In his column today, "Broccoli and Bad Faith," Paul Krugman goes after the conservative judges on the Supreme Court for their lack of understanding of health insurance and their "self-evidently absurd" claim about coercion.
First, the analogy between health insurance and broccoli:
Let's start with the already famous exchange in which Justice Antonin Scalia compared the purchase of health insurance to the purchase of broccoli, with the implication that if the government can compel you to do the former, it can also compel you to do the latter. That comparison horrified health care experts all across America because health insurance is nothing like broccoli.
Why? When people choose not to buy broccoli, they don't make broccoli unavailable to those who want it. But when people don't buy health insurance until they get sick -- which is what happens in the absence of a mandate -- the resulting worsening of the risk pool makes insurance more expensive, and often unaffordable, for those who remain. As a result, unregulated health insurance basically doesn't work, and never has.
Well, guess what? I'm a health-care expert. In fact, I was employed as one for two years by the same boss who employed Paul Krugman, namely, Martin Feldstein. From 1982 to 1984, I was the senior economist for health policy with the Council of Economic Advisers. I don't find the comparison horrifying at all.
Here's why. If you don't buy health insurance until you're sick, then when you get sick, you drive up the price of health insurance for others. If you don't eat broccoli, and your not doing so makes you sick, you drive up the price of health insurance for others.
Now, there is a way around both conclusions: allow health insurance companies to sell insurance, as that term is generally understood. Let them price according to risk. Then, when people don't buy health insurance until they are sick, the price will be quite high and they will not be subsidized by others. Similarly with broccoli. If eating broccoli makes you healthier, and if that health can be measured, your insurance rates, all else equal, will be lower. Those who refuse to eat broccoli will have worse health and will pay higher rates.
Which gets to the other part of his quote above:
unregulated health insurance basically doesn't work, and never has.
Wrong! It's regulation that makes insurance not work. If health insurance companies are allowed to set rates based on risk, as they do in the market for most other forms of insurance, the market works well.
And notice that the regulation that makes it impossible for health insurance companies to price for risk is the very regulation that's in the health care bill that Krugman defends.
Finally, note this other claim of Krugman's:
I was struck, in particular, by the argument over whether requiring that state governments participate in an expansion of Medicaid -- an expansion, by the way, for which they would foot only a small fraction of the bill -- constituted unacceptable "coercion." One would have thought that this claim was self-evidently absurd. After all, states are free to opt out of Medicaid if they choose; Medicaid's "coercive" power comes only from the fact that the federal government provides aid to states that are willing to follow the program's guidelines. If you offer to give me a lot of money, but only if I perform certain tasks, is that servitude? [Italics added.]
I'm not sure who introduced the concept of "servitude." The discussion is about "coercion." If you offer to give me a lot of your own money but only if I perform certain tasks, Krugman is right: that's not coercion. But that's distinctly not what's going on here. The federal government first taxes the money and the only way the people in a particular state can get the money back is by doing what the feds want. So the analogy is: You take money from me by force and give it back only if I do want what you want me to do. That is coercion.