Wednesday, January 12, 2005

Illegal immigration - a classic problem of externality

Illegal immigrants inundate hospitals:
"New Jersey's escalating population of illegal immigrants is placing an ever-growing burden on the state's hospitals, which expect to lose $200 million this year on care to the underground community. ...
"'New Jersey hospitals generate about $15 billion in total annual revenue ...' said Sean Hopkins, the senior vice president for health economics at the NJHA.
"'However,' Hopkins said, 'even with all those revenues, the hospitals in this state expect to generate a total net surplus of just $78 million, and some 40 percent of the hospitals in the state expect to lose money.'"

As this story from The Times (Trenton, NJ) shows, illegal aliens aren't just bankrupting health care facilities in the southern border states. The US government estimates the illegal alien population of New Jersey at 135,000 while Seton Hall U. Institute on Work estimates 500,000. This puts the hospital loss at anywhere from $400 to $1,500 per illegal alien.

How much is this problem costing the whole country? It's a bit hard to say. This article points out that such costs for Los Angeles amount to $350 million. The Census Bureau counted eight million illegals in the US in 2000 - and they say the count was low by 10 percent, others place the figure up to around 15 million, so the national cost, just for hospital care, is likely well over $4 billion and could well be several times that amount. Federal reimbursements currently cover only three to four percent of the loss. Federal reimbursement for charity cases runs nearer half of costs, but most illegals refuse to provide to hospitals all the information required to process a claim under that program.

Add to the healthcare costs the costs of schooling their children and incarcerating their criminals, and the cost to the US economy runs into many billions of dollars annually. Remember that the next time some bureaucrat condescendingly explains to you that we just can't afford to control the border, let alone repatriate illegals to their countries of origin.

In economics, there is a concept called externality. Costs are said to be externalized when they are borne by others than those who reap the benefits. A relative few employers reap very substantial benefits by employing illegal immigrant labor, but they do not bear the full cost of employing these people, they externalize those costs on the rest of us. We pay for this in higher costs of medical care, insurance, schools, prisons, etc.

Looked at another way, if hospitals controlled the borders, they could put several billions into border enforcement and save money on treating people who cannot pay. But the costs and benefits are shared asymmetrically.

The bottom line is that we are, as a society, already paying a very heavy tax imposed on us by the Congress in the form of illegal immigration. They assume that, because they don't send us a bill for this "service," we will not be smart enough to figure it out. So, when some congressman tells you we can't afford several billion dollars to control immigration, tell him we not only can afford it, we would save money by doing so.


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