Arnold Kling  

Uncle Jonathan Wants You

PRINT
Great Graphic Novels I've Been... Trade and Hegemony...

Jonathan Gruber writes,


It is useful to think about the uninsured as tuna and those who already have insurance as dolphins. The goal of environmentally conscious fishermen is to catch as many tuna as possible in their nets, while minimizing the number of dolphins who are caught by those nets (which happens since tuna and dolphins swim together in the ocean). If the uninsured tunas were swimming in a separate ocean than the insured dolphins, the problem would be minimized. And if the uninsured tunas greatly outnumbered the insured dolphins, then there would also be a minimal dolphin catch. But, in reality, the 47 million uninsured tunas mostly swim in a part of the ocean where there are 190 million privately-insured dolphins, making it difficult if not impossible for policymakers to design insurance nets to capture the tuna without pulling in the much more numerous dolphins.

...Indeed, roughly one-quarter of the uninsured work in firms that offer insurance. But these are very costly tuna to collect, because those uninsured who are offered insurance represent only about 7% of the total pool that is offered. So targeting this 7% of uninsured within firms without providing government subsidies to the other 93% already insured is very difficult.


Where this is leading is to an argument that health insurance mandates will be cheaper than health insurance subsidies.

Think of health insurance as military service. Suppose that at the going wage for soldiers, your do not generate enough volunteers for the army. If you raise wages to get more volunteers, you will have to raise wages for your existing soldiers, which is expensive. From a strictly budgetary standpoint, a mandate (the draft) is cheaper than a volunteer army, because you do not have to pay soldiers as much.

Of course, economists would argue that just because a draft imposes less budget cost does not mean that it causes less social cost. Forcing people to join the army is a cost to them.

Using this analogy, one could say that forcing people to buy health insurance (catching the "tuna" in Jonathan's metaphor) is a cost to them. Jonathan's "bang for the buck" analysis sets this cost to zero. After all, health insurance is good for them and/or society needs them to buy health insurance. So who cares about their individual preferences?

So drafting people into the army of the insured seems like a cost-effective thing to do.

Meanwhile, the Boston Globe is reporting that the "bang for the buck" of the Massachusetts health plan is falling far short of expectations. Maybe Gruber's fancy model needs to be re-calibrated.


Comments and Sharing





COMMENTS (19 to date)
Zubon writes:
It is useful to think about the uninsured as tuna and those who already have insurance as dolphins.

Does it help or hurt the analogy that there are entire species of tuna that do not associate with dolphins? Maybe you could take the nets over there. Also, the dolphins outnumber the tuna 4-to-1 in this case, which definitely makes it seem like we are getting tuna caught in our dolphin nets.

I was really concerned about the analogy when I was under the misimpression that dolphins ate tuna. They do not, as far as Google and Wikipedia tell me.

Josh writes:

Didn't Southern plantation owners already discover this fact like 300 years ago, that forcing people to do things is a lot cheaper than paying them to do them?

And didn't we already decide that that was wrong?

Chuck writes:

To take the military analogy further - losing the war can have social costs to those individuals who were drafted as well.

It is interesting to me that we don't recognize that some level of catastrophic coverage is the least a person should have. Cancer strikes all, even those who are 'rationally' taking their chances without insurance. When they get sick, there is no guarantee that they are going to have money saved up to pay for treatment (very unlikely), or that they are going to survive to repay for treatment, or that they'll follow through on that promise to forego treatment, etc.

Those people are taking a gamble with my money (unless, we are in favor of withholding life-saving medicine from those who can't pay).

I think maybe rather than arguing that it is wrong to 'force' people to get health insurance, maybe we should argue about making sure that, when folks abide by a mandate, they can get the kind of Hansonian plans that cover little of the inefficient medicine we get too much of, and at the same time protect the rest of us from the cost of catastrophic care should their gamble go wrong.

Randy writes:

Chuck,

"Those people are taking a gamble with my money (unless, we are in favor of withholding life-saving medicine from those who can't pay)."

This is the basic problem. But it is only a problem because we have replaced charity systems with entitlement systems.

Floccina writes:

Chuck wrote:
Those people are taking a gamble with my money (unless, we are in favor of withholding life-saving medicine from those who can't pay).

Often they set up a payment plan and pay after the treatement.

Matt C writes:

"I think maybe rather than arguing that it is wrong to 'force' people to get health insurance, maybe we should argue about making sure that, when folks abide by a mandate, they can get the kind of Hansonian plans that cover little of the inefficient medicine we get too much of, and at the same time protect the rest of us from the cost of catastrophic care should their gamble go wrong."

We might be able to stop health insurance mandates altogether. We will never ever get a mandate that excludes premium medicine.

Is it not obvious that the purpose of forced health insurance is to funnel more money into the health care system?

I don't want government run health care, but I'd prefer it to a system where people become criminals if they don't put money into the pockets of Blue Cross or Aetna. Appalling.

shayne writes:

It never ceases to amaze me that the alleged "journalists" refer (repeatedly) to the "free" health care in the same article with the excessive "costs" of "free" health care - or health insurance, for that matter. It is equally amazing that these alleged "journalists" (and politicians) then refer to the Federal Government - NOT U.S. taxpayers - as the source of remedy for the excessive costs of the "free" health care/health insurance.

I suspect that, before any real, rational solutions can evolve, there will want to be some real, rational rhetoric regarding the problem. To date, I haven't seen very much of that.

1.) "Free" health care (or health insurance, for that matter) doesn't exist.
2.) Health insurance doesn't insure health - it merely guarantees payment to those who provide treatment and shields the insured against financial loss.
3.) The Federal Government is the U.S. taxpayer.

shayne writes:

Follow up .... Try the following exercise:

a.) Copy the Boston Globe article into your favorite word processor.
b.) Use the Find/Replace function to find and replace every instance of "government" with "taxpayer".
c.) Re-read the article and see if it inspires a dramatically different impression than the unchanged article did.

Kudo's to Matt C and Josh - very rational questions.

spencer writes:

The Massachusetts health plan is just comming into existence and is really just starting to make payments.

The reason that is now appears to be more costly than eaalier projected is that enrollment is much more then expected.

this implies that the uninsured population in Mass., one of our wealthier states, is much larger than believed.

Do you think you should build this into your belief that private health insurance is doing such a great job?

Chuck writes:

Randy,

I don't want to put words in your mouth (here I go... ;-) )... but it seems you would be in favor of witholding lifesaving treatment when someone can't pay? That would be the flipside to not having a lifesaving treatment mandate.

The reason I bring that up, is because I would think the vast majority of the country wouldn't support that. They'd say, for goodness sake, save the guys life... I don't see chartity as being 'systematic' for anything more complicated than food pantries.

Matt C,

We might be able to stop health insurance mandates altogether. We will never ever get a mandate that excludes premium medicine.

Well, you will certainly be right if we don't try to get something that excludes premium medicine.

I think the universal health care train is leaving the station, the issue now is what station it stops at. Do we end up with a system where politicians can get involved in each and every decision on converage (yes to scurvey, no to rickets!) or do they just have a single knob to turn like cost, or the appointment to some kind of health care supreme court.

Take the Federal Reserve: If you are someone who thinks that is a better-than-nothing institution, put some energy into turning the dialog from total obstructionism to achieving something like that. It is fairly well shielded from politics, and has just one big knob to turn so politicians aren't particularly envious of the power anyway.

I think a politically viable option would be something like so:
1) mandates (or single payer) for universal catastrophic coverage (force all to be responsible about healthcare costs in the context of entitlement to lifesaving treatment).
2) something universal and near premium for children with the outlook that much about healthcare for kids is an investment: it keeps them in school, it keeps their parents at work. The only knob for politicians is funding, not this and that inclusion and exclusion. Maybe something like the base closing system to set benefits in the context of a predetermined budget number.
3) I think medicare stays in place - I think no one likes to think about old folks dying of neglect. But, maybe not, maybe we trade it away for universal coverage?

liberty writes:

"The reason that is now appears to be more costly than eaalier projected is that enrollment is much more then expected.

this implies that the uninsured population in Mass., one of our wealthier states, is much larger than believed."

That is a huge leap. Couldn't it be that people are leaving their private insurance for the "free insurance" - or rather, the insurance they already paid for out of their tax dollars? That is called "crowding out" by the way.

jp writes:
Those people are taking a gamble with my money (unless, we are in favor of withholding life-saving medicine from those who can't pay).

I am one of the few who are in favor of that. The care to which someone is entitled simply by virtue of being sick in the USA should be the level of care circa 1970. Beyond that, it should be up to the individual, family members, and charities.

spencer writes:

Liberty -- you are making a massive assumption.

Do you have one single example or fact to support your claim that people are leaving other insurance programs to sign up for the state govt plan--
that actually is not free.

The article does not even raise this as a possibility.

Where do you get your so called facts?

Floccina writes:

We should try to get the USA citizens to muscle the politicians into a state run system. Into a system that covers everyone and spends the same amount of money that Government spends now (Medicare plus Medicaid spending). People would allowed to opt for private care or accept the care at public hospitals and heath clinics.

We need to try to get average people to realize how much Government already spends on healthcare compared to say the French . We also need get people to realize how small the returns are from medical spending beyond the basics of vaccinations and antibiotics are.

Another alternative would be to challenge the government to produce a cheap optional Government run plan heath plan that people can opt for as their health insurance plan.

Randy writes:

Chuck,

"I would think the vast majority of the country wouldn't support that."

I agree. But if a vast majority of the country is in favor of it, it should be no problem to create a voluntary contribution program.

Arnold Kling writes:

Having people leave their current health insurance for government health insurance is something that everyone expected to happen. That's the whole point of the dolphin/tuna metaphor--the people who take up the subsidy but who were already insured are the dolphins.

Gruber uses an elaborate simulation model to predict the number of dolphins. Either they miscounted the number of tuna in the first place, or his model under-estimated the number of dolphins they would catch, or both.

Victor writes:
Gruber uses an elaborate simulation model to predict the number of dolphins. Either they miscounted the number of tuna in the first place, or his model under-estimated the number of dolphins they would catch, or both.

What did he assume for the quantity of dolphins that would transform into tunas? What did he assume for the number of out-of-state tunas he would attract, and the number of dolphins he would encourage to go out of state?

Is there a non-gated version of this paper?

Erica writes:

I found this article to be very interesting. Health insurance is definitely a big topic on everyones minds especially with the presidential election coming up. I wish that the U.S. could come up with some sort of soulution that wouldn't "force" people to get insurance but rather make it easier for them to obtain it. No one wants to be uninsured, most just can't afford it. It is rather expensive to insure ones-self, but when something happens the cost of not being insured can sometimes outway the initial cost of being insured. The opportuinity cost of being insured is just too great for some people, so they opt to avoid it.

Randy writes:

Erica,

Exactly, and I suspect the democrats are going to take a huge political hit if they try to pass a "requirement to obtain insurance" plan. "Universal healthcare" sounds all helpful and useful and good, but "requirement" just sounds authoritarian. The true believers will go for it, but no one else will.

Comments for this entry have been closed
Return to top