Why Megan McArdle doesn’t understand morality — or insurance

Here’s the problem with a single-payer health care system, according to Megan McArdle.

McArdle says there are three reasons you might want to transfer money from one group to another: the recipients are needy, they are unlucky, or they are deserving. A single-payer health care system transfers money from the young to the old, and the old are neither needier, unluckier, or more deserving than young people.

It’s true: old people are, as a rule, more affluent than young people, and arguably they are no more unlucky or deserving.

But McArdle’s argument still falls apart in a number of places. First of all, it’s unclear to me that a single-payer universal health-care system would result in a massive transfer of wealth from young to old. After all, older Americans are already covered by Medicare. The young and healthy are already paying for the old and sick’s health coverage. Adding universal coverage for everyone would actually transfer money from old to young, since the old people would have to pay for more of young people’s health coverage.

But McArdle could be arguing from universal principles: Medicare itself is morally wrong, and a universal health care system would be just as wrong. Fine. Then are the young, poor, and healthy unfairly burdened with providing health care for the old, rich, and sickly? Perhaps, if these were actually two separate problems. If there was one country, “Youngoland” that was constantly financing “Oldova”‘s health coverage, then the inhabitants of Youngoland should be morally outraged.

But the fact is that all young people hope eventually to become old people. When they’re old people, they’re going to need more health care, so the trade-off for paying for universal health care when they’re young is the assurance that the health care will be there when they need it.

Finally, McArdle misses the point of insurance altogether. We want insurance because we want to protect ourselves against catastrophe. The higher the proportion of people in the insurance pool who actually face catastrophe, the higher the insurance rates. If we exclude healthy people from the pool of people paying for health insurance, then the price for sick people necessarily increases. If we charge different rates for different levels of health, eventually we don’t have insurance at all: the sickest people would have the highest rates. At that point, you might as well just go to the doctor and pay him/her directly.

Perhaps McArdle is arguing against the concept of insurance entirely. But I suspect she’d be in the minority of Americans. Most people want to know that their health bill will be covered if they get sick.

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4 Responses to Why Megan McArdle doesn’t understand morality — or insurance

  1. Any insurance that is non-voluntary is a tax. Just as any job that’s involuntary is slavery. People who buy insurance voluntarily are paying a premium to enjoy freedom from worry (or self-reproach if something goes wrong). People who are forced to pay into a social insurance scheme are paying to give money to someone else. They may get added peace of mind out of it, but many of them may not, and further many of them may not value the peace of mind at what they’re forced to pay. Moreover, under an insurance system, you can select how much peace of mind you want to buy; under “social insurance”, you get what the government decides to give you. I don’t think they’re morally very comparable.

    I also don’t think the “We’ll get old” argument will do the work you’re trying to get out of it. Some people won’t get old; they’ll pay into the system and get nothing. (Fine if it’s a voluntary purchase of peace of mind; not so fine otherwise). And second, it’s not a reciprocal transfer; the class of people who will pay for me when I get old is not the same as the class of people for whom I am paying now. As I pointed out in a later post, if I will get the same payment as the current old people, this is a stupid transfer; I might as well pay out of my own pocket. If I will get a bigger transfer, this is a bad deal for future generations; and if I will get a smaller transfer, this is a bad deal for me. Any way you look at it, it’s hard to justify giving money to one group on the grounds that an as-yet unborn group will return the favour to me some day–not least because I have no way of ensuring that they will. If the health care budget continues as it has, they nearly certainly won’t.

    As for the massive transfer, a single payer system will almost certainly cover many things often paid for by seniors now, such as prescription drugs, nursing home care, home health workers, and so forth. It would also cover people in their late fifties and sixties, who are themselves quite expensive. It’s nearly certain to enhance the social transfer to the old and near-old.

  2. Dave says:

    Megan, you’re on more solid ground when you stick to the libertarian “taxation=slavery” argument. Once you get into the practical matters, there are many other factors involved. There’s no way to say whether benefits for the older will actually increase under a universal health coverage plan. Maybe benefits for younger people will increase. Why is it “almost certain” that nursing homes and other things will be covered under a universal health care plan?

    The “some people won’t need it” argument is also pointless when discussing insurance. If everyone needed it, it wouldn’t be insurance.

    When discussing practical matters, you make your argument sound more solid than it is by only mentioning the negatives of universal health coverage. What about the inefficiencies of the insurance system? What about health care portability? What about the moral injustice committed when insurance companies negotiate low health care prices with hospitals and doctors, but the uninsured must pay full price?

    But leaving that all aside, you’re really just making the standard libertarian argument that all taxes are bad, and that individuals should just take care of themselves. In this case, even that argument faces difficulties, because in the ultimate free market, health insurance wouldn’t exist. Insurance companies would refuse to cover, or charge exorbitant rates to cover the sick, and healthy people wouldn’t buy insurance because (a) they’re healthy and (b) their rates would go up anyway once they got sick.

    In the end, we’d be faced with the choice between “morally wrong” health insurance for all, or “morally wrong” rolling the dice with everyone’s health. Personally, I prefer the first wrong, and when faced with that choice, I think most Americans would agree.

  3. For a way to make Universal Health Care a reality WITHOUT making it a government program, might I suggest a book? In point of fact, this plan makes government LESS involved in health care than it is now. The book is “Who Killed Health Care?” by Regina Herzlinger. She presents a plan she has called “Consumer Driven Health Care”. A very interesting read and, in my opinion, the best way to fix the system I have ever heard.

  4. For a way to make Universal Health Care a reality WITHOUT making it a government program, might I suggest a book? In point of fact, this plan makes government LESS involved in health care than it is now. The book is “Who Killed Health Care?” by Regina Herzlinger. She presents a plan she has called “Consumer Driven Health Care”. A very interesting read and, in my opinion, the best way to fix the system I have ever heard. For comparison purposes, most people arguing for Government run, single-payer universal health care point to the fact that WHO ranked the US health care system 37th worldwide. They then proceed to point out how many government run systems are ranked ahead of us. What they fail to mention, however, is what type of system #1 has. It is Switzerland, and they have a type of consumer driven system as advocated in the book. Why should we emulate a system that simply ranks ahead of us? Why not emulate #1?

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