Arnold Kling  

Who Needs Health Insurance?

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The self-employed are less likely to have health insurance than ordinary wage-earners. This may not be the bad thing that most Washington wonks assume it to be, according to a paper by Craig William Perry and Harvey Rosen.


Perry and Rosen find that the gap in the utilization of health care services between the self-employed and wage-earners is generally fairly small. Indeed, for some important services there is no substantial gap at all. Further, they find no evidence that the medical expenditures of the self-employed reduce their capacity to purchase other commodities. On average, the self-employed devote only 0.4 percent more of their incomes to out-of-pocket medical expenditures than wage-earners. Nor are the children of the self-employed less likely to have access to medical services than the children of wage-earners.

Thanks to Alex Tabarrok for mentioning this paper, on the occasion of Rosen's (temporary?) accession to Chair of the Council of Economic Advisers.

I am becoming increasingly convinced that health insurance is highly over-rated. Frankly, if hospitals would treat my Mastercard with as much respect as my insurance card (i.e., they would allow me to present the Mastercard in advance as a promise to pay my bill), then I could do away with health insurance. The premiums are so high in our risk class that I would just as soon self-insure.

UPDATE: more interesting medical spending data at ParaPundit.

For Discussion. If health insurance is really such a good thing, then should we not be able to observe differences in the health and/or financial condition of insured vs. uninsured, other things equal?


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COMMENTS (7 to date)
Jim Greenleaf writes:

The proper way to use health insurance is to carry high deductable catastropic coverage and self-insure for the rest. The other often unnoticed benifit is that the insurance company acts as your negotiator. I have found that medical services billed thru the carrier are often 20% to 30% less than the quoted "retail" charge.

Ronnie Horesh writes:
If health insurance is really such a good thing, then should we not be able to observe differences in the health and/or financial condition of insured vs. uninsured, other things equal?

Yes, except that some of the benefit of having insurance may be peace of mind, which is not easily observed.

Austin writes:

Just get a really, really big deductible. If you get cancer, or you get heart problems, you are going to want insurance.

Arnold Kling writes:

I have the biggest deductible that my health insurer will allow. It's not big enough. They know and I know that the chances are we will blow through the deductible every year.

spencer writes:

The first line of the referenced paper is so incorrect that I did not bother to read any further. The paper assumes that if a self insured person does not buy health insurance themselves they do not have health insurance.
That assumption is very wrong. Very, very many self employeed persons are insured through their spouces health insurance.

How can an economist at a top ranked university pay any attention to such poor analysis.

Lawrance George Lux writes:
If health insurance is really such a good thing, then should we not be able to observe differences in the health and/or financial condition of insured vs. uninsured, other things equal?
Not equitable because of the variable and distorted methodology of health care payment in this Country. County and State pay for Emergency Care(which extends far beyond immediate assistance), Medicaid pays for the Poor, Medicare for Seniors, and Insurers write policies to maximize Profits rather than maximize reductions of medical expense. lgl
Victor Hundley writes:

[
If health insurance is really such a good thing, then should we not be able to observe differences in the health and/or financial condition of insured vs. uninsured, other things equal?
]

I assume we can. Do you have a study that found no difference?

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