July 7, 2012

CASH, NOT CARE:

Some Health Care For All, but not Too Much (Josh Barro, Jul 6, 2012, Bloomberg)

Tyler Cowen caught a lot of flak recently for saying something that is clearly correct. A lot of the flak has come from people who have misunderstood the implications of what he wrote.

Here's the relevant passage:

Trying to equalize health care consumption hurts the poor, since most feasible policies to do this take away cash from the poor, either directly or through the operation of tax incidence.  We need to accept the principle that sometimes poor people will die just because they are poor....  We shouldn't screw up our health care institutions by being determined to fight inegalitarian principles for one very select set of factors which determine health care outcomes.

Cowen is right. As both inequality and health-care costs rise, it becomes more difficult to equalize health-care consumption through transfer payments. The size of the transfers eventually becomes untenable. They also become wasteful: You end up providing hugely expensive health-care transfers to people with low incomes who would be better off with cash, housing or something else. Even if it meant they wouldn't live as long, at least the quality of their lives would be higher.

Partly right, partly wrong.  In the first place, modern nutrition, sanitation, hygiene and vaccinations mean that even the poor just don't die much from being poor anymore.  On the other hand, modern health care consumption doesn't have much to do with avoiding//postponing death.  It's mainly cosmetic.  Ideal health reform, therefore, seeks to move towards equalized consumption by driving down consumption generally--by making people pay out of their own pockets--and towards increasing the wealth of the poor--by transferring money to a savings account, instead of to the health care/insurance industries.  

The most important point missed though is that we're a Christian country, so we';re not going to let the poor die for lack of health care.  The onl;y question is whether we care for them via a defined contribution system or a defined benefit one.

Posted by at July 7, 2012 6:43 AM
  

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