ObamaCare: A Bad Deal for Young Adults

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One of the most interesting questions aboutthe health care overhaul now moving throughCongress is how it would affect young adults.That legislation would force most or all Americansto purchase health insurance (an “individualmandate”) and would impose price controls onhealth insurance (“community rating”) thatwould limit insurers’ ability to offer lower premiumsto low‐​risk enrollees.

Those provisions would drive premiumsdown for 55‐​year‐​olds but would drive them upfor 25‐​year‐​olds — who are then implicitly subsidizingolder adults. According to the UrbanInstitute, many young people could see their premiumsdouble, whereas premiums for olderadults could be cut in half.

Massachusetts benefits from another type ofsubsidy that props up its regime of mandates andprice controls: large subsidies from the federalgovernment. In contrast, the United States as awhole has no external party it can exploit to subsidizea nationwide Massachusetts‐​style healthcare overhaul — unless Congress finances thatoverhaul through additional deficit spending,which is really just another way of taxing theyoung to subsidize the old.

The irony is that Barack Obama won the presidencywith 66 percent of the vote among adultsaged 18 to 29. That’s a larger share than any presidentialcandidate has won in decades. Yet hishealth care overhaul could impose its greatestburdens on young adults.

Aaron Yelowitz

Aaron Yelowitz is an associate professor of economics at the University of Kentucky and an adjunct scholar at the Cato Institute. This paper is based on a lecture delivered to the Undergraduate Economics Society at the University of Kentucky on October 1, 2009.