I want to echo something Matthew Yglesias picks up that I’ve suspected was true. It makes economic sense to allow immigrants, legal or otherwise, to buy insurance on the proposed insurance exchange, because it will likely lower the average costs for everyone.

The mindless Joe Wilsons on the right have managed not only to lie about what the bills say but to misrepresent the issue as whether tax payers should pay for free medical coverage for illegals. But they’ve got it backwards, again.

While the House health reform bill would prevent those who aren’t citizens or lawful residents from obtaining benefits under the bill, that provision was designed to limit who gets federal subsidies on the insurance exchange that would be created. But it makes no sense to limit these people from voluntarily purchasing insurance on the exchange.

Under the reform bills, mandates would require most businesses to provide (or pay) and most indviduals to purchase insurance. The mandate exists to prevent free riders and to help create a very large pool of insured people, to help drive down the average cost of coverage. If more people with low risks of imposing health care costs sign up, then the average goes down and everyone in the pool saves money.

That seems to be what would happen here. Yglesias quotes the relevant analysis from this Newsweek article:

Consider a few statistics. According to a July article in the American Journal of Public Health, immigrants typically arrive in America during their prime working years and tend to be younger and healthier than the rest of the U.S. population. As a result, health-care expenditures for the average immigrant are 55 percent lower than for a native-born American citizen with similar characteristics. With the ratio of seniors to workers projected to increase by 67 percent between 2010 and 2030, it stands to reason that including the relatively healthy, relatively employable and largely uninsured illegal population in some sort of universal health-care system would be a boon rather than a burden. “Insurance in principle has to cover the average medical cost of all the people it’s serving,” explains Leighton Ku, a professor of health policy at George Washington University. “So if you add cheaper people to the pool, like immigrants, you reduce the average cost.” More undocumented workers, in other words, means lower premiums for everyone.

It’s also possible that some of these folks would be higher-than-average risks and thus increase the average, so I’m not certain how this comes out in the aggregate. But it would also be true that since these high-risk folks are more likely to get sick, and thus require more emergency treatment that would otherwise be provided free, that it makes sense to allow them to purchase insurance on the exchange.

Even from the conservatives’ point of view, that means the illegals they villify would be helping pay for their own care rather than relying on the free emergency care paid by tax payers. But once again, mindless reactions by the Joe Wilsons of the world won’t let them support something that’s entirely consistent with ideas they claim to support.

This seems a case where good ethics and good policy are also good economics, but I’d like to hear from health economists on whether this is right.

Update: Apparently the White House can’t support either good policy or good economics.

More:
From Think Progress’ Wonk Room, on why verification procedures aren’t always cost effective.
dday, Owning It — much more on the economic nonsense of excluding immigrants.
Ezra Klein expands the argument