TCS Daily

Health Insurance Do-Nots

By Arnold Kling - October 3, 2003 12:00 AM

"Forget about the haves and the have-nots. America now faces a divide between do's and do-nots... Conservatives, Sawhill argues, will need to spend more generously on child care subsidies and wage supplements and last-resort jobs to get the poor working (jobs bring mainstream values as well as money). Liberals will need to accept that money without behavioral change is useless or worse."
Jonathan Rauch


Columnist Jonathan Rauch points out that poverty is dominated by behavioral factors. The best anti-poverty program would be to increase work and reduce out-of-wedlock births. This approach of looking at "do-nots" vs. "have-nots" ought to be applied to health insurance.


A new Census report found that the number of Americans without health insurance has increased. Interestingly, the number with health insurance also increased. This fact did not receive as much notice.


In any case, the supporters of the nanny state reacted predictably to the news. The New York Times editorialized, "The lack of health insurance, a problem once confined mostly to the poor and nearly poor, has reached into the lower middle classes, most notably to those earning $25,000 to $49,999 a year, and even to some above $50,000. It is a problem that needs to be addressed by Congress and the administration, which have thus far sat mostly on the sidelines."


More Mental Illness


In America is Crazy, I wrote that our health care policy reflects mental illness. The fundamental problem is that we believe that health insurance is something that only should be received as a gift -- never obtained for oneself. Thus, we immediately assume that when a family does not have health insurance, they are to be pitied for not having received the gift, rather than being blamed for not having taken responsibility.


After the Census report was announced, the evening News Hour on PBS featured a young man (he appeared to be about 30) without health insurance who had been diagnosed with melanoma. The focus of the feature was the financial hardship that the man was going to have to undergo, including putting his family deeply into debt.


While I truly feel sorry for this man, I have so say that the worst of the financial burden of his illness was avoidable. When he was healthy, he could have obtained health insurance. Instead, he chose to spend his income on other things. He was a health insurance "do-not."


However, the thrust of the story was not, "Let this be a lesson to you. Buy health insurance, because you never know when you may need it." Instead, as in the Times editorial, the PBS story treated the man as a victim because he did not have employer-provided or government-provided health insurance.


Redistributing Health Insurance


In fact, everyone in the country pays for health insurance, whether or not they have it. When you pay for goods and services, part of the cost is the cost of employer-provided health insurance. In addition, everyone who is on a payroll pays taxes for Medicare, which provides health coverage for the elderly.


In Bleeding-heart Libertarianism, I argued that the welfare state redistributes poverty and may make it worse. Many people find this counterintuitive.


However, health insurance is a prime example of welfare state policies that impoverish some at the expense of others. The taxes that a young middle-class family pays to provide health coverage to the elderly (many of whom are well off) is money that the family cannot use to buy its own health insurance. Corporate employees have their health care subsidized by people who work for small businesses and the self-employed, even though the latter may have lower incomes.


The Times is right to note that the middle classes are squeezed today. However, as my essay pointed out, that squeeze comes from the welfare state. If instead we had the bleeding-heart libertarian approach to taxation, the middle classes would have more after-tax income to spend on health care.


Mandatory Health Insurance


I believe that some form of catastrophic health care coverage ought to be mandatory. This is a departure from pure libertarianism.


Mandatory health insurance would eliminate the problem of "do nots." One paternalistic argument for mandatory health insurance is that people who do not choose insurance are taking an irrational gamble. Like the cancer victim profiled on PBS, they do not appreciate health risks until it is too late to insure against them.


My argument for mandatory health insurance is slightly different. I believe that it is inevitable that taxpayers will offer some assistance to people with low incomes. Given that this is the case, then taxpayers have the right to insist that this government assistance should be spent responsibly.


Although it is paternalistic, mandatory health insurance at least treats health care as a purchase and not a gift. If instead we think of health care as something to be provided to us, and we think of those without health insurance as "have-nots" rather than "do-nots," then we are headed toward socialized medicine. Given the natural tendency for the health care sector to grow as new technologies develop, and given the way in which third-party payment for health care services stimulates demand, this means that our economy will become less and less free. That will turn all of us into have-nots.


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