I found an interesting article on BusinessWeek's site today that relates to costs, specifically sunk costs, in terms of health care. Top economists are discussing implementing an "individual mandate" requiring individuals to purchase some form of health insurance, or face a fine. If implemented, it would be something similar to requiring people to have car insurance, something that all law-abiding citizens simply accept and don't put up too much of a fuss about.
I don't know about the rest of you, but I treat my monthly cost of car insurance as a purely sunk cost. In Chapter 4 of the text we learned that sunk costs are costs that are commited and therefore unavoidable. All of us purchase car insurance, even though most of us have probably never been in a serious enough car accident to justify the cost of the insurance. Similarly, I think requiring all individuals to have some basic form of health insurance is a smart idea. Even though a lot of us in school right now are young, in good health, and have probably never ended up in the emergency room, there is always the chance of a "serious accident" occuring, which is the point of having insurance. If all of us simply treated the cost of health insurance as a sunk cost, people wouldn't be getting so worked up about health care reform.
The article discusses the right price point for the fine to incentivize people to just buy health insurance coverage rather than having to pay a significant fine. I think that this situation represents an opportunity cost, in the financial sense. Here is a hypothetical situation to help illustrate my point: Let's say you have the choice of purchasing health insurance for yourself for $1000 per year, or you can not purchase health insurance and pay a yearly fine of $600. The opportunity cost of not purchasing health insurance is the chance to save $400 per year. However, let's say you factor in the chance of having a catastropic accident, one that would leave you with $100,000 worth of medical bills if you were uninsured, or $10,000 worth of medical bills if you were insured. Now your opportunity cost of choosing to remain uninsured is a much larger net loss, versus a much smaller net loss if insured. Which would you choose?
This article helped illustrate to me why the health care crisis our country faces right now is so important, both on a macroeconomic level and a microeconomic level, since it stands to impact the lives of every individual as well as the state of the country as a whole.
What do you all think?
Health-Care Reform: The Mandate Debate