06 May 2013

Calling something "social insurance" doesn't make socialized costs any less socialist

Bloomberg | Josh Barro | Why Cash Can't Replace Health Insurance

The Douthat and Yglesias plans would each make insurance against catastrophic losses universally available and provide redistribution from the rich to the poor, but they would do much less than Obamacare (or even the status quo) to redistribute from the healthy to the sick.

Some people have the misfortune to have chronic illnesses -- diabetes, HIV infection, kidney disease -- that can cost thousands of dollars a year to treat. A system of catastrophic-only coverage, say one that only covered health expenditures exceeding 10 percent of income, would leave these people poorer while making healthy people better off, even if it came with cash grants funded by the savings from reduced health-care costs.
Some people have the misfortune to be dumb or unmotivated or have poor impulse control. This makes those people thousands of dollars poorer than they otherwise would be! The system Barro advocates here would allow these people to continue to be worse off than people who are smart, industrious and disciplined. What injustice!
Comprehensive insurance that covers routine care is not “insurance” in the sense of covering expenses that are unexpected at the individual level. But it is social insurance that covers the unexpected event of being a person with high ongoing needs for routine care.
I don't want to be one of those people that screams "Socialism!" at the slightest provocation, but that's what Barro is advocating here.

Look: some people are going to have bad luck or make bad choices. Those people will have worse outcomes than people who got a better roll of the dice or made better decisions. Some of that luck or those decisions will fall under the very broad domain of "health." It doesn't make any sense to protect people from every small negative consequence of bad luck/decisions in health but not everything else.

By all means, let's protect people from the most severe negative consequences. That's called a minimax objective, and it's what the catastrophic insurance schemes that Douthat and Yglesias advocate would do. You can't just wave your hands, slap the label "social insurance" on anything health-related and thereby make it everyone else's responsibility to deal with bad consequences.
Maybe [only partially socializing the costs of chronic diseases] is an acceptable outcome. The government does not enact policies to compensate people for every instance of bad luck. Doing so for poor health might be especially wrongheaded, since it often arises from a mix of luck and choices; offsetting the financial penalty associated with chronic illness may be reducing people’s incentives to stay healthy.
What the...

At first I thought Barro simply didn't see the flaw in his thinking. Plenty of people treat health expenses like some sui generis thing that we need to analyze in its own little moral bubble. But then Barro went and stared right at the flaw, admitted it existed, and then goes back to completely ignoring it.

How do you do that? What kind of anti-Mentat mind calisthenics enable you to handle that level of cognitive dissonance?
And if health-care costs continue to rise faster than overall inflation, a universal guarantee of comprehensive coverage would require ever-higher marginal tax rates and eventually become untenable.
This is the best chance I think there is for convincing anyone on the Left that socialized health insurance insulation is a bad idea. Not the higher tax rates part: they love that idea.

What I mean is that very soon we're going to face the trade off between, say, protecting everyone from having to pay for their own z-packs and progestin, or protecting a few very unfortunate people from, say, being born to deadbeat meth heads. Are you going to make sure that a thousand people don't have to pay for their own annual tooth cleaning, or are you going to make sure one kid gets fed, clothed and educated? Because sooner or later (hint: sooner) we'lll be facing those sorts of trade-offs.

And no, "make the rich pay" isn't an answer. There's a finite supply of resources owned by rich people but an infinite demand to get other people to pay for stuff.

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