While almost all economists will argue that a single payer health care system is inefficient, many economists support the idea on redistributive ground. Taxing the young and healthy–either directly through taxes or by forcing them to buy non-actuarially fair insurance–and giving the money to pay for the medical care for the old and sick seems like the morally correct path upon which to proceed.
Megan McArdle of Asymetrical Information (now on The Atlantic Monthly website) has a series of posts (original post, “The morality of health care finance,” “Another bad argument…“) which questions this line of reasoning. She ponders whether or not the class of old and sick people, as a whole, are a more deserving class than the young and healthy. Ms. McArdle claims that the old and sick are a less deserving class. Here’s why:
- The old and sick are less needy than the young and healthy. “They have more assets and less poverty than any other group.”
- The old and sick are more fortunate than the young and healthy. Some of the young and healthy will not live to old age, whereas the old and sick have had the blessing of living a long time.
McArdle indirectly mentions the moral hazard of having a single payer insurance system; if you know someone else will foot the bill for your medical costs, you may decide to live a less healthy life style.
Some of Ms. McArdle’s critics argue that the young and healthy will someday be old and sick, and thus under a veil of ignorance argument, a single payer system is morally correct. This is similar to the PAYGO system that we have now for the social security system. Young workers pay for old sick people. One problem is demographic risk; if there are many old, sick people and few young healthy workers, the tax rates on the young will be extremely high. Further, one could avoid all these inter-generational transfers if each individual saved while they were young in order to finance their health care expenditures/insurance premiums when they are old.
The final blog concludes by wondering why “…Warren Buffet is entitled to have his prescriptions paid for by my dry cleaner simply because Warren Buffet happens to be in worse health”
The true benefits of a single payer system is that it provides a form of premium insurance. When individuals become sick, their health insurance company will pay for their care…for 1 year. Then, when the individual has to renew their policy, unless they have a group insurance plan, their insurance premiums will rise to reflect the greater expected medical expenditure level. This problem could be solved by having consumers choose long-term insurance contracts. Long-term insurance contracts, however, limit competition, since patients can not switch insurance plans if they received poor service.
There are many problems with the market for health insurance. I am not sure whether a single payer system is the answer or not, but Ms. McArdle’s arguments against the morality of a single payer system definitely add some doubt to claims that a single payer system is needed on moral grounds.