COVID-19 and moral hazard

I imagine you are tired of exhortations from the health establishment to get vaccinated and wear a mask. I am too. You likely think that President Joe Biden’s attempt to require large employers make their workers take the vaccine is executive overreach. So do I. As a citizen with strong libertarian sentiments, I don’t like being told what to do, especially by the government. When authorities tell me to do something, I usually try to do something else.

I am often only dimly aware of how much I depend on fellow citizens to secure my freedom. Seeing soldiers in uniform reminds me. I should also remember, but too often forget, about the health and food supply chain workers who risk their health every day so I have food to eat and care if I get sick.

We freedom-lovers know that a functioning free society relies a lot on personal responsibility. I try to do my part, though often fall short of my ideals. My task is made harder when society’s incentives go in the wrong direction, such as by letting me pass costs on to others if I take risks and have bad luck. Insurance companies understand the effect this can have on complacency toward risks. They call it moral hazard.

COVID-19 is a moral hazard minefield. It would be nice if my choices about vaccines and masks affected only my health and wallet. But they don’t. Lots of evidence indicates that unvaccinated people more often get sick with COVID, and are much more likely to be hospitalized. Using a conservative estimates of $60,000 average cost for a 7.5-day COVID hospital stay, roughly 200 current hospitalized COVID patients in Alaska, and four times the hospitalization likelihood for the unvaccinated — a Los Angeles study from put that number much higher — the extra risk of insuring against hospitalization if you are 12 and older and unvaccinated costs about $100 for September alone.

Who pays those hospital bills? If you have private health insurance, as I do, your insurer is getting a lot of those bills lately. Get ready for premiums to go up. Government insurers like Medicare, Medicaid and the VA will send the bills to us taxpayers.

Of course, it doesn’t stop there. Even if not hospitalized, the sick and quarantined miss work. Overtaxed hospitals have to ration care, including for non-COVID patients. People stop eating out and visiting local retailers. Kids get locked out of school, causing more parents to stay home. The economy goes south. We all pay for the choices of the COVID-risk complacent.

You may not believe these numbers. Many private corporations do, though, and are taking matters into their own hands without prodding from the government. After three unvaccinated workers died, Alaska Airlines is giving employees a $200 bonus to get vaccinated. Competitor Delta went further; it will start charging unvaccinated employees $200 per month.

More companies are sure to follow Delta’s lead. I hope they do. Those of us who enjoy our freedoms and believe in personal responsibility applaud private initiatives to bill those who can’t see through the moral hazard fog.

So all you fellow freedom-lovers out there who reject the vaccine and won’t mask up: Enjoy your freedoms. And pay up.

Matthew Berman is professor of economics at the University of Alaska Anchorage Institute of Social and Economic Research, or ISER. The views expressed here are his own, and do not represent the views of ISER or the university.

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