The morality of health care finance

By Megan McArdle

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.

As a class, are the old and sick needier than the young and healthy? No they are not. They have more assets and less poverty than any other group.

As a class, are the old and sick unluckier than the young and healthy? Considering people as beings with duration in both time and space, no they are not. The overwhelming majority of old and sick people were once young and healthy. They got to be young and healthy, and old and sick.

But consider the young and healthy as four dimensional beings. Some of them will not get to be old and sick; they will die young instead, which is worse than being old and sick. Weighing the bad luck of those with congenital diseases who never got to be young and healthy, against that of the members of the "young and healthy" group who will die young after paying a lot of money for someone else's healthcare, it seems likely to be, at best, a wash on the luck front.

Getting old is not, as many of my interlocutors seemed to believe, unlucky. It is, rather, inevitable--unless you're really unlucky, unlucky enough to die. The elderly have no fairness claim on the young.

As a class, are the young and healthy more responsible for the bad health of the old and sick? Quite the reverse. Many people in the old and sick category did nothing at all to deserve their fate; they just aged or were victims of fate. But some members of the "old and sick" class contributed to their fate. Contra many of my interlocutors, there are a lot of very expensive diseases that have a substantial lifestyle component: high blood pressure, coronary artery disease, diabetes, lung cancer, emphysema/COPD, congestive heart failure . . . many of our nation's biggest killers, and consumers of health care dollars. So as a class, the old and sick are somewhat responsible for their poor healthcare outcomes, although I will leave it up to the doctors to argue exactly how much responsibility they bear.

But even a small amount of responsibility for their condition obviates a justice argument for transfers, since the young and healthy bear no responsibility at all. A few members of the young and healthy may have contributed to the conditions of a few of the sick and elderly, perhaps by failing to get a flu shot, or driving dangerously. But it would be ludicrous to go after the entire class just to settle the liability of those few, like taxing the entire state of Oklahoma to pay for a car accident caused by one drunken Okie.

By none of these three standards, therefore, can I make a compelling case for taking money from one huge group of young healthy people, and handing it over to another huge group of old and sick people. Even if I leave aside things like property rights, coercion, deadweight loss--things I realise my liberal interlocutors aren't particularly concerned with, but my libertarian inquisitors will be--I don't see how the massive transfer implicit in single payer is justice-enhancing.

But I think many of those who read the post attributed to me a much broader claim that no government transfer would be moral. That is not so. I was questioning the moral justice of the enormous, blunt transfer between huge classes that is necessarily embodied in a single payer system, or at least one such as the versions of mandatory pooling envisioned by wonks like Ezra. Many people took that to mean that I believed there was therefore no moral argument in favor of caring for the sick. I confess that I'm surprised that someone like Scott Lemieux would make such an error, but as I say, perhaps I was unclear.

There is indeed a very compelling moral argument to be made in favor of some sort of government sponsored health care finance, which is simply this: no one should die, or suffer unduly, because they don't have the money to pay for treatment. Some of my libertarian readers will say that this still doesn't give the government the right to take the fruits of our labor by force, but in fact, I find this argument fairly convincing.

However, that doesn't mean that I should therefore be in favor of a single payer system. The fact that some people cannot afford some good, even a really important and valuable good like food or healthcare, is not a good reason to nationalise the production of that good. We do not collectivise the farms in order to ensure that everyone will have food; we give those who cannot afford food the money (or food stamps) with which to buy it. Section Eight vouchers are generally regarded as a much more successful system than housing projects (though arguably they could be better funded and structured.) If we are worried that some people cannot afford healthcare, there is a much simpler solution than constructing a giant government-run system; we could just give them the money to buy it.

Now, there are arguments against this: means testing benefits raises transaction costs, for example. But there is fairly compelling evidence that government purchases of goods and services do a better job of serving the poor than government provision of same3; and those targeted transfers really would be obviously justice enhancing (to all but hard-core libertarians). So the drawbacks to such a smaller-scale system would have to be pretty massive for me to endorse a single-payer approach.

1To people who are advancing a social justice claim

2Except maybe surfers

3And no, that doesn't mean I think we should privatise the welfare offices; I am talking about buying things for which there are already robust private markets

This article available online at:

http://www.theatlantic.com/business/archive/2007/08/the-morality-of-health-care-finance/1759/