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Strong opinions, weakly held

Why not give people cash instead of health insurance?

Tyler Cowen positions himself as pro-choice when it comes to health insurance. Here’s his basic proposal:

When people turn a certain age, allow them to trade in the current benefits package for a minimalistic package (set broken limbs and offer lots of potent painkillers), plus some of the rest in cash, doled out over the years if need be. For some people, medical tourism will fill the gap.

But if a person wishes, he or she can keep the extant benefit structure and forgo the cash altogether. No one is forced to take this deal.

It sounds fine in theory but I worry about it in practice. These sorts of deals are contingent on the idea that if you opt out of comprehensive care, we (as a society) let you die, or suffer. When happens when a senior who has opted out developers Alzheimer’s Disease, or Parkinson’s Disease, or ALS, or some other slow-developing terminal illness that is expensive to treat? What happens when they develop a chronic condition that isn’t going to kill them but is going to require constant care for the rest of their life? Unless we’re willing to put them on an ice floe, then everyone else is going to wind up paying their medical bills one way or another. Or perhaps their family will go broke trying to purchase medical care for them.

As a society, I don’t see us being willing to let people really suffer the consequences of their choices. Even people who make healthy lifestyle choices become ill and get into accidents all the time. My prediction is that people will regularly take on lots of “health risk” and that in the end, bailouts will be available, regardless of the choices they’ve made. Our public policy has to acknowledge that

Interestingly, a number of people raise this issue in the comments and Tyler responds glibly. I really am not sure how he accounts for this problem, putting me in the group of people he describes as irrational.

8 Comments

  1. People are, in general, poor at making rational financial decisions (if you are reading rc3.org you are not “people in general”). If someone plans to save significant money this way, they need to be honest that it will be because they convince a large number of people to take $1 today instead of $2 tomorrow and those people will end up disabled by treatable conditions, living in pain that could have been treated, and dying early.

    Anecdote: A company that makes stuff out of steel had rough union relations. So every third Fall they would run hard and stack the plant to the ceiling with product so they could continue shipping during the inevitable strike. A month or so into the strike, with Christmas looming they would offer a tiny signing bonus for knocking the annual pay increases down a percent on each of the three years. Worked every time. ~2% of salary now for ~6% of salary over the next three years.

  2. Free of any context, I’ve had conversations with “fiscal conservatives” and they would say to my face without a hint of humanity “people should have to face the consequences of their decisions.” It doesn’t matter what the cost, individuals are ultimately the only ones responsible for what happens to them. Apparently it doesn’t matter that this is just some conservative utopian pipe dream, it’s treated as the reality in which we live by some.

  3. FWIW, Ezra Klein posted recently along these lines as well: http://goo.gl/3DDRq . I agree — any plan that assumes we as a society will just let people die is a pipe dream.

  4. Is “Andrew” Tyler’s sockpuppet, or just a garden-variety Teabagger?

    I love this exchange:

    Michael April 14, 2011 at 9:39 am: “Suppose a rational, intelligent, healthy elderly person takes the cash because he doesn’t have too much money at hand and optimally decides to fix his leaky roof instead of taking out a high quality package of health insurance. Unfortunately, two years later he has a heart attack ~.”

    .

    Andrew April 14, 2011 at 9:54 am: “Nope. It’s perfectly feasible. Your pathetic caricature will simply get emergency care which is pretty cheap and not what we are talking about.”

    .

    ER care is “pretty cheap,” huh? FAIL.

  5. Well, I’d argue that ER care for a heart attack is pretty cheap compared to say, cancer treatment for a few years, or a nursing home for a patient with something like Alzheimer’s. But that’s not the point – I agree with Chris above when he says that as a society we simply won’t allow people to die.

    The thing that really strikes me about a lot of conservatives is that they float ideas like this and at the same time identify themselves as serious Christians. I will never understand that level of self-delusion.

  6. There is no market for health insurance for elderly people because they tend to have extremely expensive medical events and eventually all of them die. Handing someone $15k to buy health insurance is a joke.

    On the other hand unlimited Medicare coverage for everything while much of the working-age population suffers without any insurance at all is a bad joke too.

  7. Once Americans start talking about health care instead of health insurance, they’ll have a chance.

  8. I wonder whether you’re misreading Cowen. (Not hard to do — he’s often obscure.) Bear in mind that he was offering a “more modest proposal”. Compare his quote of Yglesias and his proposal and it looks like his minimalistic package is based precisely on the understanding that we can’t commit to letting people die or suffer too much. Read in this light, his glibness in the comments makes more sense to me.

    Admittedly, I’m reading the tea leaves somewhat. But the reason this post raised a red flag in my mind was because it was Cowen who first turned me on to the question of what we can realistically commit to.

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