Public Finance Principle : The Free Rider Problem Essay

1614 Words Aug 24th, 2016 7 Pages
1. Case study:
Public Finance Principle: The Free Rider Problem
The free rider problem is when an individual or entity allows others to pay for a benefit or service they enjoy without paying for it themselves (Rosen & Gayer, 2014).
The topic is Health Insurance. In the article Duska concludes that there is an unclear notion to the right of health insurance (Duska, 2008). There are millions of people that do not have health insurance, and some of them do not, as they chose not to purchase it (Duska, 2008). Based on the fact that people have the “right to health care” and they chose not to purchase insurance, this in effect becomes a free rider issue. Having the right to health care and choosing not to purchase health insurance puts others in the position to provide individuals care that others must pay for. This is where the health care reform regulations have come into play. The question then is, if people have the right to affordable health insurance, who is obligated to provide insurance? Duska (2008), states “it is not the responsibility of the private insurance companies as it is not reasonable to require private companies to take on high levels of risk that could be detrimental to the company by taking on losses”. So it then falls back on the government to provide this coverage, which they do, and this benefit is then funded through taxation such as Social Security and Medicare (Duska, 2008). In essence, this is the example of a free rider problem. Those who…

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