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What would it cost to cover the uninsured?
Jonathan Gruber has just written a very useful and comprehensive paper on health insurance (I don't yet see ungated versions). He estimates that without a universal mandate, but using subsidies, a typical plan for covering the uninsured would cost $4500-$5000 a year per person, and that is cost in the narrow budgetary sense. With a mandate the fiscal cost of the government (again, not social cost, which includes the cost of paternalistically forcing people to buy health insurance) is estimated at $2732 per person per year. Of course it is cheaper to tell people what to do, comparing to paying them to do it. That cost estimate is assuming that the mandate is effectively enforced, which I do not expect.
I would have preferred the primary estimates to be in terms of social cost. And I would have liked a discussion of how mandates and minimum benefit requirements distort the price of health insurance and limit competition. Read Shikha Dalmia. Nonetheless this remains is one of the best papers on health care economics to be had.
Gruber also poses an interesting philosophical question for the paternalists: would you rather be uninsured in today's America or obese? And if you, like I, answer "uninsured," why not first direct paternalistic interventions toward obesity? And I'm not talking about subsidies to olive oil, I mean real mandates. After all, they will lower health care costs, no?
Posted by Tyler Cowen on February 2, 2008 at 06:48 AM in Medicine | Permalink
Comments
Maybe because the obesity mandates won't work?:
http://www.nytimes.com/2007/05/06/books/review/Bazelon.t.html?_r=1&oref=slogin
"Most people who are overweight struggle to change their shape throughout their lives, but remain stuck within a relatively narrow weight range set by their genes. For those determined to foil biology, strict dieting is a life sentence."
Posted by: Frank at Feb 2, 2008 8:32:06 AM
From a non-economist: How might "a real mandate" to fix
America's obesity problem be worded?
Posted by: Pam at Feb 2, 2008 8:35:11 AM
> And I'm not talking about subsidies to olive oil, I mean real mandates. After all, they will lower health care costs, no?
Pure FUD. In Canada, where we have had fully socialized health insurance for more than a generation, no such mandates exist.
Oh, and I love the double-speak here:
> paternalistically forcing people to buy health insurance
That isn't how socialized health care insurance works at all. A better representation would be: you are automatically insured (no forms, no payments).
Of course, I don't expect these comments to penetrate your bias against public health care. This is something that would be worth exploring. Instead of simply passing along talking points, I'd like to hear what it is about public health care that scares you so much.
Posted by: Stephen Downes at Feb 2, 2008 8:48:07 AM
Stephen, I have written in the past that I think, when faced with a choice, public health insurance (Medicaid, for one) is overall a better idea than mandates. I even link to that earlier post in this post. I don't at all favor the Canadian system, but the rest of your post is agreeing with points I have made previously, not disagreeing. Mandates *vs.* some degree of public health insurance is a key choice we face.
Posted by: Tyler Cowen at Feb 2, 2008 8:54:15 AM
I suspect that mandates toward the uninsured have little to do with paternalism.
Instead, people who would not buy health insurance are most likely to be very healthy, and most likely do not need it. If only the sick are in the insurance system, then insurance premiums are going to be higher, as the sick will have to pay for more of their own health care costs.
So mandates are more about income redistribution on the basis of health then paternalism.
Posted by: at Feb 2, 2008 9:12:30 AM
Do people create external costs on others by refusing to buy insurance? For instance, is the cost of overcoming asymmetric information greater in a system without mandates? Are E.R. and other costs passed on to others? Does lack of preventative care increase costs later? Are infectious disease rates higher when parts of the population are not vaccinated or promptly treated?
If the answers are yes, then a mandate may be justified on non-paternalistic grounds, just as a mandate against pollution is justified (rather than a subsidy to people for not polluting.)
In any event, a mandate for children getting insurance seems fully justified by plain old paternalism.
Posted by: A student of economics at Feb 2, 2008 9:13:33 AM
I'd rather be obese. From what I have read, obesity only slightly reduces life expetancy.
Posted by: David R. Henderson at Feb 2, 2008 9:13:58 AM
Is life expectancy all there is to it? Some serious quality of life issues abound in work, play, and sex, no?
Posted by: Billare at Feb 2, 2008 9:55:55 AM
Why not cover everyone de jure and instead issue credits to those who *don't* use it.
I like the idea of being covered for every scenario, but the truth is I go to the doctor less than annually. I'd like to be credited if I'm not utilizing health services, but not charged if I do.
Posted by: meter at Feb 2, 2008 10:22:02 AM
Bloomberg claimed in a recent issue of wired that obesity lowers the cost of healthcare because people don't live as long. Any response?
Posted by: cw at Feb 2, 2008 10:50:32 AM
"What would it cost to cover the uninsured?"
The answer ought to be readily availabe to us right now. After all, we do cover the uninsured. Why does everyone speak as if we don't?
Get sick/have an accident and go to an ER. Leave your insurance card at home (if you have one). You'll be treated if you need to be treated (yes some triage will be done, of course), regardless of insurance status. It's the law. So: we have universal health care and we cover the uninsured. The rest is details.
So surely it could be figured out how much it costs us to be doing this.
Posted by: Sonic Charmer at Feb 2, 2008 10:59:34 AM
It doesn't matter if Obesity is less preferable than not having insurance. The state would be less effective and more intrusive if it fought obesity than if it tried to insure people. Stop being silly.
Posted by: Michael Foody at Feb 2, 2008 11:02:59 AM
We do not leave uninsured people to die in the street like road kill, so people who do not buy insurance are still insured at the public expense for catastrophic accidents or illness. People who claim not to need insurance, unless they have a lot of assets, are free riders on the system.
Posted by: joan at Feb 2, 2008 11:24:05 AM
"That isn't how socialized health care insurance works at all. A better representation would be: you are automatically insured (no forms, no payments)."
Wow, the government creates something from nothing for you! It doesn't cost anything!
Look, there are some good arguments for publicly funded health insurance. And under publicly funded health care, you can certainly have lower transactions costs because we don't all have to go out and purchase insurance.
But you are still making people buy insurance, in this case from the government, using their taxes. That's a mandate. Pretending otherwise is just fantasy. And engaging in that fantasy while accusing others of bias really makes you look very bad.
IMHO, Tyler was way too polite to you, dude.
Posted by: Keith at Feb 2, 2008 11:50:37 AM
"Wow, the government creates something from nothing for you! It doesn't cost anything!"
Wow, neither does anything else. Like roads, national defense, education, and so on.
I have an idea: let's privatize everything!
Problem is: most Americans don't want to live in a world like that. It's inefficient (for one thing) - something libertarians don't really "get."
Posted by: meter at Feb 2, 2008 12:04:58 PM
Hi Tyler,
I respectfully disagree with your description of universal healthcare as paternalistic.
Everyone wants healthcare and it has a cost. Everyone would be willing to pay for insurance if they could afford it. I am speaking generally, of course, but I believe my assumptions are moving toward the accurate.
Under the current system, only those wealthy enough to afford insurance are forced to pay for it (using your terminology). Under a universal plan, everyone would be able to be forced to pay for it. There's a big difference.
Posted by: Deron Bauman at Feb 2, 2008 12:50:30 PM
Public insurance is a massive, massive subsidy from young to old, and from those who preventively take care of their health to those who do not. *Catastrophic* health care is often cheap - as a 24 year-old in Virginia, I can get a decent plan for 60 bucks a month - and I would be fine with the government mandating or providing this type of insurance (indeed, it seems much more sensible that providing it at the workplace level). Further, general public health measures (vaccination, sanitation, nutrition labeling, etc.) are also sensible to aggregate at the government level.
In between, though, I just don't see why this shouldn't be the responsibility of the individual. If you've already got catastrophic, the most you're on the hook for in a disastrous year is $3-5000. It's just inconceivable that any working person in the richest country in world history can't have saved this amount.
I don't know how health care can be discussed so often without noting how much of it is voluntary, or marginal in terms of benefit or decrease in pain. When I was with insurance, I was very careful about what tests I asked for. I didn't see a doctor when I had cold or a minor sprained ankle. I took better care of my health in general. Demand curves slope downwards.
Posted by: cure at Feb 2, 2008 12:56:21 PM
"Everyone wants healthcare and it has a cost. Everyone would be willing to pay for insurance if they could afford it. I am speaking generally, of course, but I believe my assumptions are moving toward the accurate."
That is not true. I am a young man with no pre-existing health conditions, and a very good family history. Instead of buying insurance, I would like to save my money in low-risk bonds and pay out from the account when I get sick. If I don't have enough money to pay for an injury, I'll take out a loan.
It's very easy to see that this is better for me then insurance, why should I be forced to buy a policy?
Posted by: David Shor at Feb 2, 2008 1:03:31 PM
Everyone should be able to get three things regardless of their station, food, shelter and medical care. Short of this we are killing ourselves by allowing diseases to spread and mutate into incurable strains. These diseases in turn will not care if you are covered by insurance or not, they will kill you just the same (ie. the "Black Plague", annual flues and other Pandemics). My view is that the economics must include in any decision self preservation and humanitarianism. Is this a perfect solution, no, but it is better than anything I have heard from other sources.
Unless of coarse you subscribe to the view that the planet needs a good pandemic every so often to clear out the lower classes and those unworthy along with "innocent" by standers.
Posted by: Joe at Feb 2, 2008 1:04:49 PM
Meter, it's called reading; look into it. Read the second part of my post.
"Look, there are some good arguments for publicly funded health insurance. And under publicly funded health care, you can certainly have lower transactions costs because we don't all have to go out and purchase insurance.
But you are still making people buy insurance, in this case from the government, using their taxes. That's a mandate. Pretending otherwise is just fantasy. And engaging in that fantasy while accusing others of bias really makes you look very bad."
"Wow, neither does anything else. Like roads, national defense, education, and so on."
Yep, I think roads and national defense and at least primary education should be provided by the state, but pretending that they'll be free if the state provides them is a very dumb, and patently false, argument. That's the argument that Steve made, right before he accused Tyler of bias.
Posted by: Keith at Feb 2, 2008 1:13:48 PM
How much does it cost to cover the uninsurable? It seems specious to simply assume it is the same as covering the insured.
Posted by: Lord at Feb 2, 2008 2:11:38 PM
Even if we grant that a mandate on obesity would be more efficient in terms of unit public health per dollar, than a mandate on healthcare, the mandate on obesity _feels_ like a much more personal invasion of privacy by the government (is that why you raised the point Tyler?). Shouldn't that feeling be taken into account even if it isn't easily quantified in dollars?
Posted by: Jim Lamb at Feb 2, 2008 2:12:43 PM
No paper on health insurance will be either useful or comprehensive if it does not:
1. Make a distinction between the people that are chronically without insurance and those that merely had a period in their lives in which they were uninsured (say, between jobs). The ever-popular 40+ million number doesn't do this.
2. Point out that it is the nearly ubiquitous and permissive nature of most insurance coverage that has sent demand for services through the roof and, thus, a corresponding increase in price, and why the universal coverage plan du jour somehow doesn't exacerbate this.
3. Note that the oppressive paperwork and controls put in place on the health care industry by the government to extend coverage to much of the population further exacerbates expense, and any government-sponsored effort to eliminate the last fraction of society that doesn't have health care will cause still greater cost.
4. Figure out how to put an upper limit on the litigation-induced additional expenses on the industry.
5. Address the fact that health care providers are always considered natural resources in studies such as this, despite being actual people who might be a little ticked off at spending many years being trained for something few people can do only to be treated as servants to government whim. The current brain drain from western countries with more socialized programs to the US might be a good place to start.
6. Determine how much the legitimately productive members of society are going to react to even greater taxes (direct or indirect, by whatever euphemism is used.) "The last straw" is proverbial for a reason.
Posted by: SaltedSlug at Feb 2, 2008 2:34:58 PM
Gruber also poses an interesting philosophical question for the paternalists: would you rather be uninsured in today's America or obese? And if you, like I, answer "uninsured," why not first direct paternalistic interventions toward obesity? And I'm not talking about subsidies to olive oil, I mean real mandates. After all, they will lower health care costs, no?
Millions of obese insured Americans disagree with you.
Posted by: Roland Martinez at Feb 2, 2008 2:40:20 PM
"why not first direct paternalistic interventions toward obesity?"
Why not paternalistic interventions toward cancer? Cancer involves genetic and lifestyle choices too...
This ridiculous analogy exposes your argument as ideological rather than logical.
Posted by: zota at Feb 2, 2008 4:34:45 PM
