Too dumb for me to come up with something witty

I normally like Megan McArdle, and I'm sure she knows far, far more about economics than I do. (This is not saying much. Your average third-grader probably knows more about economics than I do.) I am usually incredibly reluctant to criticize economics writers, because it's a bad policy to expose one's ignorance. But her post about health care "rationing" in the free market set my teeth on edge (partly because I've already written about this elsewhere), and partly because I just think it's so damn dumb.

She writes:
Robert Wright notes that "we already ration health care; we just let the market do the rationing." This is a true point made by the proponents of health care reform. But I'm not sure why it's supposed to be so interesting. You could make this statement about any good:

"We already ration food; we just let the market do the rationing."
"We already ration gasoline; we just let the market do the rationing."
"We already ration cigarettes; we just let the market do the rationing."

And indeed, this was an argument that was made in favor of socialism. (No, okay, I'm not calling you socialists!) And yet, most of us realize that there are huge differences between price rationing and government rationing, and that the latter is usually much worse for everyone. This is one of the things that most puzzles me about the health care debate: statements that would strike almost anyone as stupid in the context of any other good suddenly become dazzling insights when they're applied to hip replacements and otitis media.
Dumb. Dumb, dumb, dumb.

There is a fundamental difference between cigarettes and health care. First of all, health care (certainly for any kind of major or chronic illness) is an unaffordably large cost for much of the population, and they can't simply do without to the same degree that they could drive more efficiently or cut down on smoking. (Or, at least not without compromising their health.) Third-party payers are necessary for many people to absorb costs they would otherwise be unable to bear for care they need. The presence of these third parties makes health care a fundamentally different entity than other other commodity.

Nobody agrees to pay a portion of your gas costs or grocery bill for you, based upon their own financial interests. Insurance companies, on the other hand, make calculations about how much of your health care they are willing to pay for in light of their bottom line. They routinely refuse to pay for care for arbitrary reasons, or to cover people who had the misfortune of falling ill before being insured. In this way, health care is "rationed" in a more real, direct manner than anything else in the free market, and in a manner that affects people in a more adverse manner.

I cannot fathom how this very obvious and fundamental difference appears to have escaped a woman as bright and educated as Ms. McArdle.

1 comment:

  1. The problem with health insurance is that it isn't being used as insurance. I insure my house and my car; that doesn't mean I have insurance pay all my repair bills for my home or car, or pay my oil changes, or my HVAC tuneups. Insurance is (supposed to be) for large, rare, unpredictable events that otherwise would wipe us out.

    I would support a government healthcare plan that offered a base of catastrophic coverage; hell, we are basically paying for that today anyway. Just as an illustration, let the Feds cover 80% of the cost for treatment over $5,000, and 100% after $100,000. Buy private insurance if you don't like the $25K risk. But having insurance pay for $300 office visits is as silly as having insurance pay for $300 car service bills, or $300 plumbing repairs.