Arnold Kling  

Becker and Posner vs. Medicare

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Richard Posner writes,


As a matter of economic principle (and I think social justice as well), Medicare should be abolished. Then the principal government medical-payment program would be Medicaid, a means-based system of social insurance that is part of the safety net for the indigent. Were Medicare abolished, the nonpoor would finance health care in their old age by buying health insurance when they were young. Insurance companies would sell policies with generous deductible and copayment provisions in order to discourage frivolous expenditures on health care and induce careful shopping among health-care providers. The nonpoor could be required to purchase health insurance in order to prevent them from free riding on family or charitable institutions in the event they needed a medical treatment that they could not afford to pay for. People who had chronic illnesses or other conditions that would deter medical insurers from writing insurance for them at affordable rates might be placed in “assigned risk” pools, as in the case of high-risk drivers, and allowed to buy insurance at rates only moderately higher than those charged healthy people; this would amount to a modest subsidy of the unhealthy by the healthy.

Gary Becker writes,

Privatizing medicare would prevent that crisis from developing if combined with a system of compulsory catastrophic medical coverage, medical savings accounts, and greater emphasis on treatment by drugs and nutrition rather than by hospitalization and surgery.

For Discussion. Could Medicare be abolished?


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COMMENTS (9 to date)
Randy writes:

Posner hits on a key difficulty when he talks of the need to mandate the purchase of medical insurance by the non-poor. The free rider problem is bigger in health care than in Social Security. Its one thing to say "Your needs can be met on $800/mth", quite another to say, "Your needs include the heart medication but not the surgery".

Can medicare be abolished? Not in a society where "theft" is justifiable by "need". It can only get bigger until a collapse forces a reevaluation of needs.

Lawrance George Lux writes:

Medicare could easily be abolished. It is a system which doesn't enjoy the popularity of Social Security. It only holds sway because there is no offered alternative. The problem is the concentration on Catastrophic Care.

All American Households need a basic coverage which handle normal risk outside Expenses (medical bills of less than $20k). Medicaid could easily be turned into a Catastrophic coverage plan, while mandatory purchase of good Basic medical coverage policies can be effected. lgl

Bill Stepp writes:

As a libertarian of the non-bleeding heart, anarcho-capitalist school, I say abolish both Medicare and Medicaid. Judge Posner's scheme of compulsory medical insurance for the nonpoor is typical of the paternalism (shouldn't we just call it socialism?) that economists of the Chicago school pretend to oppose. He claims it would prevent them from free riding on family members or charitable institutions if they needed unafordable medical treatment, but where does he get off on preempting families from caring for their own family members if they so desire, or on preventing charitable organizations from providing charity to whomever they wish, perhaps to someone temporarily experiencing a financial setback who previously contributed to that charity and might in the future? After all, charities are capable of doing their own "means testing" if they like and are free not to give charity to whomever they reject.
The idea that someone can act as a "free rider" on a charity is a contradiction and ignores the definition of both free riding and charity.
A free rider rides free on someone's back typically because the State forces the latter to bear the free rider's burden at no cost to him (a cost borne by the taxpayers), or because of some breakdown in the exclusion mechanism of property rights, e.g., a hole in the wall of a movie theatre.
Charity by definition is aid freely given and without the use of compulsion against either the charity or the recipient.

Boonton writes:

Conservatives often gloss over the implications of requiring people to buy catastrophic coverage. How in the world do you do that? NJ has mandatory auto insurance. However there are people who drive without coverage. If they are caught they can lose their license and face fines as steep as $800+. Yet they continue to drive.

What are you going to do with people who simply will ignore your mandate to buy coverage? How about those who do not make any money on the books? Mandatory coverage implies a voucher system funded by a tax. Those who don't allocate their vouchers will have the state do it for them by putting them in a pool to be covered by companies that will bid on them.

The only other way to pull this off would be to mandate that those who get sick without coverage be allowed to literally die in the street!

Xavier writes:

"The only other way to pull this off would be to mandate that those who get sick without coverage be allowed to literally die in the street!"

You say that like it's a bad thing. We can't have any meaningful reform of the health care industry until we're willing to accept that some people won't get health care.

Being old enough to remember America before we had Medicare and Medicaid, I don't remember many people dying in the streets in the 1950s.

jim linnane writes:

Society will not accept people dieing in the street or dieing at all if there is a way to prevent it. That is why we have health insurance. There will always be people who, either through their own improvidence or because of misfortune, cannot pay for the health care they need to prevent untimely death. That is why we have Medicaid. Healthcare is expensive and getting more expensive. This increases the number of people who cannot afford healthcare. Healthcare is expensive and getting more expensive because someone else is picking up the bill. The trick is to return accountability for cost to the consumer but also cover catastrophic illness. Health savings accounts show some promise here; but they do not deal with people who will not immunize their children for a few bucks and leave the rest of us to pay for the child's catastrophic illness.

Randy writes:

How about this? Use existing medicare funds to build a national system of free clinics. These would be staffed with Physicians Assistants/Nurse Practitioners. The quality of care would be basic, and the lines would be long, but the service would be free. If someone "wants" or "needs" specialized services or shorter waits, they can pay for it with personal resources, private insurance, or charity.

Certainly this would not be a perfect system, but it would focus resources on the target population, those without healthcare coverage of any kind, lower middle class working people.

Stephen Richards writes:

Xavier,

May I suggest, that at least for infectious disease, we raise our standards?

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