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Health Insurance's Ideological Divide

July 2, 2009 RSS Feed Print

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Health insurance companies (or the big ones, at least) want whatever Frankenstein-esque monster bill that emerges from Congress's health reform debate to require everyone to buy health insurance. Bryan Caplan has a must-read post on what he sees as the main intellectual justification for mandatory health insurance.

Shorter version of Caplan: The standard criticism of markets in health insurance harps on a phenomenon called adverse selection: relatively healthy (low-risk) people will find health insurance too unaffordable for them, because the premiums are inflated by all the relatively unhealthy (high-risk) people buying insurance. These healthy people will drop out of the market, and thus premiums will inflate further still for high-risk people left in the pool.

Caplan responds that the solution of mandatory insurance does not actually do anything about this problem, because insurance companies really can tell who the low-risk people are, and charge them lower premiums accordingly.

So he says the real "intellectual" (scare quotes his) justification for mandatory insurance and other health-care regulations is the concern that "big bad insurers won't cover people unless it's profitable."

Here's my question to Dr. Caplan: But far from being populist anti-intellectualism, isn't the objection that "poor people will not be able to afford health care in a free market and so the sick ones will die" a very real challenge that requires a response? Does the fact that, by Caplan's own admission, a free market in health insurance would underserve sick people show a real problem with the laissez-faire approach?

I would pose to Caplan a question that Ezra Klein, a good representative of the anti-free-market view on health care, asked on his blog recently:

Are we really sure we want a bustling market in how to cleverly revoke the insurance of people who prove to be sickly?

I don't ask this question to try to prove Caplan wrong or because I don't think the laissez-faire side has a good response. I'm genuinely curious because I don't think supporters of free markets in health insurance answer Klein's question directly often enough.

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The VA has had some very bad administrators but in qualified hands it can be the best. We can do mass buying of supplies, buildings and labor--and make savings possible the way the post exchanges work. Take employers out of it. Take insurance agents out of it, along with the commissions they get. I've had medical care for years and I know modern methods and computers should be lowering costs. All Land Grant colleges must go back to not charging tuition and thus put an end to student loans. .

auradawnveirs of CA 1:36AM July 06, 2009

why Matt is so much better in this space that his predecessor, Jimmy P.
Jimmy would not have written about a moral or philosophical question concerning the health care "business"---except maybe to deride bleeding-heart liberals for even wondering if such considerations should invade "business" at all.
Yes, we need everyone buying insurance, so we can drop the other social programs like SCHIP and Medicaid--after they become unnecessary. Yes, we need everyone contributing SOMETHING, even if heavily subsidized. Yes, we need a "public option" to set a standard for what a "good" plan is and what prices it should be paying to providers. Yes, we need to squeeze the providers. Yes, we need to rein in the trial lawyers. Yes, we need to outlaw the direct-to-consumer advertising of prescription drugs. Yes, we need to expect that poor people will be taken care of as well as rich ones. Yes, we need to help employers, especially small entreprenuers. Yes, we need to lower standards, costs and risks for new people to become primary care physicians---so we get more of them. And, to the question, yes, we need to get rid of the "bustling market for cleverly revoking the insurance of people who prove to be sickly".
No corporations can do any of this. Only government can. We have the dang votes in the Senate if properly arm-twisted. We have the proper president to administer it. Now just do it.

Muser of NM 11:48AM July 02, 2009

Klein's question illustrates one of the main problems with health care today -- it's all about insurance. But you should be able to get affordable health care without insurance. Insurance should be for emergency and catastrophic care. For other procedures you should shop around for the best price. When you use insurance for health care purchases it provides a recipe for bureaucracy, cost inflation and higher premiums that promote a vicious circle of people being left without coverage.
I would argue that we are so reliant on insurance because of the tax code, which subsidizes insurance as an employee benefit. Beyond promoting the insurance model this also ties health care to employment, which is nonsensical.
Rather than seeking how to extend insurance to everyone we should be attempting to lessen its role.
Now, even after we create a true marketplace in health care that drives down costs it may be true that there will be people out there that can't get adequate health care. But how does this differ from any other system known to exist? Even in single payer universal health care systems people are denied care, either outright (treatments are determined not to be cost effective, the patient may not have long to live, etc) or through waiting lists.
Seems to me the best approach is promoting a competitive environment that drives down costs and promotes the maximum incentive for the development of new treatments.
http://togetrichisglorious.blogspot.com

Colin of DC 11:34AM July 02, 2009

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