Today, the Wall Street Journal published a letter I wrote to the editor opposing mandatory health insurance. This solution would burden the poor beyond their means, and it would deny the principle of subsidiarity by sacrificing family economic decisions to the priorities of federal legislators. Here is the text of the letter:

“Sen. Ron Wyden’s plan to make every uninsured American buy health insurance makes about as much sense as would forcing every poverty-stricken and starving Haitian to buy food (“Wyden’s Third Way,” The Weekend Interview, June 20). Sure, having every American insure himself would save us all money from unneeded emergency room visits, but there are bigger things in the way of universal coverage than just imposing a legal mandate.

Requiring every American to buy health insurance would make millions of families change their economic priorities in ways that would lead to unfortunate consequences. Almost everyone believes that getting health insurance for themselves and their families is a high priority, but virtually no one thinks that insurance comes before food and housing. Even if the government passes the Healthy Americans Act or some other sort of mandate, and succeeds in making everyone buy insurance, the victory will be Pyrrhic. The needs that come before insurance for the 15% of Americans will still exist, but the money they use to meet these needs won’t.

According to research done by the Kaiser Family Foundation, National Public Radio, and the Harvard School of Health, health insurance costs individuals an average of $4,800 annually. The cost for families to get insurance is even higher, at around $12,000 annually. These kinds of costs would push many people over the edge financially. How does Sen. Wyden propose that we pay for more people who will be unable to afford food, housing and education if they have to pay for health insurance? Effective health-care reform would be better accomplished by other means. Sen. Wyden’s own proposals to switch America from employer-based to individual health-insurance markets, for example, would do a great amount of good by encouraging competition and innovation without making life harder for the people having the most difficult time getting insurance.

Matt Cavedon
Cambridge, Mass.”


  • SB

    Matt,
    You, uh, do realize that the Wyden health insurance plan is not simply to say “okay, now everyone has to buy insurance for the current market price, so… poor people, fork it over.”

    What a straw man.

  • Matt

    Indeed I do recognize that the individual mandates are not the beginning and the end of Sen. Wyden’s plan. His intent would also be to lower prices. Even if he managed to cut health insurance premiums 75% below the average for needy individuals and families, that’s still over $1,000 per person and $2,000 per family more than people are spending now. That is a lot of money.

    Granted, some of the neediest people are currently eligible for free health insurance under the law in some states, but the individual mandates aren’t meant to help them. A simple education and enrollment campaign would do that. Why mandate coverage if it is already available at no cost?

    The mandate will only hit those who could technically afford insurance but choose not to buy it for various reasons. That is what is missing from Sen. Wyden’s analysis.

  • SB

    Your rebuttal is missing an “and” and a whole new paragraph explaining why it would be bad to mandate that people who can afford health insurance actually get it. I’m glad that we have distilled the issue to this question, because all of that stuff about how the poor are going to suffer was really just garnish for this central concern of yours, which, I suspect, is that it’s just not right to force people to buy something they would not choose to buy on their own. Something a wee socialist about that, isn’t there? We wouldn’t make people buy an apple a day to make themselves healthier, would we?

    Sure. Except that this isn’t just a question of what an individual does or doesn’t do. If I don’t eat an apple a day or wear my seatbelt, I endanger myself, but nobody else, or at least, I only endanger other people extremely tangentially. (For instance, eating bad might lead me to develop heart disease, for which the gov’mint will pick up the tab because, let’s just say, I’m very poor. And that’s an unneeded expenditure.)

    Anyway, it isn’t just a question of paternalism. It’s a question of the common good. Now, I’m happy to defend paternalism in this instance, because I happen to have personal experience with the benefits of having health insurance when many people in the same situation as you would not get it (that is, being young).

    But that’s not the issue. The issue is, do we let costs rise for everybody, and thereby, inevitably, do we deprive some people of needed care, just so a handful of twenty-somethings can preserve their God-given right to be short-sighted? You are an ideologue, and say yes. I am, you know, committed to improving people’s lives, and say no.

  • Matt

    The greatest concern is not even that people are forced to buy something they wouldn’t otherwise. It is the reason why they wouldn’t make that purchase. For the struggling and perhaps working poor, this is because of priority. It is because they cannot afford health insurance. Not in the eyes of you and Sen. Wyden, evidently, but in their own eyes. They want better housing or better food or better schooling or nicer clothing first. Where do you draw the line on what is good enough as regards any of these things to justify getting health insurance as opposed to improving these things? Somewhere else than me, Sen. Wyden, and the homeless people I know. Leave that kind of planning and prioritization up to individuals, and don’t assume that Congress can determine how much health insurance is worth compared to everything else.

    As for young and short-sighted people, some are truly misprioritizing, yes. Some would rather have beer and trips to Bermuda than care. We are not, barring your welfare state ideas, compelled to give them tax dollars to take care of them if they get hurt. It is up to their own personal responsibility to take care of themselves. If they don’t, then it is up to them to take responsibility and beg civil society, family, and even strangers to take care of them.

    Defining an ideologue is too subjective and slanderous to either accept the term or label you with it. We understand things differently. Don’t assume that it’s because I’m irrationally dedicated to a philosophy instead of looking at incentive and the big picture economically.

    Yes, you are committed to improving people’s lives, but don’t assume that you are the only one. I work at a homeless shelter and refer people to the very same services that I criticize because I believe there is a better way to improve people’s lives. My concern is not that you are insincere so much as that you do not understand the full breadth of the economic impact of a policy like this on the people that it’s meant to help and that you see a perfect state as having no victims when it rescues people from imperfect and cruel markets.

    This characterization seems lacking to me, but with good intentions.

  • SB

    I’m curious why you jumped back to your earlier concern with how the very poor will fare under the Wyden plan, when I thought you had dispensed with that yourself when you said that they are often eligible for free or heavily subsidized insurance, and that therefore the choice between shelter/food/clothing etc and health insurance is a false one. Do you no longer believe that that is a false choice?

    And again, the problem with the “let people make bad choices” model is that it raises costs for everyone, and when costs are higher, people can afford less health insurance. So, by choosing not to buy health insurance, you (combined with many others) make it harder for those who want health insurance. That’s “the big picture economically.” If you let twenty-somethings opt out of Social Security, you would have to cut payments to the elderly, and poverty among the elderly would go up. Same for Medicare. Not to mention that those twenty-somethings will thank you in forty years when they have a stable income and guaranteed health care.

    It is a mere ideological predisposition that says that health care must be more expensive for everyone, or that the elderly must be less economically secure, so that we can preserve the liberty of a handful of risk-takers. It’s an understandable predisposition, and not a rare one, but I think that politics is and should be about the common good. Face it, you disagree. Your main objective is about preserving a priori absolute values. I should have said that I am committed to improving lives through broad-stroke measures, which, yes, often involves the government, because I think that that’s more effective, efficient, and secure than the alternatives. In one fell swoop, a government program made it so that being old no longer meant being poor. Yeah, we could have tried to do that same good work privately. My belief is that that wouldn’t have been as effective. Maybe you think it would have been. But on top of that particular dispute over effectiveness, you add in this ideological predisposition opposing government action. If someone convinced me that private charity could raise living standards and economic security across the board, I like to think I would breathe a sigh of relief and happily go about dismantling the oh-so-sinister “welfare state.”

  • Matt

    “…the choice between shelter/food/clothing etc and health insurance is a false one.” – No, it’s not. If it were, I would oppose Sen. Wyden for considerably different reasons than the one in the letter. I am saying that this may be a false choice for the people so extremely poor that they can get public health insurance currently. I would not define this group as the same as those who are too poor to choose health care, but who could afford it without going to the drastic measures of being homeless or starving. My letter and arguments are aimed at showing that this group exists and that they have perfectly rational reasons for not getting health insurance.

    As for the poorest of the poor, even they are often left without public health insurance access due to insufficient funding for these programs. Unless Sen. Wyden can translate his ideal of full, permanent funding for public plans into political reality, which, given the inability of the federal government to maintain its commitments fully even today when financial burdens are less than they will be soon, seems impossible, the poorest of the poor will either be forced into overburdened public programs or left with the option of buying their own care. Neither is advisable currently. It is worth bearing in mind, too, that even subsidized health insurance bears costs for its customers.

    “…by choosing not to buy health insurance, you (combined with many others) make it harder for those who want health insurance.” That depends on who is opting not to buy. Many of those who choose not to do have health problems of various sorts. Whether or not they morally should be covered, they would make care more expensive for people currently enrolled. Even with a mandate, anything less than a universal public program or a requirement for companies to take whoever applies for coverage with them would just mean that a few companies specialize in young people with relatively few health problems. They would be cheap and the rest of health insurance would still be expensive. The same reasons why young people don’t tend to get health insurance – mainly, they don’t tend to need it very often and are already spending a lot on things like education and moving out (would Wyden’s plan mean fewer people choose to pay for tuition or their own rent? I’d say yes) – are the same reasons why they would not willingly choose companies that cover lots of unhealthy people at higher costs.

    “If you let twenty-somethings opt out of Social Security, you would have to cut payments to the elderly, and poverty among the elderly would go up.” – Not if you couple opt-outs from Social Security with individual accounts, as most refor efforts have emphasized. In that case, you would need initial funding for a decade or two to cover the transition, but would end the problem that will occur whenever there are more retirees than workers. This solution, while unfortunately expensive, would be substantially better than watching the program go bankrupt and continue to be robbed for other funding sources as it is now.

    “It is a mere ideological predisposition that says that health care must be more expensive for everyone, or that the elderly must be less economically secure, so that we can preserve the liberty of a handful of risk-takers.” – It is acceptance of the status quo and an abiding faith in the responsibility of politicians that seeks to set economic priorities for people instead of realizing the benefits that something other than health insurance or state pensions might provide for people, both now and in the long-run.

    “…politics is and should be about the common good. Face it, you disagree.” – You seem quite thoroughly convinced that I am nothing but a radical hiding behind the talk of economics and freedom for the sake of convenience. I am sorry to disappoint you, but I draw a line between the common good and the state. Very little of the common and public good is served better by the state than by markets, free associations, and voluntary action. Businesses serve the common good by producing wealth. Churches serve the common good by caring for the needy. Families serve the common good by raising children. Farmers serve the common good by growing food. By your logic, my resistance to letting the state interfere with these things whenever they result in imperfections shows that I am not dedicated to the common good. Which brings me to your next point…

    “In one fell swoop, a government program made it so that being old no longer meant being poor.” – Looking backwards from the institution of Social Security, it is a radical claim that being old meant being poor. Until the universal economic collapse of the Great Depression, there was very little support in the United States for some kind of universal public pension system. Families took responsibility over their members, and individuals invested and saved. Prudence in money was a virtue. People did not want to go broke at age 60, so they took measures to keep themselves safe. Yes, many elderly people were hurt badly by the Great Depression. So was everyone. Restoring the health of the economy and guaranteeing reasonable monetary policies that would make investments safe in the long-run should have been the priorities. Looking forward, we have had 25 years, including this year’s recession, in which the Dow Jones grew approximately 40% more than Social Security payments. Proper investing could have left the elderly far more secure than they are now, especially looking ahead to the years when Social Security will either be broke or far less generous than it is currently.

    ” If someone convinced me that private charity could raise living standards and economic security across the board…” – Private charity is a good moral practice, but it is not the guaranteer of the well-being of the poor. Higher living standards and economic security come with sound economic policies, property rights, and free markets. The evidence is in the changes in global poverty in the past two generations. Hong Kong, Japan, China, Taiwan, South Korea, Ireland, Singapore, Chile, and Botswana have seen more people pulled out of poverty in the past fifty years than anywhere else in the world since the rise of the Industrial Era. What did this? A commitment to an atmosphere of entrepreneurship and free market economics under the rule of law. Free markets create wealth. It is the creation of wealth and not the negation of poverty that makes life easier for people. This is true for the old, the young, the poor, the disabled. The more the government takes resources from creators of wealth and restricts the economic activities of people and businesses, the more it is hurting the ability of society to grow more prosperous.

  • Annie

    I understand Mr Cavedon’s point completely as I know a family which recently went through this. They are currently earning too much to go on state aid, but having gone through a period of no insurance, would have to pay for insurance for 12 months before the insurance would cover the medication for a pre-existing condition in their family.

    So they have opted to pay for the medicine which is their immediate need. Actually, this will keep insurance costs down because without the medicine, they might end up with a few ER visits, which the insurance woudl pay for.

    There are a lot of good reasons that a family might opt not to get health insurance. A few right off the top of my head: they are paying off debt, maybe student loans or medical bills from the past; they are struggling to start a business; they are sending their children to a private or parochial school because their school is inadequate; they have child support payments; the list could go on and on.

  • Annie

    SB wrote: And again, the problem with the “let people make bad choices” model is that it raises costs for everyone, and when costs are higher, people can afford less health insurance.

    This is absurd. Should we force everyone to buy new cars so that the prices will come down? Should we force everyone to get DSL, or computers for that matter, so the prices will come down? Should we force eveyone to buy organic foods so the prices will come down?

  • SB

    Annie said:
    “Should we force everyone to buy new cars/DSL/organic food so that the prices will come down?”

    Think about that for a second. Yes, if everyone were ordered to buy a car, a DSL line, or the dread arugula, the prices of those goods would go up. Demand up, price up. Basic free market principle, right?

    Now, how might it not have occurred to, you know, everybody in the whole freakin’ country that health insurance is just like every other good used by econ professors as market goods par exemplum? Well, because health insurance isn’t a normal good. For a pithy take on the subject, see Paul Krugman here: http://krugman.blogs.nytimes.com/2009/06/28/health-care-is-not-a-bowl-of-cherries/. For a more technical account, obviously, follow his link: http://www.scielosp.org/scielo.php?pid=S0042-96862004000200012&script=sci_arttext.

    But if you’re too lazy, I’ll break it down.

    All goods and services are not created equal. There is no barrier, de jure or de facto, to my becoming a vendor of organic food. (I think the new car and DSL examples actually prove my point — there are probably significant barriers to entry there.) I could plant seeds in my backyard, harvest the crops, and sell them. If I did this well, I would make a small profit. My profit would, over time and assuming my little operation grew, take a little profit away from Whole Foods. Whole Foods would then want to compete with me by lowering the prices of their equivalent goods. The equilibrium price of, say, organic tomatoes would be lower after this competition than before. But, at equilibrium, neither Whole Foods nor I would make a very big profit at all, assuming perfect competition (no barriers to entry being among the requirements of perfect competition). In fact, very slim profit margins are a logical byproduct of perfect competition — and the ideology American capitalism, with its fetishization of get-rich-quick entrepreneurialism, forgets that huge profits only come about when a firm is collecting monopoly rents, like Microsoft, Bristol-Myers Squibb, or any bar in Harvard Square.

    Of course, perfect competition doesn’t really exist, but it approximates the market for enough goods that it is a useful metaphor. But it REALLY doesn’t exist in the health insurance market, which is amply demonstrated by the fact that insurance companies make HUGE profits. I mean, ginormous.

    In any case, all of this is just to say, Greg Mankiw is a disingenuous hack, and health insurance isn’t a car, a DSL line, or an organic tomato. It’s health insurance.

  • Matt

    …and that is a problem, but ask why health insurance isn’t a market. There are entry barriers, thanks to government regulation. There are service restrictions, thanks to government regulation. There could soon be completely unfair competition, thanks to government provision.

    I wouldn’t defend the status quo of employer-based, government-provided, heavily regulated health insurance for a second. Let’s not make those problems even worse by setting up a public health insurance competitor and mandating that everyone buy from the handful of plans out there. Let’s reform to correct, not worsen, the lack of competition and let’s focus on addressing the lack of money that is stopping the poor from getting insured. I support subsidization of the poor; there are other options available.

  • SB

    Matt,

    First off, assertion is not argument. Health insurance is not a perfect market good because some goods just can’t be perfect market goods, not because of the dread government regulation.

    What regulations are you even thinking of? One possibility I can imagine is that the government could bar insurers from setting different prices for different categories of patients, depending on their health. But we don’t do that. We should do that, but we don’t.

    So, you say, “ask why health insurance isn’t a market.” Basically, because of uncertainty and asymmetry. Everybody knows when they go to the grocery store that when they buy an apple, they are getting a delicious and healthy snack. Insurance markets aren’t like that. When you buy an apple, economists assume, you have perfect information about the prices of other kinds of fruits, of apples in other stores, of other types of apples, etc. etc. Insurance markets aren’t like that. When you buy an apple, you know that you are going to get to eat the apple. Insurance markets aren’t like that; people are often stripped of coverage right when they need it. (see: http://online.wsj.com/article/SB10001424052970204621904574248061750721736.html)

    Now, as I had suspected earlier in our little debate, you are conflating in your mind two very different reform proposals: Wyden-Bennett, which has an individual mandate and tries to work within the private insurance market, and the HELP and Finance proposals, which supposedly integrate a public option (I say supposedly because it’s not entirely clear what the hell these bills are going to do, and I don’t necessarily support them).

    I support health care reform and cost containment, period. I think Wyden-Bennett could achieve a lot, and I think a robust public plan could probably achieve a lot. But it’s unfair to conflate the two.

    I am heartened by your support for subsidies. But the health care problem hits the middle class hardest, and they probably won’t be eligible for any subsidies, so that important thing is to bring costs down. And one way to do that is to put competitive pressure on insurance companies so they cut administrative waste (which is astronomical compared to Medicare), make less exorbitant profits, and give their CEOs slightly smaller enormous salaries. Oh, and provide better coverage for less money, and stop cutting people who had valid insurance coverage.

  • Matt

    I am thinking of 13,000 pages of Medicare regulation that set the standard for the entire private health insurance markets. Very few companies will go above and beyond what the government offers, as the federal program is always the fallback and, again, there is no competitive market. Stop providing public health insurance as a service and you’ll see companies start fighting to attract customers. Stop employer-based insurance and you’ll see actual competition start emerging.

    As for the excessive profits, you are right to say that they exist because of an oligopoly. It is the government, not information asymmetry, that makes this oligopoly possible. Cars are extremely complex things, but there is even a good used car market because groups have sprung up to monitor car quality through market regulation, like Carfax. Plus, the government has lemon laws to ensure some degree of quality. The same could be done for health insurance, but not until people and not their employers select health insurance for themselves.

    That would drive down profits to near-zero levels far more efficiently than forcing every health insurance company to obey government notions of just executive compensation.

    I know that the earliest debate here was not about public health programs, subsidies, or anything else – it was exclusively about the individual mandate. When you justified the individual mandate on the grounds that the status quo is bogus and that competition is failing, though, it became fruitful to dig into why competition is failing, how not to make it worse, and where to go constructively.

    We can either continue this debate into far-off tangents like drug research, care options, competing models of health care organization, etc., or we can exit the field for today and debate again some other time, some other place, some other topic when it’s relevant again. I have a funny feeling, though, that you and I may be the only ones left here…

  • SB

    Fine by me. One last thing: It’s interesting to me that you directed your ire at Wyden-Bennett, when it seems to come closest to your ideal, in terms of making people pick their own insurance plans, preserving the private market, etc. I mean, I realize you’re also allowed to have your pie-in-the-sky ideal reforms, but just as we’re never going to get single-payer, we’re also never going to abolish Medicare, so both of us are hemmed in by what’s politically feasible, and in that context I see lots of reasons why we could both support Wyden-Bennett.

  • Tracy

    Great discussions. One thing I know working in a public health sector for a large State, state can’t afford government subsidy for the targeted group mentioned above you are lucky they can help a small percentage of the poor and the elderly.

  • Matt

    I would roll back other public health programs like Medicare to provide funding for subsidies. You make a great point.

  • Benjamin Winters

    Forcing people to give money to private for-profit organizations is fascism.