After 30 years of waging the battle for broader health insurance, I am convinced the debate over universal coverage is more about values than it is about specific plans. If the resources were made available, we could easily develop a plan. We should focus on the question of what happened to social justice in an era of moral values. We should all look in the mirror.
His point is that our moral values are off kilter because we will not raise taxes to pay for universal health care coverage.
It is true that there are many people who do not health care coverage, including a large number of families with incomes over $50,000 who do not choose to buy health insurance. It strikes me, however, that we do not necessarily need to raise taxes in order to re-orient the public’s values.
We could make catastrophic health insurance mandatory, which would be sort of like taxing them to pay for their own health insurance. Redistributing income to poor people by raising taxes on the affluent could be treated as a separate issue.
It does not strike me as a matter of social justice that everyone, regardless of their level of affluence, must have taxpayer-financed health care. I can understand why a physician might be in favor of that. As an economics teacher, I might like to see taxes raised to pay for everyone to learn economics. But I see this as more a matter of narrow self-interest than “social justice.”
Thanks to Don Boudreaux for the pointer.
For Discussion. Why do people prefer that “social justice” be carried out with other people’s money via taxes than with their own money via charitable contributions?
READER COMMENTS
HispanicPundit
Nov 27 2004 at 7:17pm
My only guess would be that people assume that government is more encompassing, meaning that it covers more people regardless of their religious affiliation.
They fail to see that government is also much less efficient at doing it, though.
Marcos Polanco
Nov 27 2004 at 9:15pm
To respond to your question, charitable contributions rely on the personal discipline of large numbers of people to be effective, and is thus a risky path to achieving social objectives. Politics is simply more efficient, even if the government is less efficient.
Bob
Nov 27 2004 at 10:37pm
Marcos, what are you using as your definition of efficiency when you say “Politics is simply more efficient?” Force may be an efficient way to produce your desired outcome, but it is usually an inefficient way to produce a desirable outcome for the rest of us.
Yenko
Nov 28 2004 at 12:33am
I’m really not sure what is meant by the term “social justice” (especially since noone can seem to write it without enclosing it in quotes). In this instance, it seems to mean “social equality”, meaning that everyone is somehow entitled to health insurance. The word “justice” implies an absence of injustice. Is it an injustice that there are a great number of Americans without health insurance? I don’t think so.
What I see as an injustice is the fact that health insurance is presumed to be a necessity rather than looking at the reasons health care is so expensive in the first place and doing what is necessary to lower its cost. In my opinion, the best place to start is by getting the government out of it.
Chris Rasch
Nov 28 2004 at 2:03am
People prefer to force others to pay because they don’t believe that they could persuade them to give voluntarily.
Mike
Nov 28 2004 at 8:23am
It seems to me that people prefer to use other people’s money via taxes to carry out social justice because they feel it absolves them of personal moral responsibility for achieving socially desirable objectives.
What’s worse about this situation is that people seem content to have it dictated to them exactly which causes need to be supported – sort of a mental laziness that is very pervase in certain parts of this country.
As per health insurance, the idea that folks purchase catastrophe insurance is a good one. That is really the purpose of insurance, isn’t it? My wife and I have eschewed our employer insurance programs for years and have put that money away to pay for medical expenses – needless to say we are way up on the positive side of the ledger here. This January, my state will finally allow Health Savings Accounts, so we will be purchasing catastrophe insurance for $90 a month and place money into an account that works like a 401(k) in the event that we incur significant medical expenses.
I have never understood why people EXPECT health care to be heavily sibsidized or free. Some say it is because health care is a necessity. Isn’t food a necessity? I don’t expect to get a bag of apples for free when I go to the grocery. Why should I expect a bottle of amoxycillin or an annual checkup to be free?
spencer
Nov 28 2004 at 10:28am
Maybe it is because the system has changed. A generation ago most hospitals were financed by nonprofit organizations like churches, towns, universities, etc. But over the last couple of decades for-profit business have taken over most of the hospital in this country. Under the old systems the nonprofit hospitals always provided a large level of “charity” care but for-profit hospitals refuse to provide this charity care.
So the real question is what happened over the last couple of decades to drive nonprofit organizations out of the healthcare system?
Mike – the way the system evolved was because employeers were able to buy heath insurance with pretax dollars and the provision of continued new features to health insurance was just a way of avoiding taxes. Moreover, the development of preventive health care through HMOs was a free market solution to problems as they existed about 20 years ago.
Don’t the readers of this bog have any knowledge of history and how things got to be where they are? So many of the theories I see talked about here would not be given a second thought by anyone who knew any history of how things got to where they are.
Lawrance George Lux
Nov 28 2004 at 12:04pm
It is not just social justice! Other peoples’ money can pay my phone bill, and fill the gas tank of my truck. Everyone wants something for nothing, no one gets it.
The health care problem should be considered from a reverse angle: Pass a Federal law stating no one individual can spend, or have spent on himself, more than $100k per year( or per lifetime for that matter). There would be immediate redistribution of health care services with expanded base of Patients. lgl
Mike
Nov 28 2004 at 12:40pm
I don’t see how learning more about the history of the decline in the non-profit health care sector addresses Arnold’s question, which asks why you prefer the government to do a good deed on your behalf rather than you doing it yourself.
“the way the system evolved was because employeers were able to buy heath insurance with pretax dollars and the provision of continued new features to health insurance was just a way of avoiding taxes. Moreover, the development of preventive health care through HMOs was a free market solution to problems as they existed about 20 years ago”
– I was barely alive 20 years ago – but there are lots of forms of nonwage compensation stategies firms can employ if they want to increase employee compensation without incurring larger tax burdens (DWL?). Still, the question for me remains, why is it that employers decided to provide health insurance and not some other benefit? Why do people demand this type of compensation?
Here are my speculations about why the non-profits are going the way of the dinosaur:
1. Nonprofits are not fully able to benefit from the efficiency gains obtained through expanded operations or mergers (i.e. economies of scale). This is largely because many of the nonprofits have specific missions that do not blend well with others. For example, at my Catholic hospital, if my wife’s life was in danger during the delivery of a baby, we would have no option about how to proceed – the baby gets delivered. This hospital will not merge with another that would place my wife’s life on a higher priority level in these situations.
2. Perhaps for-profit hospitals provide better quality health care (empirical evidence is mixed – I can show you studies to support any position you might hold on this one and I do not want to get into the merits of any individual study). Even if quality is the same, for-profit hospitals are likely to provide this care at a lower cost, driving nonprofits out of business.
3. Perhaps for profit systems are more responsive to changes in demand and changes in technology – empirical evidence certainly supports this claim.
4. An Urban Institute study in 2003 by Yu-Chu Shen showed that conversions of non-profit hospitals to for-profit hospitals resulted in both increased revenues and reduced costs with no corresponding loss of capacity.
Spencer, can you explain this to me as it applies either to my comment or to Arnold’s question?
“So many of the theories I see talked about here would not be given a second thought by anyone who knew any history of how things got to where they are.”
I think that relying on economic fundamentals would go a long way here.
Deb Frisch
Nov 28 2004 at 1:32pm
I agree that the question of universal health care should not be framed as an issue of “social justice.” I disagree that the appropriate frame is “narrow self-interest of the health industry.”
The difference between univeral health care and universal economics education is that most Americans would be willing to pay substantially more for health insurance than Economics 101. Willingness-to-pay is a standard method of quantifying how much people value something. Therefore, universal health care makes more sense than universal Econ101 to anyone who understands Econ101.
It’s a simple question of how to maximize the utility of tax dollars. Some of us think that universal health care is a much better use of taxpayer money than bailing out tobacco farmers, killing Iraqis, etc.
Tom Ault
Nov 28 2004 at 2:49pm
To answer Arnold’s question: people prefer that “social justice” be carried out with other people’s money for two reasons. One, because the cause they advocate doesn’t have as much broad support as they think it should and thus some amount of coercion is necessary to force people to make the “right” decisions with their money. Two, because financing “social justice” coercively with other people’s money limits the hardship its advocates experience in pursuit of their goals. By forcing others to contribute, advocates of a particular policy experience a smaller drop in relative social status than they would if they alone financed their objectives. They might even gain if they can shift a larger portion of the burden to their rivals or attain popularity through their advocacy.
The phrase “social justice” is placed in quotes because it is really just a euphamism for “my policy preferences” expressed in terms of moral obligations. What constitutes “social justice” varies from group to group. Some consider guarantees of food, housing and health care to be matters of “social justice” and economic security and consider the deposition of the former regimes of Iraq and Afghanistan to be fundamentally unjust. Others consider the liberation of tens of millions from some of the most brutally repressive governments in history and planting the seeds of democracy in that region to be a matter of “social justice” with a far greater long-term payoff than providing a cradle-to-grave welfare safety net to those who could afford to purchase their own.
spencer
Nov 28 2004 at 3:31pm
OK, to answer the question the reason people prefer that govt force solutions rather than depending on the goodwill contributions of every individual is what economists call the “free
rider problem”. How do you keep people from either not contributing their share or taking more than their share if something is not completely paid for through a market mechanism.
As a caring society — rather than a religious society — there are costs of market solutions that society can decide to overrule. A so called free market solution does not have to always be the best solution. As a matter of fact is is hard to think of anything that is a completely free market goods.
Mike
Nov 28 2004 at 3:32pm
I believe Arnold’s question is not about maximizing the utility of tax dollars, but rather why we feel like we need tax dollars to achieve various objectives.
While you and I both agree that health spending is a better use of tax dollars than farm subsidies, you and I probably disagree that these tax dollars are necessary in and of themselves.
Just because a collective willingness to pay for some good exceeds that of another good does not imply that the former good should be purchased. I would be willing to pay more for a pair of Armani eyeglass frames than I would for a generic brand. However, I have no vision problem and regardless of how much I’d be willing to spend on a certain pair of glasses, I do not see the need to spend the money on them in the absence of a vision problem.
Further, even if I grant you that it is acceptable to keep taxing all of us at current rates, the correct decision from a public policy perspective requires THREE conditions to be met:
1. The NET benefits from spending on a good (like universal health care) are positive.
2. Individuals must be restricted from purchasing the “socially desirable” amount of that good.
3. The marginal net benefits from spending on universal health care must exceed the marginal net benefits from spending on anything else.
I’m not convinced that condition 1 is met in the case of a national health system, nor am I convinced that 3 is either.
Deb Frisch
Nov 28 2004 at 3:54pm
“Some consider guarantees of food, housing and health care to be matters of “social justice” and economic security and consider the deposition of the former regimes of Iraq and Afghanistan to be fundamentally unjust. Others consider the liberation of tens of millions from some of the most brutally repressive governments in history and planting the seeds of democracy in that region to be a matter of “social justice” with a far greater long-term payoff than providing a cradle-to-grave welfare safety net to those who could afford to purchase their own.”
Let’s forget about the term “social justice.” Let’s just focus on the question of how Uncle Sam should spend the $2 billion we give him every year.
Some of us think the hundreds of billions of dollars spent on the war in Iraq is well-spent since it’s about liberation and “planting the seeds of democracy”(a metaphor that’s appealing to eco-neocons?). Others think the money would be better spent if it were used as kindling, since the war is about occupation, murder and ensuring a stable supply of oil.
Some of us really do like the idea of Uncle Sam providing a cradle-to-grave medical safety net. Others prefer Sam limit his intervention to the pre-birth and pre-death stages of life, protecting us from abortion and physician-assisted suicide (we’ll take care of you before you’re born and when you’re almost dead. Aside from that, you’re on your own.)
A big slice of the pie is spent protecting Americans from risks. I think Sam spends way too much money protecting Americans from terrorists relative to how much he spends protecting us from breast cancer, diabetes or financial ruin caused by catastrophic illness. Surely reasonable people can disagree about how Sam should allocate the items in his risk management portfolio?
spencer
Nov 28 2004 at 4:10pm
OK, for profit hospitals raised revenues and lowered costs. Question — was the elimination of charity care a significant reason for this? I do not know.
Going back to the original question,and Klings suggestion of mandatory health insurance like we have manadatory auto insurance seems like a good idea. But there would still be a problem that insurance is a good way of subsidizing and
redistributing health care. In every state auto insurance is regulated and prices are controled by the regulator and health insurance probably would end up the same way.
Health care as a fringe benefit evolued largely
as a historic accident. It started during WW II when wages were controled as part of wage price controls and GM and a few other large corporations started health insurance as a way of raising salaries and attracting labor within the
wage control system. I would bet the reason it begin about WW II is that is when the pratice of medicine became advance enough that it made a big difference to a lot of people and how to deal with the costs of medical care became a problem. Until that time all a Dr. did for most people except for a few things like broken bones was relieve their pain. Essentially, as I understand it medicine after WW II evolved as a costs plus system much like defense contracts paid for through private insurance. It was not a problem until the 1960s-70s until the costs started being a significant factor in wage costs and large US manufacturing firms first started having significant foreign competition.
Boonton
Nov 28 2004 at 5:00pm
1. I doubt the validity of the first paragraph. Are we really to believe supporters of universal coverage do so because they feel guilty over not giving enough to private charity themselves and feel a gov’t program will ‘absolve’ them of this guilt? Or do they simply feel some level of healthcare should be available to everyone regardless of ability to pay?
2. Gov’t has always provided goods and services. At one time the best the gov’t could provide (when it wasn’t abusing people) was simple protection. As the economy grows, however, we are able to afford certain perks that are not available in a less prosperous economy…for example:
Well actually you can, its called food stamps and while there’s been some abuse it’s been a minor expense to the economy but it does appear to keep some from starving. My evidence? When there was a proposal to kill it in the 90’s, conservative Republicans from farm states killed it. Since everyone needs to eat, why would farm states care if food stamps were killed? They want people to buy food, they don’t care if they buy it with stamps or their paychecks. Obviously they believed killing food stamps would cause some people to have less food than necessary.
IMO it’s unclear that these programs cost as much as they appear. For example, if you assure people they won’t end up at the bottom of the bell curve…sick and starving in the street…you may cause them to be willing to engage in riskier bets then they would otherwise have. I mean risky in the good sense, taking a chance at looking for a new job or starting a business. I’ve always suspected that this makes the economy stronger than if the safety net isn’t in place.
There’s some evidence that fear of risk is holding back our modern economy. We often hear stories about people who are afraid to leave a job they hate because they can’t afford to lose the health benefits. A small stumbling block like this can mushroom thru the economy and result in smaller growth, inefficient use of capital and a host of other problems.
Healthcare should be approached as a safety net issue. Gurantee people some minimum standard and tax them to pay for it. Let them purchase additional coverage (if they want it) on the free market. I’ve proposed something along these lines:
1. A universal voucher funded by a dedicated tax. The voucher will be the amount raised by the tax divided by the number covered.
2. The voucher can be used to:
A. Buy healthcare directly.
B. Cash in against employer provided health coverage.
C. Buy coverage (any type, not just catastrophic) from insurance companies but require companies to charge equal premiums with only modest variation for risk & age.
D. Donate to charity or to another’s healthcare.
3. IF the people want lower taxes, they accept a lower voucher and vice versa.
Mike
Nov 28 2004 at 8:40pm
Doesn’t SAM already do this or are Medicaid and Medicare mythic programs? It is clear these programs have their problems, but that doesn’t mean that they don’t exist.
I think almost all Americans would agree that basic healthcare should be available to all, but that again is not the relevant issue here. The issue is about whether all people should have taxpayer financed health care. I suppose many won’t see the distinction, but I do think there is one. In any case, Stuart Butler gave a very interesting talk to the US Senate last year that discusses “Laying the Groundwork” for universal health care coverage. You can read his remarks here. He discusses the benefits and problems with our current employer financed system and social insurance systems for health care and many of the issues that have been brought up in this forum.
Regards,
Mike
Boonton
Nov 28 2004 at 9:01pm
True but they have two problems:
1. They are open ended, they pay for you to get ‘needed’ treatment without any attempt to match cost to revenue.
2. They have few market structures that encourage savings.
If you agree with the first sentence taxpayer financing is the only logical conclusion. Instead of ‘basic healthcare’ substitute ‘basic protection from criminals’ or ‘basic protection against foreign invasion’ and tell me if you have something that will not be taxpayer financed? This doesn’t mean that a private market cannot co-exist (take police protection, there’s a big market of private security firms that supplement basic policing).
Jon
Nov 28 2004 at 10:38pm
Many of us who favor government programs to help poor people with health care, food,housing, and education believe that helping the less fortunate is an obligation, not an option. We do not believe that any able member of society should be permitted to dogdge this obligation any more than we expect to voluntarily pay for roads and national defense while others freeload.
Many argue that this is just taking away justly aquired wealth and giving to those who did not earn it. These forget that much of what separates the rich and poor is not “earned”– being born in a time and place where ones abilities are useful, having good genes, able parents, or avoiding accidents, war, and disease.
Boonton
Nov 29 2004 at 11:01am
Jon,
I don’t disagree with you regarding an obligation society has to those at the bad end of the normal curve…so to speak. However I would like to argue for the position that pure charity is not the sole argument for a safety net.
The safety net functions as a sort of insurance policy of last resort for everyone. Even a rich person could end up pennyless given the right series of unfortunate events (look at how many one hit wonders and other stars blow through millions only to end up bankrupt years later). Hence there’s one reason to support a safety net even if you don’t care about other people.
Another reason is that I suspect a safety net makes the economy more dynamic. I recall several studies that showed that economic growth after WWII was not only larger than pre-WWII but was less erratic. In other words, booms and busts were more smoothed out. Just like a doctor will tell you it is better to be 200 lbs rather than constantly going back and forth from 100lbs to 300 lbs, I think an economy that is less prone to dramatic swings is probably healthier.
A primary cause for this, IMO, is the social safety net. This includes not only the formal welfare systems such as unemployment but also the ‘automatic stablizers’ we learned about in Macro Econ 101.
If these things cause a certain amount of economic growth then how certain can we be of the cost to individual tax payers? For example, Bill Gates pays a lot of money to fund other people’s SSI, unemployment and other benefits. If the Federal Gov’t didn’t provide these services Bill’s tax rates could be lower. However, if people choose not to buy X-Boxes and other software because they felt the need to be extra careful least they loose their jobs or get sick, then Bill’s income would be less.
I’m not going to say its a perfect wash but it might be closer to that than you suspect.
Mcwop
Nov 29 2004 at 2:39pm
The discussion point is false. Not all people prefer this, especially without knowing the terms for said social justice. Put a 15% payroll tax on it, then many will prefer staying with the current “social injustice”.
skh
Nov 29 2004 at 8:14pm
Boonton, I agree with most of your points, but question the utility of a ‘social safety net’ in the acceptance of different risk levels. It isn’t necessarily a good thing that people will take longer odds, as it were, when they know that they have a government-funded fallback position.
Unemployment (“Insurance” is implied) isn’t welfare in any respect. You are entitled to no benefit if you haven’t held a job recently and contributed to the state unemployment fund.
Boonton
Nov 29 2004 at 10:19pm
skh,
I would argue that the fact that economic growth has been better post-WWII than before as evidence that the social safety net has not caused people to take excessive risks.
skh
Nov 29 2004 at 11:28pm
The ‘safety net’ probably didn’t have much influence on the post-WWII economic boom, but rather several other determinants of aggregate demand and supply. I’d think that outside of a somewhat passive financial ‘safety net’ (for bank deposits and such), individuals buffer their risk automatically. Most people wouldn’t fold their entire nest egg into the GOOGLE IPO, because there was considerable risk. However, there most likely WERE people who did that. The risk is theirs and theirs alone.
I was referring more generally to the ‘social safety net,’ though. If people didn’t have government (of whatever stripe) to prop them up when they make poor decisions (not finishing high school, not going to college, quitting one job with another lined up, etc.), then they probably wouldn’t opt for the poor decision in the first place. That, I believe, is one of the problems of taxing the “haves” to pay for the “shouldn’t haves”…somebody in a realatively higher marginal tax bracket is, in effect, punished when somebody else loses their home due to foreclosure–which is usually caused by financial ineptitude or other poor decisions. How can it be “just” to make the public-at-large pay for such behavior?
Welfare reform in Wisconsin which required all able-bodied individuals to work for their benefits reduced welfare rolls by 90%. Welfare reform in neighboring Minnesota which did not require recipients to earn their payment saw a 30% reduction. I’d say that ‘social safety nets’ reinforce poor decision making and punish those who succeed. “Safety nets” of any type funded by government (read: taxpayers) are a rip-off. Insurance plans, such as Unemployment, give an incentive to at least earn a level of benefit which would allow a poor decision to be made. But that benefit is still earned.
Boonton
Nov 30 2004 at 2:27pm
I think on average people tend to be rational for everyday risks but there is evidence they can be irrational for uncommon risks. We all know that fear that we feel when we board an airplane even though hopping into a car is second nature to us. After 9/11 a survey found that 20% of the population believed they would be the victim of a terrorist attack within a year. In order for that fear to pan out, there would need to be several 9/11’s happening every day for a full year.
If people get a bit irrational at the far ends of the curve then it can be quite sensible to address those fears even if such a policy would be bad in a world of hyper-rational Mr. Spocks. Here’s an illustration. Suppose people irrationally fear plane crashes but assess the risk of a car crash rationally. ‘The Market’ will work with cars finding the proper trade offs between safety and affordablity. An irrational fear of plane crashes, though, will lead to a less efficient outcome. People will not use planes as much as they should and when they do they will demand a larger discount in price.
Now suppose the gov’t could, with a modest expense, eliminate airplane crashes. Because crashes are already so rare, though, this expense is not favorable from a cost-benefit analysis. However, because people are irrationally placing a high price on the risk of plane crashes, removing that risk has a hidden benefit.
Likewise the risk of a person of moderate skills who is willing to work 40 hours a week ending up starving on the street is very slight. However, if people are willing to assign too much weight to this risk the cost of that risk can become very great on the entire economy. Hence a policy to address that risk can be rational but a policy to address a more mundane risk like losing $$ in the stock market will continue to be irrational.
Rick Gaber
Nov 30 2004 at 5:46pm
It might be helpful for anyone interested in this subject to study the history
of the “medical price index” as represented by the chart on THIS
page in case relevant insights can be derived from it.
Susan
Dec 2 2004 at 12:20am
Boonton,
I think you are right, that the reason some prefer government to private charity is that it provides insurance to all. But I’d like to expand it by pointing to Buchanan’s “Samaritan’s Dilemma”. (It’s been awhile, so let’s see if I remeber correctly.)
In his model, wealthy people are assumed to be happier (have higher utility) when the poor achieve a certain level of income/consumption. (They are happier as the income of the poor rises to certain point & beyond that they are not affected – think perhaps happier when not seeing homeless on the streets, but don’t really care beyond that.)
Assume that there are two possible outcomes in the world: good and bad. When the good outcome happens, the poor hit the desired income/consumption level, but when the bad outcome happens they fall short & the wealthy feel bad.
The wealthy could give money to the poor & hope that the poor spend it on insurance against the bad outcome. But, the poor might not buy insurance. If the bad outcome does not occur, the poor are better off (have a higher income than they would if they bought the insurance) and the wealthy are not affected (they achieved max happiness at income X.)
Say the poor don’t buy insurance, and the bad outcome happens. Then the wealthy would again need to give money (and more than the cost of insurance) to raise the poor back to the minimum level.
In the model, the poor wouldn’t buy insurance since they are ALREADY insured against the bad outcome by the wealthy people’s desire for the poor to achieve a certain income/consumption level.
So, the wealthy also realize this, and turn to the government to insure themselves against this outcome. That is, they give to the government and have the government insurance to the poor, not money. If the wealthy can also force others to give to the government (through taxes) so much the better. They get their max level of happiness at a lower personal cost.
So, people want “social justice” carried out with other people’s money via taxes for two reasons: it provides insurance for themselves -NOT- for the poor, and it reduces the amount the individual who wants the “social justice” pays by spreading the cost among those who aren’t “happier” when the poor achieve a given level of income/consumption.
kenny
Dec 2 2004 at 9:56pm
I would argue that the fact that economic growth has been better post-WWII than before as evidence that the social safety net has not caused people to take excessive risks.
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