The morality of health care finance

I think this post wins the prize for boringest title ever. Also, it seems to be roughly one squintillion words long. But stay with me. This is important.

A post from my old blog on the morality of healthcare transfers has attracted an amazing amount of ire from the liberal bloggers and commenters flocking to complain about how evil I am. Most of them, in the course of criticising it, display what seems to me like an Olympic-caliber ability to miss the point. However, given how many of them did not understand what I was saying, it seems likely that I was more in error. Let me see if I can clarify.

There are some arguments that the market for health insurance is different and special, and therefore can be best provided by the government; I find those arguments unconvincing, for reasons I will explain another time. But that is not really an argument about the moral merits of the system; it is a claim about efficiency.

In discussing the morality of a single-payer system, those efficiency considerations are irrelevant. In discussing the morality, one thing matters1: who is made better off, and who worse off, by the system?

Most advocates of single payer, I think, care most about this justice claim. They may also think that they can make the system more efficient, but if one could somehow prove scientifically that a private system would be cheaper and better, they would still favor a public system as long as a substantial population remained uninsured.

But wholesale transfers to large classes, from large classes, are not good moral philosophy unless those classes are very well specified to the moral effect you are trying to achieve.

For example, we could take money from taxi drivers and give it to surfers. Some of the taxi drivers would be bad people who don't deserve their money; some of the surfers would be sterling chaps whom society has failed to justly reward. But still, we all2 recognize that this would be moronic, because virtue and vice are fairly randomly distributed within and between the two populations. There is no reason to think that on net, we would have enhanced social justice.

Now, Ezra's original post criticized Giuliani's health care plan on the grounds that it will transfer less money from young, healthy people to old sick people:

If you're healthy, a world in which Giuliani's plan was law would be a world in which it was economically foolish of you to purchase high quality, comprehensive coverage. And that would be fine -- for the healthy individual. But insurance works based on risk pooling. If our hypothetical 23-year-old only uses $10 of health care a year, but is now paying $80 rather than $100 for his plan, that's less money that can subsidize someone with a chronic illness.

This post makes what I think is a very common assumption among single-payer advocates.

A gigantic single-payer system is a pretty blunt instrument; it transfers money from one group, the young and healthy, to another group, the old and sick. It does not distinguish much more finely than that between the deserving and undeserving within that class. This is why discussions of particularly deserving or undeserving people within the larger class, such as your fine old Uncle Bob who served his country in two wars before becoming a minister, are irrelevant; as with the surfers and taxi drivers, almost any class we can specify will contain some very worthy members who deserve more from society than they have gotten. What we need to know is whether the class of old and sick people as a whole are much more deserving than the class of young and healthy people; whether our transfers do more good than harm.

Single payer advocates seem to invariably assume that the answer is yes. This is a natural reaction; the old and sick inspire our sympathy. But I am not sure that, as a group, they should also summon our sense of social injustice.

How do we decide which class is more "deserving"? Our intuitions offer dozens of ways, but I think these are the major metrics:

1. They are needy. The class we propose to benefit has greater need for the money than the class from whom we propose to take.

2. It's not fair. The class we propose to benefit has been unluckier than the class from whom we propose to take.

3. They are responsible. The class from whom we propose to take has in some way contributed to the problems we are trying to rectify.

How well do any of these describe the old and sick en masse?

Start with a stylised fact: most people who use a lot of healthcare do so because they are above the median age of the population. There are people with horrible congenital diseases, but there are not that many of them. Most people use healthcare because their body has been around long enough that something has broken down, or the law of large numbers has had enough time to deliver an unpleasant accident. As a class . . . let me say it again, as a class, they are sick because they have already lived a long life. Individuals within the class may have a different story, but if you are only interested in discussing a particularly unlucky, and small, subgroup, such as young people with cancer, then what we should be looking for is a transfer which benefits that subgroup.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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