Gaming the Healthcare System

In recent blog posts I’ve discussed how the Affordable Care Act creates perverse incentives for employers and insurers. In this piece I’ll touch briefly on how it creates perverse incentives for individuals. (For more discussion, please see my Independent Institute book, Priceless: Curing the Healthcare Crisis.)

One can get a glimpse of the problem by observing a flaw in the model for the ACA—the Massachusetts healthcare system: Healthcare in the Bay State is afflicted with people who are gaming the system.[1]

People remain uninsured while they are healthy and get insurance after they get sick. Then, after they receive care and their medical bills are paid, they drop their coverage again. In the industry, they are called “jumpers and dumpers.” They jump in after they get sick and dump the plan after they get well. This behavior is more likely the lower the penalty for being uninsured and the more weakly the individual mandate is enforced.

Under the Affordable Care Act, the fines for being uninsured are low. When fully phased in, the fine is $695 for individuals and $2,085 for families. But these fines do not apply to people who do not file tax returns—and that is more than 20 million households.

Individuals gaming the system could be the death knell for private insurance—leading to what many in Congress wanted all along: a single-payer, public plan.


1. Kay Lazar, “Short-term Insurance Buyers Drive Up Cost in Mass.,” Boston­ Globe,
June 30, 2010,

[Cross-posted at Psychology Today]

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