Free Rider – A Justification for Mandatory Medical Insurance Under Health Care Reform?

Abstract:     
Section 1501 of the Patient Protection and Affordable Care Act added section 5000A to the Internal Revenue Code to require most individuals in the United States to purchase a minimum level of medical insurance. This requirement, which is enforced by a penalty imposed on those who fail to comply, is sometimes referred to as the “individual mandate.” A frequently stated defense of the individual mandate is that there are a vast number of persons who do not purchase medical insurance and then obtain free medical care when the need arises, and the individual mandate will require those persons (often referred to as “free-riders”) to pay their share. It is the significance of this free-rider justification that we question. We conclude that the free-rider problem, if it existed at all, likely was of minor significance and can hardly be said to justify the adoption of the new health care program. The actual congressional reason for adopting the program seems to rest on an entirely different purpose, and the debate over the desirability of the program should focus on the merits of that other purpose.

Number of Pages in PDF File: 12

Keywords: Individual Mandate, Free Rider, Medical, Health, Insurance, Patient Protection and Affordable Care Act, Obamacare

JEL Classification: I10, I11, I18, I19, K32

Accepted Paper Series