David Balan asked me to post his opening statement for tomorrow’s Separation of Health and State Debate.  Enjoy!  I’ll post mine at midnight tonight.

Thanks to Bryan
for agreeing to this debate, and for letting me post my opening statement on
his blog. A few words on my background. I’m an economist here in Washington DC,
and a fair bit of what I do involves health economics. While it’s no great
secret who I work for, in settings like this I avoid identifying my employer just
to make it extra super clear that I am speaking only for myself. I got to know
Bryan and some of the other GMU Economics folks a few years ago when I gave a
seminar out there, and since then we have had a good many extremely interesting
and highly spirited (GMU people are very into “spirited”) chats
about health care and many other things. We don’t agree on much, but we have
fun and we learn a lot (or at least I do), and hopefully that will continue

Let me start with a bit of throat clearing. First (and this should go without
saying, but I’ll say it anyway), this is not a “debate” in the sense
of two people using rhetorical tricks to try to score points off of each other.
Bryan and I disagree on a lot (that’s why we’re “debating”), but the
goal here is to explore our disagreements and to see how much truth we can
uncover in the process. Don’t be shocked if you hear us agreeing on something,
or if one of us concedes a point to the other. In fact, I think part of what
will make this interesting will be to think about how it is that we have quite
a lot in common (both in terms of actual propositions that we would both
support and in terms of our intellectual styles), and yet we reach very
different conclusions. Second, this debate is not about the merits of any specific
health care plan or system. While I am still stumbling around in a joyous delirium
over the U.S.
health care reform that passed the other day, this debate is not about the
merits of that reform or about how it compares to alternatives. My purpose here
is to argue only that there are strong moral and economic grounds for
significant government involvement in health care. The exact nature of that
involvement is beyond the scope of this debate.

 With that out of the way, let’s get started. The proposition that is
being debated is “Significant governmental involvement in health care is
both economically sensible and morally just.” The “economically
sensible” part and the “morally just” part are inter-related,
but at the cost of a bit of over-simplification I’ll treat them separately,
starting with the “morally just” part.

Suppose that everyone in society had exactly the same health status, and
everyone needed a certain amount of health care to avoid debilitating illness
or death. Also suppose that health care is sufficiently expensive that the
poorer people in society cannot afford it, by some reasonable meaning of the
word “afford,” through not-too-much fault of their own. (I’ll
ignore the question of how fault is determined and just talk somewhat vaguely about
the “deserving” poor, however you think that should be defined).
What should happen? Should the government intervene and require the rich to
subsidize health care for the deserving poor? Your answer to that question
should be the same as your answer to the question of what should happen with
regard to any other essential thing that deserving poor people cannot afford.
That answer will depend on many factors, including how expensive health care is
and how beneficial it is; how concerned you are that public provision, and the
taxes required to pay for it, will damage work incentives; how averse you are
to governmental action in general; and many other factors. But let’s assume for
argument’s sake that there are some circumstances under which, all things
considered, you would favor some significant governmental redistribution
towards the deserving poor. (I’ll talk a bit below about where it leaves us if
you’re not prepared to assume this.)

How do things change when you introduce the fact that not everyone has the same
health status, and some people need much more health care than others? This
brings us into the world of risk and hence the world of insurance. We routinely
buy insurance against major losses such as our houses burning down because
we’re better off paying a small insurance premium in all states of the world
than we are paying nothing when our house doesn’t burn down but losing
everything when it does. The same idea holds for insurance against
catastrophically bad health outcomes. Each of us has some probability of
getting seriously sick and needing health care that is much more expensive than
we can afford. It makes sense to buy insurance against that eventuality just
like it makes sense to buy insurance against our houses burning down. The
problem is that you can’t buy health insurance when you’re already sick, just
like you can’t buy fire insurance when your house is already burning. So when
should you buy health insurance? Well, presumably you should buy it before you
get sick, just like you should buy fire insurance before your house catches
fire. The problem is that all houses start out not burning, whereas some people
start out sick or with a propensity to become sick. A for-profit insurance
company will not insure an already-sick person for the same reason that a
for-profit insurance company will not insure a house that is already on fire.
Absent government intervention, there is simply no way that you can insure
yourself against being born sick, or of becoming sick early enough in life that
you cannot have been reasonably expected to have bought insurance against
becoming sick (here I’m leaving aside the very real possibility that you buy
insurance but the insurer finds a way not to pay if you become sick). This
brings us right back to the scenario we described above where everyone’s health
status is the same. In that world, the right thing to do depends on your
attitude about what to do when people are born poor. But being born sick is
just another version of being born poor: it means that you have expensive needs
that you cannot afford to satisfy on your own. (By the way, do you know where I
got this point from? Bryan Caplan!) If you thought it was appropriate to insure
against the one, you should be in favor of insuring against the other.

There’s a great deal more that could be said here, but that’s the essence of my
moral case for governmental involvement in health care. For those (important)
health expenses that are reasonably predictable, there should be a public
guarantee of provision for the poor just like there should be for a public
guarantee of a minimum standard of food or shelter. For those health expenses
that are not predictable, there should be universal insurance because anyone
who ends up getting sick is like someone who was retroactively born poor, and
it’s impossible to buy insurance against that, just like it’s impossible to buy
insurance against actually being born poor.

But what if you don’t, as a matter of principle, buy the idea that it’s ever
appropriate for the government to use its coercive power to compel the rich to
support the poor? Some take that position on general libertarian grounds, which
I disagree with but which are beyond the scope of this debate. But there is another
objection to the idea of governmental support for the poor that I do want to address
here, because I think it has considerable merit. People who are born poor in rich
countries like the U.S.
are much richer than poor people in poor countries. Furthermore, those
rich-country people who really are poor in an absolute sense (such as people
who are born with serious illnesses), are much more expensive to help than are poor
people in poor countries. It can be fairly argued that to the extent that rich
people are morally required to spend resources on helping the poor, it should
be the much poorer and cheaper-to-help foreign poor. While I am not the
complete non-nationalist that Bryan
is, I am sympathetic to this argument. I follow it in my personal charitable
behavior; almost all of my charity goes to extremely poor foreigners. But I
don’t regard that as much of an issue for this debate. If it was remotely
feasible that instead of guaranteeing health care for poor Americans we would
spend a similar amount of public resources in helping very poor foreigners, I
would be inclined to go a long way in that direction. But it’s just not relevant
for practical politics.

Now let’s turn from the “morally justified” part to the
“economically sensible” part. I have argued that there is moral merit
in providing for the health needs of the deserving poor. But that only works if
such provision would confer some reasonable return on investment: there is
presumably no moral obligation for a society to bankrupt itself in order to
provide expensive care that does the poor almost no good. So is health care for
the poor a reasonably good bargain? I think that it is. While there is a
distressingly large amount of evidence that much of modern health care,
particularly in the U.S., has little or no health benefit (the policy
implications of this fact are a whole ‘nother story), I don’t think there
is much doubt that certain kinds of health care are highly valuable, and that
having access to them significantly improves the length and quality of one’s
life. Is it too expensive? Well, all of the wealthy countries of the world, and
some less wealthy countries, have been able to provide it at what appears to be
tolerable cost, in that it is not bankrupting their societies (those same
societies have also, to a greater or lesser degree, ameliorated other kinds of
poverty, also at no overwhelming social cost). This does not prove that it’s
a good bargain, but it at least proves that it’s not a catastrophically
bad one. And even if you think that it’s a pretty bad one, you could make
governmental provision of health care less generous (say by means-testing
benefits) without violating any of the principles of my argument.

Up to now the discussion has centered on the moral obligation to
provide health care for the poor, and the “economically sensible” considerations
were limited to whether this moral obligation can be satisfied at tolerable economic
cost. But there are a bunch of other, more conventionally “economic”
reasons for government involvement in health care, of which I’ll list
just a few. First, healthy people are more productive. Second, there are significant
externalities and spillovers related to health: we’re all better off when our
fellow citizens are healthier. Third, there is a strong case for governmental
involvement in medical research and development. Private firms only have an
incentive to do research that will lead to patentable innovations; they have no
incentive to test whether an apple a day really does keep the doctor away. Fourth,
there is a case for governmental regulation to ensure that health care is safe
and effective (no selling poisonous snake oil), and that health insurers
actually pay up when you get sick. You could argue that the market will take
care of this by itself through reputation effects, but look around!! Fifth,
there are some instances where the government is simply more trustworthy than
private firms, and that trust allows economically efficient things to happen
that otherwise wouldn’t happen. For example, it seems pretty clear that in
the coming years people (not just poor people) are going to need to be induced
to limit the health services that they consume; we just can’t provide
everything to everybody all the time. The problem is, it’s hard to get
people to agree to limits when the ones doing the limiting are unregulated
private insurers who have an incentive to cut whatever care they can get away
with cutting, rather than cutting care that is of low value. But if it is the
government doing the limiting (either directly or through regulation of private
insurance), and this limiting is being done through a rational process that
people trust, then it has a chance of happening. I could go on. 

My bottom line is this. Guaranteeing health care for the deserving poor
and guaranteeing catastrophic health insurance for everyone is morally required
provided that health care provides significant benefits and can be provided at
a tolerable social cost. These conditions are easily satisfied in contemporary prosperous
societies. There are also a number of other practical reasons, not directly
related to moral obligations to the unfortunate, for various kinds of
governmental involvement. This is a very minimalistic framework: there could be
a great deal of variation of opinion about optimal policy even among people who
buy into it. Since Bryan
is going to be arguing for no governmental intervention at all, I look forward to
hearing which part(s) of the framework he rejects. Let the games begin! (Oh,
another thing Bryan and I do together is play nerdy games.)