Public Option = Massive Income Redistribution

From the Wall Street Journal article (9/29/2009) “Young Back Health Proposals Amid Potential Costs”:

Young adults remain some of the strongest supporters of a health-care overhaul, but many acknowledge they don't understand proposals that will likely saddle them with higher costs.

In the latest Wall Street Journal/NBC News poll, 18- to 34-year-olds showed some of the same apprehension as other age groups when asked whether President Barack Obama's health-care plan was a good idea. But half in that age group said they support a public insurance option, one of the most controversial elements of some of the proposals, with 43% opposed. It was the only age group in which more respondents supported than opposed a public option.

At the same time, the poll suggested many young adults didn't know what was in the legislation, with 48% saying they didn't understand or understood only somewhat what was being debated. That compared with 40% for respondents aged 65 and over.

MP: Before they throw their support so strongly behind a public insurance option, young adults might want to better understand the huge, inter-generational income redistribution that might be imposed on them if the public option passes, as outlined in these two recent reports:

From the Washington Post article (9/16/2009) “Young Adults Likely to Pay Big Share of Reform's Cost”:

As health-care legislation advances through Congress, the young adults who were so vital to President Obama's election are emerging as a significant beneficiary of his top domestic priority, but they are also likely to play a major role in funding any reform.

Drafting young adults into any health-care reform package is crucial to paying for it. As low-cost additions to insurance pools, young adults would help dilute the expense of covering older, sicker people. Depending on how Congress requires insurers to price their policies, this group could even wind up paying disproportionately hefty premiums -- effectively subsidizing coverage for their parents.

From the Wall Street Journal article (9/27/2009) “Health 'Reform' Is Income Redistribution”:

Like the homeowner who waits until his house is on fire to buy insurance, younger, poorer, healthier workers will rationally choose to avoid paying high premiums now to subsidize insurance for someone else. After all, they can always get a policy if they get sick.

To avoid this outcome, most congressional Democrats and some Republicans would combine guaranteed issue and community rating with the requirement that all workers buy health insurance—that is, an "individual mandate." This solves the incentive problem, and guarantees that both the healthy poor 25-year-old and the sick higher-income 55-year-old have heath insurance.

But the combination of a guaranteed issue, community rating and an individual mandate means that younger, healthier, lower-income earners would be forced to subsidize older, sicker, higher-income earners. And because these subsidies are buried within health-insurance premiums, the massive income redistribution is hidden from public view and not debated.