The Economics of Health Insurance Mandates

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The economic theory really does apply in practice but also perhaps not surprisingly it is true that the real world is more complicated than what streamed of in our philosophy and so what we saw. It's not just enough to to mandate it you have to enforce the mandate which may sound obvious, he says. One way to enforce a mandate is to find people for not complying instead of the stick is the carrot it's to subsidize people for complying. Joe: I think two main lessons came out of thinking about these mandates.

If you knew exactly when every person was going to die, or require medical care, you could make a killing buying and selling insurance. Nobody knows these things, of course -- the future is hard to predict -- but some people know something about the future that other people don't. This sets up adverse selection: the ability of one party to leverage information another party doesn't have, in order to gain an economic advantage. Economist Amy Finkelstein is an expert in this phenomenon, as well as the usefulness of empirical studies in economic research.

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Amy Finkelstein received her Ph.D. in economics from the Massachusetts Institute of Technology. She is currently John & Jennie S. MacDonald Professor of Economics at MIT. She is the co-director and research associate of the Public Economics Program at the National Bureau of Economic Research, and the co-Scientific Director of J-PAL North America. Among her awards are a MacArthur Fellowship and the John Bates Clark Medal. Her recent book, with co-authors Liran Einav and Ray Fisman, is Risky Business: Why Insurance Markets Fail and What to Do About It.

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