Comment on Liam's Post on Health Ins

Couldn't put this in as a comment on Liam's post about Schwarznegger's health insurance policy because I've signed into the new version of Blogger using my Gmail account.

There is a really interesting situation developing in America on this issue. The Californian trade unions came out against Arnie's proposal yesterday as they fear the financing of universal health insurance would effectively put more tax on the "middle class".

Have trade unions become a "middle class phenomenon"? Will universal health insurance dominate next year's election in the States?

I can't answer the first question, but in relation to the second, Senator Edward Kennedy is due to follow a similar suit on Schwarznegger's initiative today, by suggesting to the Senate Health Committee that they introduce FEDERAL universal health coverage. Now that's something.

What we know as economists is that those who don't have health insurance probably need it most. And that universal cover would probably see prices rise for everyone.

Finally, there are also parallels here with the "Automatic 401K" idea from the literature on behavioural interventions in finance. This idea suggests that employees should be automatically enrolled in pension plans, then given the "option to opt out" of the plan.

Why is there less paternalism with 401k's compared to the paternalism that is emerging on health insurance? It must be the case that the federal government can save some money by putting everyone on health insurance now (rather than paying medical bills that arise at some point in the future, for individuals that have no cover).

However, the federal government has no similar incentive to introduce universal 401K's. If people are on the breadline when they retire, then the federal government will pay the necessary bills at that future point in time. The notion of taking out an insurance policy to cover the risk of poverty in retirement is too absurd as poverty will occur with absolute certainty unless individuals make provisions for retirement from their current income.