Arnold Kling  

Posner vs. Becker

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Richard Posner writes,

the uninsured are on average less rather than more healthy than the insured

Gary Becker writes

most of those without health insurance are young and do not have major medical expenses.

Well, I suppose that the uninsured could be young people with no major medical expenses but nonetheless they are less healthy than other young people.

But honestly, I think the discrepancy between these two statements is genuine. I don't think we know very much about the nature of the uninsured population, and the guesses tend to be all over the map. As Greg Mankiw once pointed out, many uninsured are eligible for Medicaid but have not enrolled. Some others have declined employer-provided health insurance.

I don't claim to have a handle on the uninsured population.

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COMMENTS (11 to date)
Scott W writes:

I didn't have health insurance during my first year as a grad student. My parents' plan didn't cover me after undergrad. So, I chose not to buy insurance (though I could purchase it through school if I wanted to). The previous 4 years I had visited the doctor maybe once, and I have a healthy lifestyle.

Since I've been married, and got on my wife's insurance, I still have yet to see a doctor for anything. I think I'm subsidizing older people with my purchase of insurance.

Carl Shulman writes:

Or Posner is talking about the effect of insurance status on health, controlling for demographic variables, while Becker is talking about the demographics of the insured?

Steven Bass writes:

It's at least plausible that there is no contradiction between the two statements. If the uninsured tend to fall into two camps, the young/healthy and the poor/old/sick, it is entirely possible that the former make up a strict majority, but the latter bring down the average numbers.

shayne writes:

Another perspective ...

Insurance, of any kind, is a merely hedging device designed to protect the insured against the extraordinary financial loss that could be incurred from their exposure to instances of relatively low probability events. A young, healthy person, who could reasonably expect to pay for incidental elective medical treatments on their own (via savings or short-term earnings), would probably be economically irrational purchasing health insurance - the financial loss of insurance premiums is incurred when it is not required. As the person ages, the probability of more treatments, and more extensive treatments, increases so the purchase of insurance becomes a more economically rational decision. As Scott W. noted, the young and healthy are to some degree subsidizing others with their present health insurance premiums. By the same token, I am a safe driver (no accidents in over 30 years), so my auto insurance premiums are subsidizing others. That is the nature of insurance of any kind.

The most important implication is that health insurance does not provide health, or health care. The health care system does that. The subsidy that Scott was referring to (and my previous health insurance/Medicare premium subsidy for that matter) has built and supports the U.S. health care system. Health insurance merely provides a guaranteed payment to the providers of that health care and shields the insured from the extraordinary financial loss that would be incurred from demanding treatment.

Regards Posner and Becker, I wasn't able to connect using the links, so I can't comment beyond Arnold's extracts. Richard Posner claims those without health insurance are "on average" less healthy than those with health insurance. I am inclined to wonder what metric(s) he's using to define "health". I've seen several claims that apply the assumption that people are considered less healthy because they don't have insurance. That strikes me as the functional equivalent of stating someone has less "weather" because they don't own a barometer.

Floccina writes:

IMHO People should be allowed to fund HSAs with any amount on money per year up until the amount in HSA is over $1,000,000 letting the deductible rise with the amount of money in HSA. Much of the excess spending is after the $5000 dollar mark has been reached in one year. So a young person might contribute $1,000 to an HAS to start a policy with $1,000 deductable but during the year they might contribute $5,000 to the HSA (assuming they used no medical care is the year). . So in year 2 the insurance premium would fall as the deductable would go to $6,000. Then they might then add $10,000 and the next year the deductable would be $16,000 etc.

Lord writes:

I would assume the uninsured are also more likely to be uninsurable.

shayne writes:

I did get through to Posner's article, and he somewhat addressed my concerns about the metrics associated with measuring "average health". It seems the most reliable metric was the mortality statistic. And he rightly emphasizes that mortality (even health) may be influenced to a far greater extent by other factors affecting the poor than by lack of health insurance. I would also argue that "health" is immeasurable - health is subjective, and what I would call "unit-subjective" for lack of a better term. In other words, I and I alone can measure whether or not I am "healthy." Furthermore, my own assessment of my health results in a binary decision - either I determine I want some form of health care treatment, or I don't.

There was one other curiosity embedded in Posner's (and other's) underlying assumptions/analysis that I consider defective: the government not taxing some activity or transaction should be considered a government subsidy. That follows from a premise that the government has rightful claim to 100% of the proceeds of production and that which is allowed to me for my discretionary spending should be considered a government subsidy. I don't concur with the premise. But his perspective (that not taxing an activity/decision IS a government subsidy) leads him to propose full taxation of ALL health care expenditure. He correctly postulates that would reduce both supply and demand relative to the health care system, resulting in lower health care costs overall. I agree, his proposed approach would probably have that effect. I'm not convinced that it's the most desirable result.

From my perspective (NOT taxing an activity/decision/transaction is NOT a government subsidy), making ALL individual medical expenditures, whether for direct health care expense AND/OR health insurance coverage, FULLY tax deductible would be a more rational approach. Each individual, based on their own assessment of their own "health" can purchase as much or as little health insurance out of current earnings as they see fit. But the result would not be reduced supply AND demand, it would merely bring supply (and particularly supply pricing) back into a rational relationship with demand.

Mike writes:


Very interesting idea. My only complaint would be you are requiring the HSA user to fully spend down their account balance before their medical coverage kicks in. I think the idea is to use it like a savings account. Namely, save and withdraw as your ability and needs demand and if you have a residual in retirement you can reinvest it in an IRA. In your model, if you are in good health and prudently use the health care system your balance builds but when you have a particularly severe health problem you are forced to wipe out your entire HSA balance before you can benefit from the insurance. I would think you would want an incentive to build the balance while using the insurance to cover unexpected health problems that arise. Someone who plays by the rules and builds a large balance but has a severe health emergency that should have been an insurable event gets wiped out. Not exactly my idea of a good incentive to take out an HSA since the ability to use the insurance, even for an insurable event, is negatively correlated to your good behavior. Not a very desirable incentive to play by the rules.

Mike writes:


Another point ... You could set the minimum deductible to some percentage of the HSA balance (like 50%) and achieve your goal. Of course, I am assuming the premiums on the higher deductible policy would go down commensurate with the higher deductible.

Floccina writes:

Mike to ensure that I am understood, my goal a system that would encourage consumers of medical care to help to control medical costs.

Mike writes:


IMHO I think I appreciated where you were coming from and I agree with the objective, I just don't think it would be well accepted for the reasons I stated. It would be like building a geodesic dome home and trying to sell it. It may have ideal design features but most people just don't want to live in them. I hope I haven't offended any geodesic home fans to try to make a point.

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