The Right Prescription

Joe Wilson: The Answer to Your Question Is “Yes”

In what economists call a "common pool," someone else always pays.

By 9.14.09

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It's remarkable that in the whole brouhaha about Joe Wilson shouting "You lie!" at President Obama's assertion that illegal immigrant won't be covered by Obamacare, no one has pursued the question, "Who's right?"

So here's the answer. Yes, illegal immigrants will be covered for Obamacare. Or rather, "Illegal immigrants may be legally ineligible for Obamacare, but they'll get covered anyway."

How do we know this? Because it will be in the interest of all the players -- doctors, hospitals, any other care provider, social workers, immigration lawyers, plus the immigrants themselves -- to get them into the system. The only people opposed will be some bean-counting bureaucrat in Washington or some crazed Republican who worries about the future of the country. These interests will be distant and abstract and will count for little. All the institutional momentum will say, "Give them coverage." It will be like water flowing downhill.

Here's an example of how it will work. Ten years ago my nephew, who grew up in Holland, moved to New York City with his pregnant French wife. He was an American citizen, she was not. Neither had ever lived in this country. They didn't know Medicaid from the medicine cabinet, but the first time they visited the gynecologist, he signed them up for New York's generous Medicaid benefits. My nephew had a good education but didn't yet have a job and was still getting money from his parents. No matter, he was eligible. Medicaid paid the entire costs of the delivery.

Within a few months he had a job and a year later he was making so much money that they decided to move to New Jersey to get away from New York City taxes. It was a perfect exploitation of New York City's welfare system. My nephew is a strong conservative and libertarian and became quite embarrassed about it years later when he understood what had happened, but I told him not to feel bad. The system was designed to be exploited. The doctors and hospitals were eager to have him on Medicaid because they wanted to be paid themselves. They didn't want to have to worry about whether he would find a job or whether his parents would continue to pick up the bills. Medicaid is what economists call a "common pool."

Common pool resources are the dread of all economists but the delight of everyone else, since everyone figures they can take out more than they put in. Back at the dawn of the Environmental Era, Garrett Hardin defined environmental degradation as a common-pool problem. In a famous 1968 essay, "The Tragedy of the Commons," Hardin used the chronically overgrazed Medieval sheep commons as a model for the exploitation of commonly held resources like air and water. "Private property, or something formally like it," Hardin wrote, was the solution to environmental problems. (This was before environmentalists themselves began exploiting the common-pool resources of the American landscape by littering it with ugly windmills and solar collectors.)

The same logic works with health insurance. If coverage is provided by private insurers who have an interest in their own survival, they will maintain control of the system and exploitation will be limited. But if the federal government aggregates everybody into one big common pool, then everybody will think healthcare is "free" and nobody will have any stake in monitoring the system. The government itself will simply borrow or print money in order to win the favor of voters by maintaining the illusion that the system is sustainable. The tragedy of the commons becomes inevitable.

Obamacare and all socialized medicine schemes are an effort to turn health spending into one gigantic common pool. The rule of thumb about common pools is the bigger the pool, the harder it is to monitor and the easier it is for everyone to take all they can get while contributing as little as they can. As Frederic Bastiat put it in the 19th century, "Government is the mythical entity whereby everyone tries to live off the efforts of everyone else."

This is what has happened with Social Security. When it was invented in 1936, Social Security as a way of allowing people to retire at age 65 at a time when the average American lived until 66. Today the average American lives to 79 but people can start collecting at age 59 and may go on collecting for thirty years. Hardly anyone puts in as much as they take out. That is why the system is on course to run out of money in 2037, leaving unfunded liabilities of $10 trillion. Medicare is in even worse shape, projected to go into the red in 2017 with unfunded liabilities of $40 trillion, more than three times today's gross domestic product. Already Social Security and Medicare absorb one-third of federal revenues. By 2040 they may swallow everything.

The bizarre thing is that Obama and the gang think they can solve these problems by creating a bigger pool! Democrats continuously cite the impending Medicare implosion as "the reason we need healthcare reform."

But all Obamacare will assure is that all the individual players -- doctors, patients, hospitals, major corporations eager to dump their health benefits onto the federal government, social workers on a mission to help the poor, immigration lawyers dispensing justice -- will all be working to game the system, including getting illegal immigrants on the rolls. After all, doesn't making the hospitals treat uninsured illegal immigrants just add to their costs? Wouldn't it be cheaper to include them as well? Just to anticipate a bit, "If we can provide full medical to terrorists in Guantanamo, why can't we provide it to hard-working illegal immigrants."

During the New York City financial crises, a woman wrote a letter to the Daily News defending the city. "God bless New York City," she wrote. "I grew up in New York City and the City provided us with everything. It gave us housing, it gave us welfare, it gave us unemployment insurance, it gave me a free education at City College. People say New York is too generous but all I can say is 'God Bless New York City.'" The woman lived in Teaneck, New Jersey.

That's the way common pools work. Take all you can and then get out before it comes time to make your contribution. Only this time the stakes will be even higher. If Medicare has created a chasm the size of Grand Canyon in the federal budget, Obamacare promises to be a meteor crater as wide and as deep as the United States of America.

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About the Author
William Tucker is news editor for RealClearEnergy.org.