act must create new injustices. These new inequities fall on three groups.
First, the government will try to force young healthy people to buy insurance through the individual mandate requiring everyone either to purchase health insurance or pay a tax penalty. Insurance companies can earn a profit by adding these new people with low average medical costs to the pool of insured people. Those profits will be used to offset the losses the insurance companies are being forced to absorb on the sicker people who can no longer be charged higher prices or denied coverage. Given that the young health people did nothing wrong, making them pay for the cosmic injustice visited upon the sick is really just trading one cosmic injustice for another.
Second, subsidies will be offered by the government to lower income people who cannot afford health insurance on their own and are not offered it with a job. Taxpayers will actually pay for these subsidies, similarly transferring injustice from one group to another. Taxpayers did nothing wrong to deserve higher taxes, yet must pay a cost to correct an injustice they did not create.
Finally, for insurance companies to charge everyone roughly the same price those people whose expected medical costs are less than average will be paying an unfairly high insurance premium. Again, correcting one cosmic injustice simply creates a new one in the form of undeserved costs borne by healthier people.
Cosmic justice is not something that people or government can achieve. For example, because the government cannot perfectly distinguish between people whose illnesses were caused by voluntary behavior and those who did nothing to deserve their fate, all the efforts to correct the cosmic injustice done to some will also deliver benefits to those whose fate is not so unjust. These people are essentially getting unfairly lucky. Meanwhile, other people who did nothing wrong except to be young, healthy, or higher earning pay the cost of correcting cosmic injustices they had no role in causing.
In an attempt to correct cosmic injustices the government is forced to inflict the costs upon innocent parties who did not cause the original injustice. Rather than trying to convince people to pay the price as a step toward a compassionate society, Obamacare hides these costs through all its complexity, rules, regulations, and mandates.
All the thousands of pages of the Affordable Care Act serve the purpose of forcing some people to pay the costs for others in ways that they won’t notice. Cosmic injustice cannot be eliminated, only redistributed. Trying to hide the redistribution does not make it disappear. The government may want to hide the fact they are unjustly punishing some to correct other perceived injustices, but that is still the simplest way to understand the Affordable Care Act.