Private health insurance?

How do I afford to have good term life insurance coverage at a reasonable price in my 60's with several common conditions of that age? It's fairly simple. I simply purchased guaranteed premium term insurance when I was about 40 and perfectly healthy. Why should health insurance be any more complicated?

In order for your premise to be economically plausible, we would have to expand the privatization of the health insurance market, primarily by eliminating the state regulations, especially mandated coverage, that make health insurance so expensive. Along with the competition among health care providers that would be a natural consequence of this liberalization, the dynamics of the truly free marketplace would come up with an affordable solution to your problem. It could easily be something nobody has thought of yet. What it certainly would not do are things like "insure" you against the "loss" of the cost of a routine doctor visit. We are now chained by the government to a limited spectrum of methods and practices of providing care and insurance. Innovation and competition would drive down overall costs just like they do in any market. So, there would be an insurance product you could afford, and your care would likely still be more expensive than it is today, but not nearly as much as today's projections suggest.

The best way for you to start is to recognize a few fallacies:


1. INSURANCE FALLACY

If a risk is sufficiently high, then cost effective insurance against it CANNOT exist. That is, if there is high enough risk, then it is not worth it TO YOU to purchase insurance against it. It is always worth it to an insurance company (if permitted by law), since they charge you the full cost plus their overhead.


2. COLLECTIVE FINANCING REVENUE FALLACY

If we Americans don't already have the money to afford something, there is no way the government can do it for us. The government has no money that didn't once belong to people like you. Uncle Sam is not sitting on a magical pot of gold.


3. COLLECTIVE FINANCING UNIVERSALITY FALLACY

Medicare and the Obama vision is for the government to finance EVERYONE'S health care. It is impossible that EVERYONE needs a government handout. Since government only has what it takes, it must be the case that most people can, and indeed DO through taxes, FUND THEMSELVES. That means for everyone to afford to buy something, you don't need the government involved with everyone.


4. COLLECTIVE FINANCING INTERGENERATIONAL FALLACY

Medicare makes young people pay for old people. There is no reason why a young person TODAY can afford to pay for an old person TODAY, but a young person TODAY cannot afford to pay for an old person TOMORROW. That is, you still have young to old transfer if you have each young person fund his own old age. Of course the difference in incentives between having someone fund himself versus fund a complete stranger is significant. The difference in efficiency between simply keeping your earnings versus forcing your money to pass through the government before uncertain distribution, is also significant.


5. THIRD PARTY FINANCING EFFICIENCY FALLACY

Third party payers can get volume discounts, but that does not control GROWTHS in costs. Costs grow because efficiency is not being sought in individual purchase decisions. You already prepaid for your health care (through premiums or taxes), so it makes little sense to waste your time shopping, negotiating, or taking less desirable lower cost measures.

But costs CANNOT grow without bound, so something must control their growth. Since it is the third-party payer facing the immediate burden, it is they who make those decisions. The easiest thing is to increase your premiums or your taxes--thereby deciding for you that your income will go toward health care rather than some other consumption.

Next they try to reduce what they pay out. But it is IMPOSSIBLE for a third-party to accurately reflect the trade-off decisions (TV, vacation, ballet-lessons, etc.) simultaneously for every one of their customers. Therefore what the third-party tells you that you can't have, not only isn't reflected in noticeable savings to you, but it also is unlikely to be your choice even if you could realize such savings.

And if a single entity, like the government, is making those choices, then everyone is legally denied the same kind of services, regardless of any unique trade-offs they as individuals may be willing to make.

The result of ANY third-party financing scheme (private or governmental) is that you find yourself paying more and more, and simultaneously get denied more and more of what you thought you already paid for.

I still disagree with the notion that "everyone can find insurance". Why would anyone want insure someone else when they know that someone else will billing them almost immediately? If they do the premiums would be so high as to dissuade the would-be insuree.

Inter-generational unfairness? How then did the oldies get any care before? Tales from Old Europe state the families care for their older members. In other words - the young are caring for the old who in turn will pass the costs onto younger generations. The yound are subsidising the old! Surprise! Surprise! If someone can't care for themselves and are still living then someone else is caring for them. If Libertarians find this surprising then they should be one retailing euthansia pills.

There is a world of difference between the individual family members of the elderly dependent providing the care and support, and "society" providing that support. In order for society to do it, coercion on a massive scale is required, including coerced giving to strangers, and some third party decides how much each taxpayer is "willing" and able to give. The extended retirements and free medical care most Western nations now support on the public dime are a luxury, not a necessity, and as such ought to be seen not as an entitlement but a transfer payment (aka welfare). If we were more parsimonious to our seniors--providing this welfare only to the truly needy--our productive citizens would change their behavior so as not to arrive at their early retirements depending on the state for support.

Who in the world believes that "everyone can find insurance"? But I think you are correct that in order for insurance to be profitable to an insurance company, the premiums have to be a function of risk times event cost. As risk goes to 1, insurance companies are usually just middlemen, or at best negotiators. But you will be giving them more than the full cost of your health care. Insurance is usually cheap, because true insurance is for high event cost items where the risk is so low that the product risk*cost is low.

I don't get your bit about euthanasia.

As a latecomer to this conversation, I will try to only add two points, while agreeing with much of what was written before.

1. Moral hazard. We currently live in a society in which people rationally expect Government to take care of them if something goes wrong. The need to take care, save for emergencies, or help your relatives and neighbors has been eroded.

In a free society, all of these will come back, drastically reducing any need for forced redistribution.

2. The morality of forces wealth redistribution. One problem with the moral argument is that it proves too much. Surely, the moral argument does not recognize national borders. If I live in Los Angeles, why am I more morally obligated to help a person in New York than a person in Tijuana? For that matter, why am I more obligated to help middle-class retirees than starving African children?

In a free society, anybody can help anybody else with his or her own money, and many many people will, just as many helped in the past.

3. The role of insurance. Current "insurance" practices mask an important distinction between expected cost and unanticipated costs. For a given 65 year old, an actuary could estimate the expected medical costs through the rest of their lives. That amount could never be insured in a free market - it has to be either saved or received through charity. Major expenses beyond that amount can be insured, but in that regard there is no difference between a 65 year old and a 25 year old.

In a free society, a responsible 65 year old person will have set aside enough savings to cover their expected health care costs (as well as any other living costs), and only insure deviations upwards. Private insurance companies will have no reason not to offer policies to cover those (random) deviations.

"Here's my take. The good professor Roberts began this whole conversation with the line "Tom, a reader with Hayekian sensiblities writes...". Where in anything Tom said were the Hayekian sensibilites?"

I think professor Roberts meant that in most economic matters Tom shows Hakeyian sensibility, but when Tom looks at the reality of his situation, he wonders what else can be done other than accept government help -- so this brings up a dilemma which many libertarian-minded people find themselves facing when principles run up against reality. Our social imagination, after years of government regulation, can't fathom, sometimes, how a totally free market could meet some of our most urgent needs, like healthcare in old age when sickness is most present.

This weakness in social imagination is what gives progressives an edge, so Professor Roberts is hoping that the readers can help Tom imagine how a free market could address this sticky dilemma. Until we can articulate how spontaneous order could develop solutions without central planning, the progressives will point to these situations and say "See -- the state is needed when the market fails." Tom is like many people who have faith in free markets -- but only to a point. Is he right? Or can the free market answer Tom's dilemma?

mfarmer, good reply! But how can "we" (the society?) develop free market solutions to Tom's sticky dilemma? I would think Tom should be the one to solve his own dilemma. If "we" are required to develop solution's to Tom's dilemma, then how would it be a free market solution? "We" can offer advice, but beyond that how would "our" solution not resemble the solutions offered by all the statists? I don't see our lack of social imagination as a weakness. I see the statist insistence on social imagination as a serious threat to individual liberty. What am I missing?

I didn't mean we, like in you and I, although you and I are a part of the market, I meant solutions in the free market. I don't think I wrote "we", but referred to the market. I believe the market will develop solutions to meet needs, and what I was saying is that many people have never gained the faith and understanding (the ability to imagine the market working) of the market in order to trust it, to see that the answer to Tom's question is in the market when it's left free to respond with interference.

Well, then I agree with you!

I'm sorry Tom, because you seem like a decent guy; the board has voted, now curl up and die.

Schwabby!

What an excellent description of socialized medicine!

Here's my take. The good professor Roberts began this whole conversation with the line "Tom, a reader with Hayekian sensiblities writes...". Where in anything Tom said were the Hayekian sensibilites?

In a truly free market, would health care be this expensive? One of the most important things a business must do is set the price of its goods and services at a level its customers can afford. If customers can't afford it, they won't buy and you are out of business. It is only when somebody other than the customer can be made to pay, including insurance companies, do prices get out of hand. Fixing a broken arm won't be $2k if everybody is paying cash, perhaps saved in an HSA or like vehicle. Even expensive chemotherapy drugs get affordable in the long run. Who would be paying for that R&D, then? The rich. That is no different than most technological advances. Anybody else remember when quality CD players were $1k+ in 1985? The same thing is more like $99 now. No freedom is lost when the rich subsidize R&D by paying big bucks to be an early adopter, as compared to when we steal from them to pay for R&D.

You are quite right. Regrettably, such a scenario will meet with implacable resistance from the levellers, who will object to 'the rich' receiving life-saving treatment for a condition which is terminal for the poor or the average Joe, only because he can't afford the treatment. That is the single biggest obstacle, in my opinion, to truly free market medical care and health insurance: the deification of equality by the left, which is for some reason more intense vis a vis health care than anything else. It will be necessary to do a lot of educating in order to have most Americans realize the benefits of the rich early adopters, and even more to convince them that it is acceptable that the rest of us make do without until the treatment becomes affordable. I expect, though, that our job will have been made easier by the disintegration or conversion (to private) of the current nationalized health insurance programs in the interim.

In a free market, where individual consumers are able to express their unique trade-off decisions, you will likely see a wider variety of types of health care consumption available, with a wide variety of costs. You will see lower quality but lower cost health care as an option. You will also see much higher quality and more expensive options. But you will also see downward price pressures on current standard of care options.

Tom:

Please allow me to respond to your question with one of my own, which simply turns your question around.

You ask: Isn’t “socialized” medicine for older people an unpleasant moral necessity for our wealthy society?

My retort: Why would you assume that “socialized” medicine for older people is a moral necessity for our wealthy society? What makes it morally right? If an elderly person threatens me with force and demands my money so that he can afford health insurance, am I morally obligated to meet his demand? If so, why? What is moral about government using its power of coercion to tax me to provide health insurance to someone else, particularly if doing so is unsustainable, leads to a misallocation of health care resource or takes money from my wallet that funds my family’s health care needs, education needs, etc?

Well put. Why not make the Medicare fund voluntary? We would then see how much of a moral obligation Tom really feels, along with all other wage-earners. I'll wager an awful lot of people find that in their mind the obligation belongs to everybody else.

In an April interview with David Leonhardt of the New York Times, Obama said this:

"The chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here. ...there is going to have to be a conversation that is guided by doctors, scientists,... you have to have some independent group that can give you guidance."

Please be "guarded" about ObamaCare, too.

Tom
I see two fundamental questions
What should be done about providing health care to those over 65 in general? and What should be done in your case under the current system?

The first one is actually easyer to answer. Going back to the Hayek Quote
"Nor is there any reason why the state should not assist the individuals in providing for the common hazards of life against which, because of their uncertainty, few individuals can make adequate provision."

To me that reads "Hazards of like" are so unpredictable that "few individuals can" plan for it themselves. However, the very fact that we are having this conversation tells me that the cost of health care are in fact predictable. We all know that the cost ramp up over our lifetime and eventualy become problamatic past age 65. That seams pretty predictable to me. What I belive Hayek was refering to was the sudden health issues, like falling and breaking a leg, or such. Where you can't predict with any reasonal amount of certainty when or were such an even twoudl happen. They same would apply to car crashes, being assalted, a tree limb falling on you or whatever. And infact the government already provides, through subsity and law, care for such events, via the Emergency Room system.

So we are left with high cost, long term care, durring the later stages of life. Sounds plannable to me. There fore I would support HSA's, insurance contracts, or even a revamp of Medicare to behave more like a defined benift pension where it put money back into peoples pokets for medical services instead of paying the doctors directly. This would allow the market forces to drag down cost, and improve service. But with a bit of government guilded funding for the elderly. It's not exactly a great plan, but the point would be to make sure the market is involved and people taken care of unlike currently where health insurance gets in the way of the market. Personally I favor geting rid of insurance for anythign but catastrophic care. We dont buy car insurance for oil changes and fill ups, so why does health insurance get involved for every single doctors visit and simpel test?

Ok second question, what can be doen about your situation and the current enviroment? first off be glad, very very glad you live today and not 50 years ago, or 100 years ago. The amount of advancment in medical practices is stagering. Cancer drugs, blood pressure medication, laser eye surgery, organ transplants have all been developed because of the need and the abily for someone to meet that need. Market at work. While there are some things to do about the system, yoru first priority is to look after yourself, are you eating right? getting enough physical activity? getting early screenings for tretable desises? I know that all sounds nice, and a blog poster is telling you this, but if you are worried about cost, prevenative messures are the best way to go about them.

To address the system I pose the question is medical caer so expensive because demand is up or supply is low? I'm 99% certain it is because demand is up. The insurance companies stand between people and doctors, so there is no need to avoid over use. We hear about this in the news, doctors are basicly CYA, "aww you bomped your head, get a cat scan" because they know they can be held liable if anything happens to you after seeing them. And we wonder why people who genuainly need a CAT scan have to pay so much for them? Supply - demand.

So here is my list of posible actions that could bring down medical cost in the short term.

1) remove the silly restriction on insurance companies only practicing in one state, who else has such a restiction? Microsoft? Fedex? (increase competition)

2) revise medical malpractice lawsuits, and I understand that any revision could go too far, but I don't want a bloody cat scan if I walk into a low ceiling, I want some tylonal, hell I shoudlnt be at the doctor at all, but as long as my insurance is paying not me.... (reduce demand for expensive procedures)

3) lift restrictions on high deductable - catastrophic care insurance, does this seriously need a law preventing consumer coice. Likewise life the regulatiosn on minimun policy coverage, if i want a $50/month coverage, then let me get somethign appropriate, laws that maindate X Y and Z in all insurance policies, Floor the cost of insurance at what X Y and Z cost! (lower cost, drive competition)

4) massively expand the benifits and ease of enrollment in a HAS. Ok not nessasarly that short term, but with more money under people's controll, expect cost to be driven down (eliminatign third party pay)

5) change Medicare from reimbursing suppliers to paying consumers. I'm nto 100% sure how this would take affect, but as long as its nto as terrible as my FSA it shoudl work. (decrease demand)

6) create a rival to the American Medical Association's which recently stoped issuing new medical school accredations. and create a puply campain to increase medical school enrollment which is basicly stagnate now, becasue college's have not expanded capacity, and applications per slot ratios have been rising, mean MCAT scorse are going up, and cost have skyrocketed. (increase supply in 11 years as these doctors get out of school)

You said: "To address the system I pose the question is medical caer so expensive because demand is up or supply is low? I'm 99% certain it is because demand is up."
--It is clearly both, as your list of remedies suggests. Libertarians say do away with licensing, and I agree. More practitioners and different specialties and services would spring up.
--Why is med school enrollment stagnant? For the same reason doctors are working less and retiring younger--being a physician in America has been becoming gradually less and less attractive for decades as the cost of malpractice insurance, of complying with Medicare, the cost of med school has gone up, reimbursements have gone steadily, or quickly down. More headaches, less income. Obamacare only accelerates that process. I read that under the Public Plan an anaesthesiologist's reimbursement would be cut immediately more than 50%. Something needs to be done.

Tom Hastened to answer, but I see from the responses already posted most of my points. But taking a slightly different tack, your question poses the dilemma of a person finding themselves at 65, surely about to develop a disease, indisputably nearer their own death. If you avoid planning for health (or life) coverage until then, well my Hayekian/Friedman sense, would be that "free to choose" you chose badly. The other respondents have nicely covered the many options you would have had prior to 65 to 'insure' (inclusive of savings) yourself against the inevitable disease and death we know we shall experience. To posit that one can reasonably leave health and life financial planning until 65, at which point the Government is the only option is entirely non-Hayekian, it seems to me, and a false dilemma partially assumed by current proponents of greater federal involvement. As a point of disclosure I am not in the insurance business, but a doctor, and as such I rather imagine from my own experience and knowledge that a healthy (which your hypothetical suggests as only a healthy person could surely be so oblivious as to the need to finance one's 'health' for 65 years) 65 year old could indeed have relatively low health care costs for many years (based on a low deductible for routine care, a few meds, annual physical with catastrophic coverage [if insurance companies could offer only that nationally without state regulations]). Indeed, a healthy 65 year old can purchase term life insurance for a price; I have no doubt the private market would provide health insurance (again the cost would be less if other options suggested by other respondents were adopted earlier in life).

Silly because just the same you could say “Once you elevate "individual" above society rights, anything goes and anything may be justified.”

In the first place, there is no such thing as "society rights". There is no such entity as "society". All that actually exists in reality -- and all that can actually possess rights -- are discrete, individual, human beings.

In reality, the notion of “society rights” means the right of some individuals -- usually those claiming to “represent society” or those who’ve been voted into power -- to violate the rights of other individuals. But nothing justifies this notion. Nothing gives the majority the right to vote away the rights of the minority. The notion of a right to violate rights is worse than a contradiction in terms.

Secondly, the principle of individual rights -- far from "justifying anything" -- defines and limits what any one individual can do to another individual or what government can do to the individual. The right to life, liberty, property and the pursuit of happiness means that no one -- including the government -- can take your life away from you, that no one can interfere with your freedom to act (provided you don't infringe anyone else's freedom to act), that no one can take from you by force or fraud property you have created or rightfully earned, and that you are free to exist for your own sake, by means of your own honest effort, without having the power to force anyone else to sacrifice for your sake.

Now, please explain how that principle -- the principle of individual rights as briefly stated above -- can "justify anything"? All it can "justify" is exactly what it says: that all men possess equal rights which all other men must respect and which the government must protect (and never violate itself).

And yes, individual rights, as described above, necessarily means one has the freedom to associate with others -- provided they wish to voluntarily associate with you. But it does not mean you have the right to "associate with others" the way an armed robber "associates" with his victims.

"But it does not mean you have the right to "associate with others" the way an armed robber "associates" with his victims."

In short, a consistent set of rights cannot include the right to violate rights.

Damn, Michael, you're on fire!

It is said “Once you elevate "society" above individual rights, anything goes and anything may be justified.”

Silly because just the same you could say “Once you elevate "individual" above society rights, anything goes and anything may be justified.”

I did not make the question of “What makes for a stronger and more sustainable society” in order to take sides but in order to clarify that there is a fundamental difficulty that we can either discuss or brush aside but that won’t go away. If any individual believes that the right of individual freedom does not include the right to associate with others I doubt he knows what individual freedom is.

Someone suggested that the real question is this:

What makes for a stronger and more sustainable society…

A stronger and more sustainable society? Every dictatorship -- every form of totalitarian rule -- ever established was founded on some such principle. It begins by pushing the concept that "society" takes precedence over the rights and the lives of all the individuals that make up "society".

Hitler argued that the looting and subsequent mass slaughter of 6 million Jews left Germany a "stronger and more sustainable society" -- just as he argued that his invasion of his European neighbors was justified on the same grounds.

The white plantation owners in 19th century America made exactly the same argument -- in principle -- to justify slavery, i.e. that it was "necessary" to make "stronger and more sustainable" their "way of life".

Once you elevate "society" above individual rights, anything goes and anything may be justified.

In one sentence Tom wrote:

Isn’t “socialized” medicine for older people an unpleasant moral necessity for our wealthy society?

And in the very next sentence Tom wrote:

Please note I am deeply suspicious of most arguments cast in moral terms in discussions of politics and economics.

Why do you invoke a "moral necessity" argument -- and then declare such arguments "deeply suspicious"?

Do you mean that you want to invoke the "moral necessity" of socialized medicine -- then have your moral premise placed off-limits to any discussion, so that it goes unexamined?

Do you mean you expect all of us to uncritically accept and abide by the moral code of altruism, which asserts that we do not have the right to exist for our own sakes and must, instead, constantly sacrifice for the sake of the needy to justify our continued existence?

It is the moral issue that needs discussing more desperately than all of the political and economic issues combined -- and I, for one, refuse to concede the moral high ground to the Obama-led statists/leftists/liberals/progressives that are trying mightily to extinguish our remaining freedoms.

The fundamental moral issue is this: To whom does your life and the fruits of your labor belong? Does it belong to you -- or does it belong to "society" or to the government, to be disposed of as they see fit, to fulfill any alleged “needs” or to advance whatever it may decide to be its "interests"?

Are all men created equal, with all possessing the equal right to their lives and to the pursuit of their own happiness, by means of their own honest effort, with none having the power to force others to sacrifice for their sake, and with none being forced to sacrifice for others -- OR , do some men possess the special right to have other men forced to labor on their behalf, such that one group gets to receive the unearned while another group is sentenced to labor to provide the unearned?

This second notion is the moral premise behind all the statists pushing for total government control over our lives. But nothing on earth justifies it -- because nothing justifies any amount of involuntary servitude, no matter what alleged “good” it achieves, no matter how badly anyone may “need” such servitude.

And if you are tempted to shrug off this argument -- if the promise of free medical care just sounds so good to you that you don’t care what it does to the lives of those forced to labor on your behalf -- don’t kid yourself: you, too, are a target. For once government becomes responsible for your healthcare, it will have a vested interest in your health -- which means, it will have an excuse for demanding control of everything you do that affects your health: your diet, your exercise, your entire lifestyle -- virtually every aspect of your life will become a target for government control.

Those pushing socialized medicine know this. They are hoping that you do not.

Bravo! It is the abhorrent "social contract" that underlies and justifies "the Obama-led statists/leftists/liberals/progressives that are trying mightily to extinguish our remaining freedoms." This idea is accepted on the left reflexively, unexamined and unquestioned, despite its having been twisted into the service of tyrants and despots from its very first day. You do a great job of exposing it. Great post.

“I encourage readers to ease Tom’s mind”

Why on earth should we do such irresponsible thing like that, when just the opposite is required? The way things are going any moment now we could have our individual gene maps placed on Facebook and will that all social cohesion might break down… they might even tell you “with such a gene you are bound to commit a mistake like the credit rating agencies and so we better not accept you in the universities”.

You should of course develop an insurance against anything that is discovered in your gene mapping, but, what type of minimum capital requirements for the insurance company would be needed in order not to take an exaggerated counterparty risk?

At the end of the day the following question has to be answered: What makes for a stronger and more sustainable society… a health sector where everyone shares the risks, or a health sector where everyone is on their own?

These types of questions are much too important to be ignored just in order to ease somebody’s mind, and a tenured professor should know that, that is why he is tenured. By the way how would our Dear Tenured Professor answer the question above?

This is gobbledygook. Everyone sharing the risks--much like everyone sharing the responsibilities--is generally a recipe for disaster.

And he said he would try to get to it Monday.

And the economic principle of adverse selection explains why no free markets in health exist or could exist.

But a free market in health care DID exist in this country for over 150 years before significant government intervention began. So don't try to tell us that such a thing is impossible.

Yeah back then you could just bleed yourself and find your own leeches.

And the were no health insurance companies...so good point lets get rid of them.

Brilliant.

FINALLY you agree that we need to undo the disastrous government regulations that have made insurance companies the primary method of financing private health care consumption.

Let me try to look at this a little differently. There's lots of discussions about HSAs, but what if they could run a balance of less than zero? When you run into a large health related expense, you're able to borrow from the government towards that expense. Payment of that expense can be done via the tax system directly (up to some max % of income). Upon death, if there is a negative balance, we take from the deceased estate (or rolled over to a dependent's account).

Market incentives still matter here, since we still don't want to go into significant debt. The insurance market still works for the same reason. And people don't get all kinds of free care, except in the case where they die with a worth less than their health debt.

Which points to the biggest problem. You could imagine that once someone reaches a certain level of debt that they feel they would never pay back, they have no incentive to shop around and would just spend and spend. So you get back to the fact that the underwriter of your debt (the government) would eventually want a say in what you spend. But at least we could define that level more concretely (as a % of income or some max), and it would be a pretty big incentive to get a good insurance policy.

The life insurance company has an incentive to keep its customers alive so the insurance company does not have to payout benefits. Perhaps life insurance companies would pay for medical care as long as it does not exceed the payout? In a certain way, you could say that the life insurance payout is the value of the insured person's life. If the cost of saving that life exceeded the value of said life, then it would not make sense to do it.

Before the rise of the welfare state in the developed world, the elderly were cared for by their families. Has welfare contributed to the breakdown of the traditional family unit or is it the other way around?

Despite whatever good intentions a politician may or may not have, the state can never be an agent for a moral necessity.

The subjective nature of state power means that by definition, the men who control that power are inherently incapable of deciding what is "right" for everyone.

It butts up against utilitarian thinking in that utilitarianism relies on some minority of people in power making decisions for the overwhelming majority for their own good. Along the way a lot of people are hurt, and violated for the greater good, but it's a trade off.

The elite - no matter how genuine their intentions - decide subjectively that it is "right" or "moral" to favor one individual or group over another.

Also, statistically speaking, America has never been a place where the old are just forsaken and left to die. Never. So all of sudden we're all in danger of being left to die painful, expensive deaths in the 21st century?

And just as there's always someone willing to loan money to the worst credit offenders, in a truly free market, there would be private health insurance for the elderly. I believe economic history holds this to be true.

Tom rest assured F. A. Hayek and even Adam Smith would see your point. And the economic principle of adverse selection explains why no free markets in health exist or could exist. ( the problem that relatively safe risks will not desire to buy insurance, while relatively unsafe
risks will, which unless dealt with, will make it impossible to offer insurance).



"Nor is there any reason why the state should not assist the individuals in providing for the common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance- where, in short, we deal with genuinely insurable risks- the case for the state's helping to organize a comprehensive system of social insurance is very strong."

F.A. Hayek



"The necessaries of life occasion the great expense of the poor. . . . The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. . . . It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

__-Adam Smith, quoted in the New Yorker, October 27 2008

Clever trick. Also erroneous. Carefully read, Hayek's statement would not come close to justifying modern medicare. It would appear Hayek did not anticipate the urge of the welfare state to metastasize. His idea is more consistent with catastrophic health insurance. Secondly, IMHO Hayek likely would regret having said it in the first place, had he known the manner in which statists would employ it.

As far as Adam Smith, no doubt he never could have envisioned a "public expense" that would require more than half the income of the wealthy. About the time he made this statement, Ben Franklin declared that the government that would take so much as ten per cent from its subjects was intolerable. Smith was much closer in his politics to Franklin than to Obama.

“neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance”

This clause pretty much makes the quote irrelevant to the discussion at hand. We are concerned with Tom’s ability to fund care after a lifetime of choices. Heart disease, cancer, and pretty much everything 65+ers get are significantly influenced by lifestyle history.

Hayek may be arguing for subsidized insurance in limited cases. He is not arguing for blanket subsidy of medical care.

“It is not very unreasonable that the rich should contribute to the public expense”

The word missing here is “compelled”. It may be proper moral sentiment for a rich man to donate a greater share to the poor man. But it is immoral for the poor man or his minions to extract that contribution by coercive means.

True, Smith was discussing tax on rents, so coercion was assumed. But tax on house rent, as Smith continued, is akin to land rent. Here he seems to align with the Georgist argument that the only moral tax is that on land. This thread assumes our current tax scheme which progresses against productive labor (income) rather than wealth (house/land value).

Perhaps we should fund Tom’s care from a national surtax on real property?

Thank you, muirgo. These are fascinating quotations, wherever you stand on this issue.

Where is that Hayek quote from? That's absolutely wonderful!!!!!!

I really hate how free-market economics gets unfairly conflated with pseudo-anarchism (not accusing anyone specifically - don't jump on me for that). I'd be very interested in knowing where Hayek said that.

"The Constitution of Liberty"
But you have to read the whole thing--it won't do to pick and choose tiny fragments of a thousand-page book to support your own specious argument.

Muir obviously did not listen to Russ's conversation with Hitchens.

Listening is not enough.

Just as we shouldn't confuse "health care" with "medical care" and a "right" to medical care with actually receiving medical care, we shouldn't confuse "listening" and "understanding".

That Hayek quote just blew your butt out of the water, methinks. Good one Dr. Muir!

Gadzooks muirgeo - will Hayek and Smith have some explainin' to do before their Libertarian cards get shredded?

If they were going to do any explaining, it would be to the likes of you and muirgeo.

Yeah if they were blogging with us they'd surly be called socialist, statist communist pigs.

Hahahahaha :)

"Invisible hand! you are fired" -Im. George Balella

BTW, Im. stands for Imbecile.

Yeah , I'm funny huh? That was one of my good ones.

Actually, adverse selection may not exist in the health insurance market. It is a theoretical concept unsupported by any study in the insurance market. A recent study found that risk adverse individuals with the lowest expected medical costs increase insurance and not those with the greatest expected costs. Just the opposite of adverse selection. (See link below.)
http://knowledge.wpcarey.asu.edu/article.cfm?articleid=1800

"The modern world consists of increasing degrees of social democracy leaving the days of free market capitalism that Hayek yearned for in the dust bin of history. Free market capitalism gets NO credit for modernity." - Im. George Balella.

"Free market has never been tried." - Im. George Balella.

I was wondering how many would say to 'Tom': "tough luck buddy if you can't afford insurance or get a charity to help you out as you're going die a painful and, maybe even, preventable death because there's no way in Hell you're going to foist your health care costs onto me"? Fortunately, Vidyohs and ArrowSmith chimed in.

Vidyohs and ArrowSmith didn't say anything that hasn't been told to patients by NHS in Britain, the Canadian government via the Health Act, or to American Indians by the Indian Health Service. In every one of those systems, patients are simply a line in a budget to some bureaucrat, and if there's not enough money in the budget, then, as Uncle Joe Stalin once said, "NO HEALTH CARE FOR YOU!"

Is that then proof that there's not enough of certain medical procedures to go around, brotio? If 1 million magic pills were invented and was sold privately they would all go to the highest bidders. If the magic pills were captured by the government and 'socialised' then they went to the first 1 million who signed up. In both cases everyone but a certain 1 million would miss out. The only difference would be which 1 million got the pills. Mere proof of scarcity that even the government can't get around?

Except that if the government was the one buying the million bills they might only be able to buy 750,000 pills because the drug company isn't willing to make more at the price the government is going to buy it.

Look - I'm not a 100% dedicated fan of the public option, but I'm cautiously supportive of the idea that something reasonable and useful like a public option could be devised in the next couple of years - and that it will be a good thing. But that doesn't mean we can allow ourselves to be under the illusion that that won't have certain costs too.

One of those very real costs is that your million pills might shrivel down to 750,000 pills.

And one of the real costs that brotio has to face up to is that a healthy life will be determined by ability to pay. Some people are quite comfortable with that. To a certain extent I am. But some people aren't.

one of the real costs that brotio has to face up to is that a healthy life will be determined by ability to pay

What have I ever written that would make you think I'd have it any other way?

And the corrollary is that methinks can't really ignore that scarcity is a real problem. The number of pills available to him is NOT unbounded.

Markets alot scarce resources efficiently (by one definition of efficiency, at least). They don't eliminate scarcity.

Profound straw man there, Kuehn.

how is that a straw man?

Did you not write "In the case where I may [sic] my own choices, the number of pills available is unbounded"?

It's not unbounded. Occassionally I am guilty of putting up a straw man, and I try to back away when that's pointed out. I have no clue how this is a straw man. I'm not disagreeing with your fundamental point at all. I'm just pushing back a little at your scoffing at Gil's concerns about scarcity - concerns that the market does not alleviate at all... it just deals with efficiently (again, by one definition of efficiency).

Not enough medical procedures to go around? What nonsense is this?

Until the last few decades everything we take for granted wasn't around. One million magic pills were not invented. A magic pill was invented and a quantity of one million was produced at a given price.

I might decide to cut back on other consumption to buy the pill because I value my life more than my cable service and my luxury car. The company will make as many pills as I am willing to pay for.

Government will buy only a finite number of pills with your money and who gets one is not your choice (no matter what you're willing to pay) but the choice of your trusty politician.

In the case where I may my own choices, the number of pills available is unbounded. If government makes the choice, the number is finite and allocated by political fiat - first the politicians, then celebrities, then you.

Maybe it's proof that totalitarian medicine won't pay for procedures that are routinely used in the United States, because those procedures are too expensive?

As an aside:

That asswipe who blew up the plane? The one who just got pardoned by the Scotch? If he'd been in the United States when he was diagnosed with prostate cancer, it probably wouldn't be terminal.

Of course, if he'd been in the US, he probably would have been executed. Some people just can't win.

The question to ask yourself is: how much value do you derive from others without the financial means, to have access to reasonable health care. vidyohs and others have eloquently posted that they derive no value from others having access to health care. I certainly derive little or no value from others failure to achieve the financial means to acquire food or housing. Of course food and housing that is adequate for survival can be had for shockingly little money in this country. Health care on the other hand is expensive and especially so for those over 65. The problem for People over 65 is further compounded by they're being on the declining side of their lifetime earning potential.

It is possible that in a more competitive market for health care, costs for many basic treatments may fall by surprising amounts and just like computer technology, many of the more advanced treatments may also fall by surprising amounts. I would certainly experiment with liberalizing the health care market by licensing more doctors, lowering medical liability, reducing regulation and letting the FDA approve more drugs before I would consider reducing Medicare benefits.

In the end I feel better living in a world where there is a gun to your head making sure you pay your 'share' of the elderly's health care than letting them die for the want of health care.

Well chico, you can see the words but like most leftloonies you can't understand them so you create your own interpretation.

Where in my post did I say or indicate that I want people to have no access to healthcare? Or that I derive no benefit from society?

I am perfectly happy that you can have healthcare that you can pay for, that is your key to access.

If you die due to lack of healthcare or the lack of the key, does society cease to exist along with you?

Are you dead certain that you can't be replaced? Your death may be cause for mourning by those close to you but why should it be for me, a man who doesn't know what area of the world you live on, much less feel close enough to you to care.

I do pay my "share" of the cost of healthcare for two elderly, 100% of my wife's and mine. I have no share in yours, and nothing you can ever do or say will change that.

In the end I feel much worse knowing I share the world with such a huge amount of thumbsuckers who think they have rights to my labor just because they breath air like I do.

In the final analysis I am much more compassionant than you, chico. I do not build up false hopes and unreasonable expectations in people, and I promote the pride and security of self reliance.

In T-Brazorian philosophy being dependent on another man for one's existence is the most degrading thing a man can subject himself to. That you promote the idea that people should do so voluntarily says volumes about your lack of character and hatred of people. You must enjoy seeing people begging and being humiliated by.....no, that's right you on the left do enjoy it, having people come to you for necessities seems to give you the kind of sick pleasure that comes from dominance. Are you guys all afraid to live on a world where every man can look you in the eye as an equal?

To a T-Brazorian the most sickening thing about you and your government is the knowledge that you all actually work to make people dependent, you don't accept that some will be so naturally, you actually work through promotion of slack character the idea that we all have a right to the labors of others. You do so without shame and a willfulness that is remarkable to conservatives in the T-Brazorian mode.

Every single one of us make decisions throughout our lives that place where we are at this moment that I type. Most of us make bad decisions from the git-go, but as we do we learn from them and maturity brings better decisions so that we don't wind up thumbsuckers or beggars at anytime in our life.

Some people will simply never learn to make a good decision because it just requires to much work to be self responsible. Why work and strive, hell, chico will take care of me, or else use his gun to make others do so.

And you think you're somehow better or more moral than myself or brotio? You're a thief at heart, and your ideas promote moral scum.

Whoa, Whoa Whaoooo, slow your role dude! Letting the insults Fly 'Leftloonies'. You talkin' to me? I think most of us here would think that taxes if not violent are a least personal property theft with the threat of violence, hence the gun to the head analogy. Additionally I don't think you could find many congressman or senators, right wing or not who openly call for the abolition of medicare. My point being that in current highly regulated environment for health care costs are too high to be borne by many of the elderly. Maybe if we deregulated health care, costs would lower and then we could reduce medicare benifits. Some people believe the biggest government interference in health care is medicare therefore if we were to eliminate it costs would be lower. I feel that that step would be too big a gamble.

No no chico, you are either for freedom, or you are in the way of, preventing freedom.

When you say this: "In the end I feel better living in a world where there is a gun to your head making sure you pay your 'share' of the elderly's health care than letting them die for the want of health care."

You clearly stamp yourself as one of the leftloonies, those who hate freedom and choice.

Note that what Chico wrote is, "... I feel better living in a world where there is a gun to your head making sure you pay your 'share' of the elderly's health care than letting them die for the want of health care." (emphasis added)

But what is "reasonable" health care? 2009-quality health care is really expensive. 1950-quality health care is much cheaper, but any doctor providing it would be sued for malpractice within a day. 1500-quality health care is very cheap; quite likely cheaper in real terms than it was back then.

I think you actually derive at least as much value from your fellow citizen having adequate financial means to acquire food or housing as you do for health care. The difference is that, through the miracle of the market, food and housing are really cheap. You're asking for Rolls Royce-quality health care, but you're not demanding the same of food or housing.

We need policies that focus on economic growth. Why not grow the economy by $6 trillion? Then we would have another say $600 billion to spend on things that will ease Tom's mind.

The what-ifs of a totally free market are endless. I couldn't devise a plan for a 20 year old just starting out that would cover his healthcare needs and his retirement needs -- well, I probably could, but it might too simplistic -- but the private sector working to find solutions to individual needs would devise such a plan. There is no doubt in my mind that such plans would be offered, and an unburdened free market would create such prosperity, that even the most helpless cases, who could never get it together to afford such a plan, would be taken care of through benevolent private organizations designed to assist the unfortunate. People doubt that faith in such private developments is viable, and they suggest that players in a free market would fail to provide for old age or unfortunate persoanl tragedies, but when we use imagination, think of all the what-ifs, we do begin to see how a free market could easily respond to these needs. There is no need to go through government to accomplish these things, and as has been proven, government is too politicized to competently handle the responsibilites indefinitely -- we're going broker and broker.

The problem is that a free market would deliver unequal results. Better results for everyone, but still unequal. And since people would have nothing to compare it to, they'd bemoan the inequality and press for regulation and subsidies and guarantees.

One can only really appreciate the benefits of a market when compared to the alternative. Presently there's a huge amount of free-riding - European countries can institute single-payer healthcare and purchase American R&D breakthroughs at the marginal cost of production. So our medical care is similar even though the R&D costs are borne here. Imagine, however, a world in which international trade and communication were impossible. A pure isolationist world. Everyone would be worse off, but then we could really see the power of various growth rates without the free rider problem. Over a few generations, the relative difference in available technology between, say, the US and Europe would be stupendous. It would be like magic.

Schumpeter predicted that democracies would trend towards socialism as basic human needs are met and the people become afraid of creative destruction. How right he was...

Is it possible that if a true free market in health care were unleashed (I know, its a fantasy), prices for health care would fall so low that health insurance would become superfluous?

Not superfluous, but it's quite likely that it would be necessary for only catastrophic events. I'm constantly amazed at the difference between the price my insurance company pays for services versus the "list price."

I don't understand why we're even having this discussion. Health care is not a right just housing and food is not a right. I want all you busybodies out of my life! Hail Ayn Rand and Galt's Gulch!

So I did a quick word search, and it seems that nobody here has claimed that it's a right. So rest easy - you don't have to worry about that!

Ask Yasafi.

Tom has a point about not being able to get coverage at 65 but how different is that from not being able to get life insurance at 65? Everyone knows that at some point you are going to die. Life insurance companies don't give term life insurance for 30 year terms when the actuaries predict you will die in the term. We insure for unforeseen events, not the foreseen ones. The solution to foreseen or predictable problems is to save. Or, how about a health / life insurance policy that pays out like a whole life, life insurance policy at a certain point. Then, you will either have money for that hip replacement, or money for your next of kin.

The bottom line is that if there is no "cost" to NOT saving for retirement, end of life health issues, college, (anything...) then you are at the same time subsidizing the lifestyle of the recipient of the subsidy tomorrow. IE, I will buy a nicer car today if I know I don't have to worry about paying for healthcare tomorrow. It turns savers and planners into the chumps of the subsidy game.

Tom -- BLESS you for providing a thoughtful launching point for discussion, and for the community at Cafe Hayek for being civil and thoughtful.

Don and Russ... I think this thread stands as a testament to the power of threaded comments. THANK YOU Wordpress and Disqus!

Thanks Ike. Appreciated. And comments to Don and Russ seconded.

Tom, as you are no doubt profoundly aware, none of us can escape the inevitability of death. How much would it require me to pay you to accept death now with certainty? I suspect that there is no amount - and therein lies the conundrum. There is no scarcity of scarcity in this world, and all (most?) of us would vote to use unlimited resources to keep ourselves living for one more day ... so if you pose your question appropriately, there is no entity, government or private, that can come up with the infinite resources that would be required to sustain you. So I think the premise of your question is unfair regardless of whether you were asking about socialized care or some other kind of care.

Once we wade into this water, we have to ask ourselves other hard questions. What is medicine or medical care? Even if you are suspected of having a chronic and expensive condition, it is not at all clear what treatments should be covered - just pain relievers? Experimental treatments?

The "free-market" is no more or less capable of making us live infinitely long than is some other system. Allow me to ask your question differently ... at some point, even if you had perfect insurance that insulates you 100% from costs, do you not still face gruesome medical decisions? For the life of me, I cannot seem to see how the medical/death questions are clearly delineated from the basic economic questions ... and those on both sides of the debate like to blur this issue to suit their preferred idea.

But dealing more directly with your question ... if all of us will end up facing a decision like yours, and no one of us can afford the expensive health care, then how is it that "we" collectively will be somehow able to afford it?

Tom,

You would surely risk a painful life and preventable death with public health insurance. In fact, many people who are "covered" by public health insurance do live painful lives and die preventable deaths. A government may say that you're "covered", but medical resources (including knowledge) do not cease to be scarce because of it.

It is always possible for people to live painful lives and die preventable deaths; neither markets nor governments can solve that problem entirely (indeed governments often add to the problem). The question is whether one or the other is better at preventing it, and to that I answer markets.

Indeed, Lee.

In fact, resources become more scarce and the government run public system generally disintegrates into allocation of resources by political fiat.

Death is a reality. My mother in law passed away 2 months ago, due to a kidney failure. She had a transplant 3 months before that, which didn't take. Since there was no organ market , it was nearly impossible to find a second donor in a short period of time. My father-in-law spent a fortune on her care, and we all pitched, we didn't think for a second that someone else owed us something.

There are a bunch of ideas. One is that, although premiums for over 65s may be expensive as a portion of current income, they may not be as portion of their household wealth and certainly not in the aggregate. So one idea is that put all 65+s into a pool, charge everyone the same premium, but allow the premiums to accrue and be repaid out of their estates and then further supported by the estate tax. Second, family coverage - given Medicare, it has evolved to be minor children and their parents, but if we didn't have Medicare, it could have evolved to cover three generations and the younger two would dilute the cost of the most senior. Obviously this requires one to depend on one's children to act for the senior's benefit which does not help all seniors and not that many families could afford the premium (although who knows, if we eliminated the payroll tax associated with medicare, how many more could do so). So maybe some combination of the two would have done the job.

But ultimately the problem is one of demographics swamping limited resources, and an unwillingness of politicians to act to limit the amount spent on services for seniors in advance of the impending crisis of limited resources.

I think all the answers to Tom's question may be in this video, which I believe I was originally pointed to from Cafe Hayek.

http://cafehayek.com/2009/08/private-health-ins...

It hit me a couple weeks ago when I bought a GPS navigator that 80% of Best Buy's floor space was filled with gadgets or accessories to those gadgets that didn't exist 10 years ago (or existed in a primitive form at a very high price). I bought the GPS to get me around on vacation. Wow. Worth every penny. It will be invaluable on future business trips and vacations.

Certainly, the thought of paying for end of life care in our current medical care industry that has been restrained by government and third party payments is overwhelming. I know it's tough to have faith in opening the market to see what happens, because nobody can predict it. I don't know what will happen. Neither does a politician or government committee. It's unpredictable.

But, I can tell you that ten years ago I wouldn't have been able to predict what Best Buy would be selling and I wouldn't trade any of it.

Oops. I posted the wrong link to the video. Here's the correct one:
http://www.youtube.com/watch?v=WXStPqhLmIk

We got one for Christmas.

I always used to marvel at mapquest. How in the WORLD did we get around before mapquest, I wondered.

And now that we have a GPS, mapquest seems positively primative... I mean, you have to make sure they're giving you the route that makes sense, and then you have to print it out - and if the trip is a long one the map is going to be too small to read - and it's hard to read while you're driving so you have to basically memorize it before hand, etc. etc. In light of the GPS, mapquest is even getting barbaric and primitive.

It is quite amazing :)

Prior to the introduction of Medicare in the 1960s older people essentially found it impossible to obtain insurance.

If true, it was probably because no company would bother (or was legally allowed) to charge the kind of premiums commensurate with their degree of risk. If they did, people like you would claim they were preying on the elderly.

You need to stop and think about what insurance really is--a product, a hedge--and what is not--charity, financing.

Imagine we had entirely private life insurance market – no government options at all. If I live to be sixty-five, I will probably have a pretty high probability of dieing in the next 15 years or so. I would wager that is true of almost all sixty-five year olds.

So why would anyone insure me?

Because the life insurance market has developed a very reasonable solution to this -- you negotiate a term life rate for X number of years. Your rate might be Y a year for 10 years, or 1.5Y a year for 20 years, or 2Y a year for 30 years. The longer the rate guarantee, the higher the rate. You are explicitly paying higher rates than you might have in younger, less risky years to make sure you get a coverage guarantee at an affordable rate in later, risky years.

Of course, if you play the grasshopper and never buy insurance until you are 65, your price is going to be awful. But I don't think it is a reasonable role for government to do all kinds of individual-liberty-defying and costly things just because you did not take responsibility for your old age earlier in life. However, saying that, I of course know that this is EXACTLY what the government does with Social Security.

I have a high deductible individual insurance plan from Assurant who specializes in insuring individuals, and they have been evolving to a pricing model sort of similar to the term life model I listed above, though they are not quite there yet.

To the folks that say this is no solace for folks already 65, that is an implementation transition issue, not an argument against the market's ability to deal with this. Certainly a lot of folks have paid Medicare taxes for years and are counting on it. Some kind of phase out, possibly where the government redirects Medicare funds to make up the difference in policy prices for having not started locking in earlier, is possible. But the question was not an implementation question - it was a question of whether the market inherently fails for 65-year olds, and I think the answer is that it does not. We have a perfectly serviceable analog in life insurance to prove it

I can think of the following reasons why no insurance company is selling a level premium health insurance policy (the analog to the life insurance option in the comments above):

* Tremendous uncertainty regarding the benefits that might be paid under the policy. Life insurance is easy. The policy pays out a fixed amount at death (or nothing at all if the policy lapses before death). An insurer that wrote a traditional indemnity policy in 1950 would not have priced in the possibility of widely available (and very expensive) organ transplants and medical imaging, not to mention better and more expensive prescription drugs and longer life expectancies over which theses costs are being incurred. The pace of technological innovation in medicine makes insuring the costs of improvements difficult. It might be possible to buy a level premium policy that did not cover technological improvements and that ceased after the expected life span, but who would want it?

* General price level inflation works in favor of the insurer in the case of life insurance. As long as medical care inflation outstrips general inflation the reverse is true (of course, other reforms like shifting more direct costs to consumers and reducing subsidies might reduce medical inflation, but unless those reforms are universal, no insurance company will want to write a level premium policy).

* Adverse selection would be a real problem if consumers can let the policy lapse before the end of the stated term. Enforcement of policy terms that locked in consumers as well as the insurance company would be difficult.

* Compounding the above is the need for the policies to have very long terms. Level premium life insurance usually has a term of 10 to 30 years. Assuming the policies are to replace Medicare, the level premium for a 20 year old today would likely need to be at least 100 years (I would not be surprised at all if average life expectancy improves that much or more over the next 80 years). Uncertainty means that the the average 20 year old probably would not buy such a policy compared to the lower cost of non-level premium insurance or no insurance.

For the above reasons, I do not think that level premium health insurance would solve the problems. Reforms are needed to make prices meaningful in medicine (reduce subsidies and more direct payments to insurers). I have a daughter with a serious health condition. Current insurance policies are completely inadequate to handle her expected lifetime care under the current regime. We need technological improvements to reduce the cost of care, not insurance reform. Unfortunately, the reform we are likely to get will only reduce technological improvements and therefore increase the cost of care in the long run.

It is always possible to design a policy with some upper limit on the payout.

I have heard Peter Schiff say that his dad, back in the late 50s and 60s, used to sell insurance policy with a premium of $15 ( $109 today ) per year with a deductible of $500 ( assuming 1960 $s, based on CPI, it is about 3634.42 in today's dollars )and an upper limit of 5000 ($36,300 today ) dollars. It was affordable and it covered most of the expensive, unforeseen medical emergencies.

Of course, don't caught up in the numbers, with a higher premium, it is always possible to increase coverage or reduce the deductible.

Good thoughts - and the impact on innovation is what worries me most about a public plan that has any prospect of growing very large. However, technological improvements are not going to reduce cost of care in the short or even medium term. That's one of the things that's driving increases in costs. It doesn't mean it's not important to maintain - but medical and technological breakthroughs are likely to make care better, albeit more expensive.

I do share those concerns about the long-term insurance options that were mentioned above. If we could get something like that it would be preferable, but I would imagine we'd see more of it if these problems you raise were surmountable. One way to move that way, at least, is to make insurance more portable by reducing the disproportionate incentive to get insurance from employers.

I think it is fine to say that with a purely market based solution there will still be some folks who do not get the care they need. That fact is unpleasant. That fact is sad. That fact does not entitle anyone to forcibly take from their fellow man and call it "moral necessity".

"What has always made the state a hell on earth has been precisely that man has tried to make it his heaven."
-- F. Holderlin

I feel like the uninsured 65 year-old example doesn't adequately capture the issue. The 65 year-old without insurance has, as many have pointed out, made a choice at a younger age to not contract for long term coverage. So the solution is that the middle aged uninsured should be incentivized to obtain long term coverage.

But the thing that bothers me is how to cover younger adults who have diseases with high mortality rates -- or diseases that will require lifetime treatments at a high cost. Requiring higher premiums for those types of individuals just doesn't sit right with me, as there was no individual choice they could have made to improve their lot in life.

Hayek says that opponents of competition argue that it tends to be blind, and then points out that it was a virtue of the ancients diety of justice that she was blind. Does that suggest that the market believes it to be 'just' to weed out the old and sick among us? I don't want to believe that, and I know that there is a creative solution, but I just haven't really heard it yet.

I was surprised charity was not more commonly cited. Tom is correct in that needless human suffering and death reduces the wealth of the world. For this reason, private resources are put forth in stunning frequency to heal the sick. This happens today and would likely happen even more in Tom's hypothetical situation because the absence of a government provided system would mean more wealth in the private sector.

I think he hits the nail on the head. Most concerns about what a public option (Medicare, or an option open to anyone) will do compared to the market are true, and the concerns are shared by the most thoughtful advocates of the public option. It won't be as efficient. It won't be as innovative. It will cost more than a private option that has comparable pricing mechanisms, etc. etc.

But none of those concerns really speak to the fundamental question of how appropriate a market is to health care in the first place. Obviously it is at least partially appropriate - we like innovation and choice and efficiency in health care. But the letter write gives a good reason for thinking it's not entirely appropriate.

It's like national defense - forget the public good argument. We wouldn't want to say that the level of defense people receive against an invading enemy army should be proportional to how much they could pay for it. We want everyone to have access to a basic level of defense.

It's even more like education. Nobody advocates public education because they think public schools are better quality than the relatively fewer private schools. Talking about the efficiency of private schools isn't an argument against public schools. We have public schools not because we mistakenly think they will be more efficient - but because we are willing to sacrifice some efficiency because we know that some people simply won't be educated if we rely entirely on private schools. And it's great to enact reforms that introduce the sort of competition in public schools that will improve their efficiency - but at the end of the day we've made the choice that you have to sacrifice some efficiency to ensure a basic level of education.

Or what about sex? Presumably, if there were a free market for sex there would be a ton of people out there who would be much more satisfied with their love life than they currently are. And actually for that reason I'd be fine with legalized prostitution - and yet we still don't generally buy our sex life. Why? Because haggling over something like sex cheapens it in most people's minds. Haggling over providing care in old age feels like it cheapens life too - so we like to have something like Medicare to make the provision of care more dependable - if somewhat less efficient.

Religions that have introduced the idea of buying off God for their salvation haven't really thrived (it didn't take long for the Council of Trent to step back from that ledge). Great artists haven't exactly proven to produce their greatest works with any correlation to the profit motive either.

Economics has done a great job of showing WHY the market does so well in so many situations. But we make a mistake if we assume that means it's appropriate to all situations.

A lot of people argue as if the pro-public option crowd is ignorant of the benefits of the market. It blows my mind that they still think that's even the point. It's not. The question is, what degree of efficiency and innovation are we willing to sacrifice to provide a basic level of care in this country. How do you balance the market with public provision to make sure that we still maintain innovation and efficiency. It's a tough question - a really hard question, and a question where I've come up with huge doubts about the public plan. But it's not a crazy question to consider and it's not a question that is born out of ignorance or opposition to markets.

BTW - it's nice to see so many people commenting on this one that don't usually comment!

It's not a really tough question at all, it is answered very easily.

People take care of themselves. If they do, they live. If they don't they die.

I'll try very hard to use my money to keep my wife, daughter, and 2 sons alive. I'll contribute to keeping one of my siblings alive.

I won't spend a penny keeping your wife alive. Nor unfortunately, just being honest, will I spend a penny keeping Tom alive. I didn't bring DK, his wife, or Tom into the world, and I don't think I have a moral or legal obligation to keep them from exiting at the natural time. (P.S., if you put yourself in the way of an 18 wheeler doing above 15 MPH, or anything similar, it is a natural time for you to exit.)

I consider myself to be on my own, and I suggest Tom and everyone else should do the same. Equal and fair.

See, good answers all, and not difficult at all........further more is it infinitely naturally fair and equal.

"I consider myself to be on my own,....."


Yeah we KNOW what you consider yourself. But your imagination and reality are two very different things.

Big talk for a guy with guaranteed government provided health care for life. Pathetic.... you can actually say crap like that and take yourself seriously? It's weird but I guess as long as your good with it.

Man, it really bugs you that Vidyohs was in the Navy and doesn't worship the State - like you do.

It also really bugs you that Vidyohs only talks big with Vidyohs' money, while you only talk big with Vidyohs' money.

It doesn't bug me at all that he was in the Navy and gets a pension and government supplied health insurance. I have no problem at all with those things. But yeah... hypocrisy bugs the crap out of me... sure it does.

Vidyohs isn't being hypocritical -- he's being disingenuous. He said that he wouldn't spend a penny to keep your wife alive. My guess is that he would probably give as much as a dollar -- if you asked, and if it was voluntary.

I agree with Vidyohs sentiments almost 100%, if I'm speaking to the law, a tax collector, or voting. I would have a little different take if I was talking to my church, your wife, or you.

The left is always amazed when people claim that they want to keep free choice only because they want to exercise free choice in giving -- the left then falls either amiss or last in line when it's their turn to give.

LMAO! @ being bugged by hypocrisy!!!!!!!

Aren't you the man who claims to oppose corporate welfare, but supports corporate welfare for GE and ADM?

Aren't you the man who claims that (my) carbon footprint is leading to catastrophic global warming, while you take carbon-intensive vacations to Alaska and Mexico? Leading by example, are we?

I think it's a little more complicated than that.

"Partially divisible goods and services, with interactions extending over groups of critically large size This category includes the large-number externalities, or Pigovian externalities. There are both publicness and privateness elements in a good or service, but the publicness or indivisibility elements extend over a group that is critically large in size. An example is inoculation against communicable disease. The securing of a shot provides me with some privately divisible benefits but, also, it provides some benefits to all other potentially exposed persons in a large group. By comparison with the small-number interaction, in this instance many persons are effectively my neighbors."

The issue of "how appropriate a market is to health care in the first place" is akin to the matter of "how appropriate freedom is to health care in the first place." A people cannot be free unless, in the first place, they are generally permitted to deal with their labor and the fruits of their labor as they see fit. Just because another's medical condition is implicated (and it always is) doesn't justify the abrogation of that core principle. The benefits of free markets (such as innovation and efficiency) are great, but beside the point. Markets, the aggregate activity of free individuals, reflect an underlying belief in the value of each individual as an end in him or herself, not an instrumentality to be used unwillingly in pursuit of the interests of others.

I'd agree with you Matt. Each individual is an end in him or herself. Each individual should be generally permitted to deal with their labor and the fruits of their labor as they see fit. And because markets are an aggregate of the activity you describe I'm a big fan of markets and a great admirer of Hayek at that. I simply don't ascribe to the idea that all majoritarian social coordination that follows basic principles of fairness and civil liberties tramples the idea that individuals is an end in him or herself. Indeed, I think a great deal of majoritarian social coordination uplifts that principle.

The grim reality is that the majority has, when it stands to gain at my expense, time and again demonstrated its utter disregard for my freedoms and my rights respecting my labor, the fruits of my labor and the consensual activities I undertake with parties of my choosing. The majority, unchecked by the rule of law, necessarily views individuals as mere instrumentalities. The majority has been all too ready to enchain future generations with the cost of its present indulgences.

It is easy to paint "markets" as dark forces. The flaws most often cited in reference to markets are tied in large part to the distorting effect of "majoritarian social coordination." While markets are, to a significant extent, spoken of with a great degree of abstraction, they represent the rightful arena of individual decisions concerning the disposition of time and treasure. When such decisions fail, in the aggregate, to please those who wield political clout, legislation and regulation (which should be stewarded for the limited collective aims expressly set forth in our nation's founding documents) are brought to bear to bend and to pervert the market in the attempt to satisfy those whom it did not otherwise prosper. It is theft under the smiling mask of "majoritarian social coordination".

There is no rule under the 20th century interpretation of "general welfare". Anything goes.

You think wrong!

Masterfully argued.

Thank you. You give me way too much credit. I would argue that I didn't do quite as well as this one.

I simply don't ascribe to the idea that all majoritarian social coordination that follows basic principles of fairness and civil liberties tramples the idea that individuals is an end in him or herself. Indeed, I think a great deal of majoritarian social coordination uplifts that principle.

Tom here - I think this is a fascinating exchange of views. Matt Huggins (and perhaps sandre?) has an uncompromising commitment to the principle of liberty, reflecting "an underlying belief in the value of each individual as an end in him or herself, not an instrumentality to be used unwillingly in pursuit of the interests of others". I respect this view.

But this is an argument couched in terms of values, rather than the maximization of welfare. Daniel Kuehn is open to the idea of "majoritarian social coordination" if it can improve the general welfare (however measured). For Matt, that measurement is irrelevant. The principle's the thing.

Since most economists aspire to a constant frame of empiricism, I find this commitment to a value rather than that which is observed very interesting. It may be where I start to part company with a 'pure' libertarianism.

Either way, thank you to all of you for this. You really are all terrifically smart people. But hey - it's Cafe Hayek. Why would I expect less?

Tom, you said: "...this is an argument couched in terms of values, rather than the maximization of welfare. ...I find this commitment to a value...may be where I start to part company with 'pure' libertarianism." Well and good, by all means part with it, and may God be with you. All I ask of you (as a 'pure' libertarian) is that you depart in peace, and - please! - don't try to use the state to force me to go with you. I prefer to stick to my commitment to values.

I have to disagree with your distinction between "an argument couched in terms of values" vs. "the maximization of welfare". How you decide what "welfare" is, is inherently a value judgment.

But I understand what you're saying. You're not asking whether or not liberty is morally correct in principle; you're asking whether or not a greater degree of liberty might result in some elderly being neglected. Correct?

I think in the end you have to make choices based on principle, because the consequences are largely unknowable ex ante. But I do think it is often useful to talk about things in the terms you're asking them to be discussed.

"But this is an argument couched in terms of values, rather than the maximization of welfare."

The trick is that welfare itself is an argument in terms of values. How do we measure "welfare"? If we consider that government control of healthcare may impede innovation and increase cost, is not overall welfare reduced? Yet it can be argued that there are individuals who would not receive care, so how is that conducive to the general welfare? Even taking a look at the whole or majority rather than concerning ourselves with the freedom of choice the individual, one must still determine how to define this concept of "welfare". Given that this entire argument fundamentally revolves around the value of life and the ability to preserve life regardless of the monetary means that life may possess, it is inextricably and inescapably a value argument, regardless of position.

Definitely - and I'm not sure that Tom necessarily meant it in that way. The trick is to identify the tradeoff between the welfare losses of some sort of public insurance and the welfare gains - because it's quite clear there are both losses and gains. I don't think any of us are intelligent enough to make that calculation with complete accuracy.

But even if we could - and it was an undeniable net positive, would that justify the state stepping in? To answer that question I have to emphasize that I didn't just support "majoritarian coordination" - I was careful to support majoritarian coordination that takes fairness and civil liberties into account. Matt is mistaken if he thinks he's the only one that supports liberty or limited government.

The trick is to identify the tradeoff between the welfare losses of some sort of public insurance and the welfare gains - because it's quite clear there are both losses and gains. I don't think any of us are intelligent enough to make that calculation with complete accuracy.

That's not much of a trick and we don't have to be that intelligent. It's not as if this is 1824 and nobody has ever tried public insurance or forcing everyone to buy private insurance. This has all been tried before and the results are well known.

Yes - the benefits of private insurance are very well known. And if you're willing to make the assumption that there are no net benefits to any public insurance then the task is pretty easy. But I think that's just another version of Hayek's fatal conceit. At least I know I can't predict perfectly what effect some level of public insurance, regulation, or reform will have - I can make a good guess but because I don't know I proceed with caution. It is quite an easy decision if you exhibit the fatal conceit of thinking you know exactly what the implications are.

It's not conceit - fatal or otherwise - to be able to learn from history, Daniel. Learning is a sign of intelligence, not conceit.

Conceit is your willingness to continue to experiment on other human beings against their will because you can't know with 100% certainty the minute details of the outcome of every socialist experiment.

Certainly learning is a sign of intelligence, not conceit. But learning from history is very different from thinking that you don't "have to be that intelligent" (in your words) to know the impact of a public policy choice. Hayek's concern was with recognizing the limitations of any person or group of people's ability to orchestrate or even understand a complex set of interactions like the economy - and to proceed cautiously and in a limited way, knowing that uncertainty. There's nothing cautious about declaring that it doesn't take much intelligence to understand the impact of private insurance - particularly when you trumpet that assurance in the face of so many other intelligent people who disagree with your conclusions about public insurance. That should be a sign that more caution is warranted, not less.

I guess you're willing to ignore every public plan experiment in the rest of the world and pretend Americans are a different breed of human. I don't know how intelligent that is. It's very easy to imagine yourself high-minded and intelligent if you "cautiously" subject the unwilling to your experiments on them.

Truly private insurance does not exist. Anything resembling a free market in private insurance doesn't exist because politicians have made sure it doesn't. Then, of course, private insurance and a non-existent free market is blamed for all that ails the medical system.

In this case, "caution" is just code for "throwing everyone into a single-payer system SLOWLY". And I really don't care how many clever people masquerading as "intelligent" disagree with me. Nobody is "intelligent" enough to be able to make medical decisions for strangers - which is exactly what socialized medicine (which you euphemistically refer to as "public insurance") does.

Ignore every public plan in the world? My reservations on the public plan are BASED on every other public plan in the world.

And please don't bring up single payer. You know I don't advocate that and won't defend that.

"Nobody is "intelligent" enough to be able to make medical decisions for strangers"

Exactly, which is why I wouldn't ever advocate a system where they do. I think you may have a very unusual understanding of what I think on this issue, methinks. The only thing I even CONSIDER the prospect of a public system in is insurance, not care. I don't want government to make any decisions for people that HMO's don't already make for them (imperfectly, but decently enough).

The "public option" and "single-payer" are the same thing.

One leads to the other and that's precisely why the left won't allow a bill to pass without one.

When you have a single-payer or even one giant company that dwarfs all others, the difference between "insurance" and "care" is zero.

If you don't like HMO's you don't have to join one. If you don't like any insurance plan and prefer to self-insure, you have that option.

The current proposals will severely limit your choices, create a single-payer and force everyone to buy the insurance government dictates. An HMO can't limit how much you pay your doctor for a procedure and they have an appeals process. The government "public option" doesn't and it prohibits you from paying out of pocket.

So, it doesn't matter what you're "for" in your heart of hearts.

What you support will lead to exactly what you claim you don't want in your heart of hearts.

we have been down the road of the limited government argument before, may be a couple of months ago. We had a major debate on what the United States constitution and the ennumerated powers. You have agreed with all of us that with the 20th/21st century progressive/left interpretation ( which you largely ascribe to ) of it, hardly puts a limit on what the government can or can not do. In principle, you have agreed that a 100% tax above certain income wouldn't be illegal - that is not to say you support it. But in principle, you agreed, there is very little that is stopping the government.

Your limited government bonafides are questionable at best.

I think my argument was along the lines that the 16th amendment doesn't provide an upper bound on tax rates, and so it is up to the common sense of the American people, through their representatives, to decide what is necessary, proper, and consistent with liberty. You'd have a tough time convincing anyone that that simple interpretation of the 16th amendment places me on the left.

If you know of an upper bound on that, please let me know. It would be reassuring to know there is that extra defense against excessive taxation. But if you don't know of any Constitutional upper bound, then I think your understanding of the Constitution on this issue is about the same as mine.

The opponents of the 16th amendment failed in their bid to set an upper limit on taxation. Proponents promised that taxes would never rise above 10% and would only ever apply to the very rich.

Ha ha aha....let's just take a moment with that.

That's not to say that it's all up to the common sense and ethics of Americans. When representatives promise to redistribute wealth to some while taking it from others, the receivers are going to rely on self-interest rather than some sort of steely ethic. I think we have plenty evidence to support that.

I think there are natural caps to taxation, though. The disincentive effect of taxation will eventually lead to less tax revenue collected when taxes are raised as well as higher unemployment, a lower standard of living and more fear in the population. It's that cold reality, not the American people's love of liberty, propriety or ethics that in the end decides the tax rate. At least, for most American's it's not the principle anymore.

If you know of an upper bound on that, please let me know.

There is an ethical/moral upperbound - 0%.

BTW, it wasn't just about taxes, it was about the ennumerated powers, which you said is meaningless, because the government can do anything under the "general welfare" clause. So, in your interpretation of the constitution, there is no limit to what the government can do.

Once again, I don't think your memory serves you right. It would be extremely odd for me to say that the ennumerated powers were meaningless, since I consider the ennumerated powers to define what the government can and cannot do. I think the issue wasn't that I've ever said the government can do "anything". It's that I trust the people somewhat more to place limits on what is "necessary and proper" - and I feel like my trust has been fairly well rewarded - and that I don't see the Constitution as the useless, withered husk of a document that you apparently do.

Don't you think this is a little bit of a tangent? Don't you also think that his "limited government bonafides" is completely irrelevant to the present discussion?

Also, you can choose to skip this particular tangent. Ain't threaded commenting great?

May be. But when someone inserts his sketchy limited government credentials into this discussion, I thought, it needs to be exposed as such.

Personally I believe in taking someone's arguments on their merits in order to have an an intellectually stimulating discussion. I've never really been a fan of Ad Hominem. But that's a debate for another time I suppose.

There was no ad hominem. I was addressing a specific point that he brought up. When he alludes to his "limited government" credentials, I just brought up the fact that he contradicted himself. I didn't call him a jackass. He, clearly, is not. I have reserverd that name for another embecile who posts under the handle - muirgeo. But you are unnecessarily taking this on a tangent.

Haha, beat me to it!

You couldn't let others answer the question before you butted in with your 2 cents, could you?

You are not so much as answering Toms concerns but just echoing it with your own noise added.

I have questions in my mind and I am asking them, you should do to. For a second, just pretend that you don't know everything and just listen and ask questions.

Thanks,

Dude - I'm like the thirtieth commenter. What's your problem?

We were asked to ease Tom's mind. What do you think I was doing? I am answering Tom's concerns - just not how you'd like me to answer.

Here we are answering Tom's hypothetical question about health care in old age - specifically past 65 - a world without medicare and medicaid, and here you are ranting and raving about some public option - a.k.a medicaid for people who are younger or under 65.

I said a public option or Medicare - voluntary, guaranteed public insurance plans. Essentially the same thing in my mind, except for the age restriction on one of them.

Btw - I wouldn't even consider supporting Medicaid for 65 or under. Look, Tom raised suspicions about how such a system would work. I concurred with those suspicions. You really need to get over the fact that I'm not always going to agree with you.

Dan, I don't think medicare is voluntary. As a condition of receiving social security, a senior must enroll in medicare.

Well, I suppose I could be aggressive and argue that that's technically still voluntary - just bundled with a public pension package...

but I'm not going to because I agree with you that that's a bad restraint on medicare and does make it relatively less voluntary :) . I'm not making the argument that Medicare is flawless.

I am okay with the fact that we almost always disagree.

There are supplemental insurance programs for Medicaid now covering care over current limits.

Why does the absence of Medicaid change the calculation?

Sorry, That should have been Medicare.

Get rid of medical licensing. Watch costs drop; watch your savings go further and watch your charitable offerings go further. You might have to get by with someone less qualified administering your care - but you'd get care. I can't enjoy the luxuries of my own private jet either, but I still fly.

Boy, I can hardly wait for that! But you go first, and if it works out I'll use your Dr.

Thank you to everyone who has responded so far. What a wonderful and thoughtful forum this is.

Many comments have focused on long-term health insurance policies, purchased in one's youth and renewed through to old age. Notwithstanding sandre's excellent point ("what if the insurance company goes bust"), I offer that a long-term health insurance model is fraught with unrealistic expectations.

I sign a health insurance contract in my 20's, and I have to stick with it until my dotage? What if I develop a common, chronic but non-lethal condition - such as type 1 diabetes? Am I forced to stick with my original insurer, even if the service I receive from them is lousy? Does this really provide incentives for insurers to innovate?

Also, I submit this: our society may have come close to a totally unregulated private health insurance market in the past. Perhaps the 1920s would qualify (although you are free to disagree). You can correct me if I am wrong, but I do not think we saw innovations such as long-term health insurance, personal insurance futures markets, and tattonment price discovery processes in that marketplace. Rather, we saw a lot of poor (and not so poor) old (and not so old) people dying for want of medical care.

We lost a lot of human welfare with each of those deaths. Would we not see more premature deaths and disabilities in a future purely private marketplace? And as smart economic thinkers, are we not in the welfare-maximizing business?

But I'm conflicted. So keep telling me what you think.

Again, thank you to everyone who comments.

It may be enlightening to look back to the 1920s. One of the main reasons Americans spend as much on health care as we do is that we can, and that we want the goods and services. The poorest quintile in the US, if memory serves, are now 5 times better off in real terms than the comparable cohort of the early 20th Century. Even accounting for the inflated cost of medical care, the poorest American is far better off now than the average American was then.

We talk about the problem being cost, the problem being the government, and so on. I believe the seminal discussion, if we do intend to arrive at a market solution we can live with, must center on the single biggest obstacle: egalitarianism. If it is not socially and politically acceptable to come right out and say that those of lesser means will not receive the same medical care as those of the highest means, then the government will ultimately step in and arbitrarily determine the allocation of resources.

This is not to say that the poor and near-poor would not receive quality care -- they would. But if insurers and providers are not permitted to develop solutions that make basic care and basic insurance affordable, and if they are not permitted to deny the most expensive treatments to some policyholders and not others, the market will be hamstrung. As government intervenes, there will be winners and losers, not determined by impersonal market forces but by arbitrary standards.

I'd like to respond to this comment of yours;

"Rather, [in the 1920's] we saw a lot of poor (and not so poor) old (and not so old) people dying for want of medical care."

Although prima facie this seems like the logical consequence of the lack of government programs to provide health care for the aged and the poor, as far as I am aware this problem was much less than could be expected due to private charity.

In fact, there was a saying in the 1920's that only the middle class were squeezed when it came to paying doctor's bills, since the rich were rich and the poor's bills were paid by charities.

Tom, thank you for continuing to ask pressing questions. It's easy to attack an opposing view, but it's far less simple to propose something in its place. Yet, to an extent, that is what we must do.

To be fair, part of the promise of the free market would be innovations and solutions, albeit not universal, to health problems without the foresight or planning of singular individuals such as ourselves or those in government. Yet this is still, honestly, a leap of faith in the free market. It's obvious that the free market, the combined innovations and efforts of individuals, has given us a very high level of care in this country. Yet there are issues facing us to which there do not seem to be free-market solutions at present. One can say that the private solutions have been suppressed by the public options, which need not turn a profit, and yet I cannot foresee what the new private options would be that would rise to take the place of what now stands.

Part of the problem of socialized medicine, even subsidized medicine, is the determination of what to treat. With limited resources, and so to control costs, one must determine what to treat. This applies to both subsidies and full socialization. The other individuals who are posting here are correct in that there are no solutions, only trade-offs. What we are positing, then, is that the net effect of subsidizing care is worse than the effect of not doing so. Under the latter system, extensive care may not be available to certain individuals, and they may die from lack of care. Yet under the former system, with certain procedures blessed and others not, and with costs higher for all users, the negative effects are simply spread around and all users suffer. In other words, I can offer no real solace or promise that the free market would instantly make the world a brighter place. I only know that it will keep medical treatment in the hands of its users rather than its overseers.

"You can correct me if I am wrong, but I do not think we saw innovations such as long-term health insurance, personal insurance futures markets, and tattonment price discovery processes in that marketplace. Rather, we saw a lot of poor (and not so poor) old (and not so old) people dying for want of medical care."

I'll agree with other posters that this assertion would need to be backed up with data, but it's worth noting that the issue may have been less about the availability of methods of affording care and more simply about the availability of care itself. There have been innumerable progressive steps in medical care and technology made in the past 80 years.

"Part of the problem of socialized medicine, even subsidized medicine, is the determination of what to treat."

Is this really a prohibitive problem? It's not like the public doesn't have organs for reaching these kinds of decisions once they've decided they're in the public interest. It's not as if liberal theory in general, and Hayek in particular, don't have volumes written on democratic decision making institutions and procedures.

It seems to me that a complete answer to this problem, along Hayekian lines, would not content itself with generalities ("the free market is the best", without showing how this case satisfies the conditions under which the market has its beneficial effects, what precisely those beneficial effects are in this case, or how precisely they come about in this case).

A Hayekian answer would have to contend with the following questions.

1) Given a specific proposal (eg., subsidized care for 65+'s), what exactly are the less obvious costs involved? How do they factor into the total cost for a given project, and who is going to bear the brunt of that cost under the existing or proposed tax structure?

2) Once we have a better appraisal of the costs, do we find that they are prohibitive? Or is there still a gain to be made in the view of the general voting public? (Neither Hayek nor Mises assume that the public will necessarily back off a project once the total costs are laid out for them. Hayek in particular considers in detail cases where a well informed voting majority might still decide that a public interest is served with a collective programme.)

3) Is the proposal consistent with democratic rule of law? How can it be effectively administered, given the limitations of bureaucracy? (Hayek never assumes the answer is, "under no conditions whatsoever".)

On that last point, to the extent that the elderly were worse off in 1920 than they are today, it may just reflect the fact that we are much wealthier today than we were back then, comparative health care systems aside.

Also a darn good point. I mean, we actually have time in our modern world to worry about the plight of Polar Bears in the Arctic. Regardless of one's position on the issue, the simple fact that we're not so worried about our daily bread as to focus solely on that is an incredible thing!

I do not think we saw innovations such as long-term health insurance, personal insurance futures markets, and tattonment price discovery processes in that marketplace. Rather, we saw a lot of poor (and not so poor) old (and not so old) people dying for want of medical care.

Tom,

Innovation takes time. In the 1920's the health insurance market was still in its infancy. I'm not sure it's fair to conclude that since health insurance didn't innovate everything all at once that it wouldn't ever innovate under competitive pressure. Certainly, the financial markets have found ways to manage risk better over time.

Also, in the 1920's people were mostly dying for lack of medical care because there wasn't much medicine could do for them even if they had access to it. There were no antibiotics and the only treatment for cancer was cutting out the tumor and hoping for the best. That was less than 100 years ago.

In the context of human history, modern medicine is a sparkling new luxury.

Certainly, the financial markets have found ways to manage risk better over time.

Errr...not to get too picky but is that really an argument you want to be making at this particular time?

Yes, Adam, I do.

The fact that some people continued to choose to pile on dangerous level of risk or engage in techniques they don't understand, doesn't mean that many many useful risk management innovations have not been made.

Risk management tools include exchange traded options, interest rate and currency swaps (which facilitate international trade), long/short strategies (which reduce bid/ask spreads, adding liquidity to the market and reducing the cost of trading stocks), and target date retirement funds. And this is just a tiny small sample.

It's a fair point :) I concur.

I didn't mean to spark a discussion about which risk management innovations in the financial markets work and which don't. Not everything tried will work and not everyone trying it will use the tools properly (or at all - despite their claims).

I'm merely pointing out the fact that risk management innovation appears over time. The fact that modern risk management techniques didn't exist in the 1920's is not an indictment of a free market in health care and health insurance.

If you are referring to the "housing crisis" and recent economic downturn, this is a separate issue, and has been covered extensively elsewhere. It's not worth bringing up in this thread, save to say that if I believe I am going to be stabbed in the back, I will be watching my back quite closely unless I have reason to believe someone else is watching my back for me. So apart from protective measures by an authority, investors will be watching their backs quite carefully.

I was referring more to the intellectual bankruptcy of Value At Risk equations generally...but as you say, it has little to do with the discussion of this thread; sorry for the tangent.

Rather, we saw a lot of poor (and not so poor) old (and not so old) people dying for want of medical care.

Did we see that? That's an empirical question and I wouldn't be so quick to jump to an answer without doing the proper research on the matter.

Part of the problem is that in today's world we all assume that you need insurance. It may in fact be the case that overall costs would be a lot less if the vast majority of medical transactions were paid for out of pocket, because it would create a disincentive against excessive doctor's visits. If you can weed out a lot of the unneeded doctor's visits, you can bring down the cost of seeing the doctor.

I really don't think that there is a solution to this. There are only trade-offs. The best approach, in my humble opinion, is one that results in lower costs and innovation. The free market approach always comes out on top to that end. Moreover, private charities play a not so insignificant role in alleviating the hardships of a lot of people. Sure, their funds are limited, but so are government alternatives--limited in funding, administrative capacity, ability to adapt to changing circumstances, and so forth.

You're never going to do away with limitations. There aren't any easy answers.

Thanks for spurring this fun discussion :) hope you're finding these answers helpful.

It's also worth noting that allowing a freer market may make available innovations that would extend the lifespan of the average individual and delay the onset of disease, rendering the question Tom asks largely moot, even if only for those individuals who have yet to reach the age in question.

In other words, if we do achieve a market solution and healthcare is truly marketed to the people at an affordable price, with perhaps more in-home, self-run care and the like, it's entirely possible the net effect would be to keep people out of hospitals almost entirely in their older years rather than hanging them out to dry with astronomically high insurance premiums.

In other words, we're looking at what it would take to provide existing care if government subsidies were removed rather than considering the innovations and changes in the way healthcare is administered that may come to pass under a truly free system.

As for caring for the elderly that are present now, if there is profit - a living, no pun intended - to be made from it, it will be present.

Sooner or later many of us will face Tom's 65-year-old case. We can argue that we should have saved more or that we should have been closer to relative and friends or have been a member of a church or a private institution to rely on their generosity. All that may not be enough, however. Then, yes Tom, we may want the government to provide some relief to our painful condition: when all else fails the government may be the reliever of last resort (you may read David A. Moss' book "When All Else Fails"). Please note that there is a long road for each of us to reach that stage, and during this trip WE CONTROL ALL OUR MEDICAL DECISIONS (please read the last three columns by Thomas Sowell), including the decision to take advantage of whatever the government as reliever of last resort may offer. So, under our assumptions, the relevant issue is what government should offer to people in such conditions. My answer is very simple: medical care at an "affordable" price. Nothing else; it will be part of a safety net but there is no insurance involved.
Indeed, that's not what your country's government is doing or wants to do. Your government has already taken from you several important medical decisions and wants to take some other decisions. Why? Read Sowell.

No one has mentioned health savings accounts, where money unspent could be rolled over into the following year, and so on and so forth.

Complete 100% tax deductions for health care expenses, no ceilings or minimums, not just for individual and immediate family, but even for a completely unrelated person - by which I mean, if person X wants to pay for person Y's health care, he gets a complete tax write off. Now, in my ideal world, there would be no personal income tax - in which case, such deductions could be extended to corporate or other forms of taxes.

I was wondering the same thing about health savings accounts. Also, does a completely private insurance market mean removing the tax incentive for purchasing health insurance through your employer?

If a private market meant consumers paid more of the costs directly wouldn't we have to factor in the argument that Arnold Kling makes?

If Tom's concerns were correct then there would be no company offering Long Term Care insurance.

Bingo! We have a winner. I was very tempted to just begin a direct reply without reading through the 101 comments [as of my writing]. Good thing I stopped and waited because this (post) is the gem that allowed me to stop reading for the moment. Long-term care insurance and cancer insurance handle the qualifying events and protects the insured from catastrophic losses.

In the absence of Medicare, other long-term contracts (policies) would crop up to handle a market of aged/aging people looking for some form of insurance to protect their assets from catastrophic events. In general, though, the premiums paid over time on average, would more than pay for the benefits one would recieve for qualifying event. That's what insurance is and does by its very nature.

So, then, the question from Tom asks, in essense and stripping away all its emotional appeals and sentiment, is it fair for an insurer to deny or offer at a steep premium, a contract to someone who chose to pay for their anticipated care later in life or perhaps after they had a qualifying event? That's really what is being asked here. And any attempt to sugar coat the reality of the 'pay early and be protected' or 'be late and pay dearly' tradeoff is nonsensical.

Expecting someone else to pay your freight, let you into the lane after you chose to merge at the last possible moment, or any free-rider scenario applies when discussing insurance is immoral in my book and recieves no overwhelming campassion from me. Sorry, Tom, it's past time to look at what the concept of insurance really means.

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First, I would expect a much larger portfolio of options all around so that what we see now as a fairly narrowly defined health insurance industry wouldn't exist except as one part of a bigger picture. In general I would think that the industry would evolve to spread the risk over our lifetimes; i.e. the way to ensure that we are covered in our old age is to enter into long term contracts where we pay a little more up front when we're young.

Those who don't (or cannot) plan for themselves this way would, of course, have a problem. But with a larger portfolio of options I would also expect some innovative solutions including perhaps a return to various types of "mutual aid" societies. I also have no doubt that charitable giving would increase to fill some of the void - I believe history supports this.

I posted a brief video that explains how socialised health care is administered in our state.

http://oregonguythinks.blogspot.com/2009/08/wu-...

It's at the bottom of the post.

In a "perfect world" it might be possible for Tom to see a common sense approach to health care. But we don't live in a perfect world. We live in a world where politics are motivated by interest groups. And political markets are not noted for either fariness or common sense. Let alone perfection.
.

My response is this: in a private marketplace don't expect a universal solution to any problem.

Markets NEVER provide a universal solution. That's th whole point -- you buy whatever fits your needs, and the market adjusts to meet most needs.

Bu whar you're stumbling towards is the idea that some problems are simply HARD to solve, and tnat neither markets nor governments solve tnem well. Unfortunately, many people assume that governments solve them better, a prikori.

And unfortunately, the ones that think the government solves the problems better mix themselves in with the people that think that the government solves only certain, very specific problems better (and even then not perfectly), thus giving the people that think that government solves only very specific problems (imperfectly, but) better a bad name :)

The problem, Daniel, is that government really *doesn't* solve any problems better once you count everything. For example, you have both the inefficiency and immorality of taking people's property.

Well that largely depends on what you consider a "problem", doesn't it?

If the "problem" is that 47 million people don't have health insurance... if you define that as a problem, then the government quite clearly does a better job.

Now - I think the costs of insuring those people outweigh the benefits, so I've never supported a mandate. But that's only because I define things like cost inflation to be as problematic or more problematic than uninsurance. Other people may define the problem differently - and the government may indeed solve the problem better. In that sense, you don't even have to appeal to very real concerns like market failures to think of situations in which the government solves problems better than markets.

If you define the "problem" as "government isn't doing enough" then why obviously the problem can only be solved one way. No, I mean real problems experienced by real problems, not contrived problems specifically devised so that only a government can solve them successfully.

And please stop about "market failure". There is no such thing. There are certainly situations where people don't *like* how markets work, but that doesn't mean that the market has "failed". If you get a sunburn, is that a "sun failure"? If you fall off a cliff and die, is that a "gravity failure"?

Well... I suppose if you think the government isn't doing enough then government is the solution - but that's a really odd sounding problem to me.

I'm talking about real problems too - not imaginary non-sensical problems.

"Market failure" is an unfortunate and odd monicker, but I see no reason to stop talking about it as a concept (and using the label that we've inherited for that concept). There's no point in using only an over-simplified concept of the market that doesn't really exist to understand the world. If there are problems with who holds relevant information, then no - the market hasn't "failed". But it works differently and it's not a bad thing to think about that. If producers aren't incorporating all costs of course the market hasn't "failed", but it works differently and it's worth considering the implications.

I hope you aren't mistaking my use of a common term that I didn't come up with as me thinking that markets literally "failed". It's just a label for a phenomenon, russnelson. We can coin a new one here, though, if that's troubling for you.

People not having insurance is not the problem. The problem (to the extent there is one) is cost. Part of the reason health care is so expensive in the US is that it is extremely good, but much of the reason is market distortions from government action.

IMO, the government should start by looking at what they do that drives up costs and stop doing those things. Unfortunately, politicians never think that way.

I agree with every single sentence that you just wrote (except I'd probably replace "never" with "rarely" in that last sentence).

My point is simply that you and I do not have a monopoly on defining what "problems" are, and which ones are most important. And conditional on the identification of uninsurance as a "problem", the market is not better at solving that problem.

"the market is not better at solving that problem."

How would you know? It has never been tried. At least since the 1930s. If it were not for those brilliant interventions of the government, health care inflation would have been a fraction of what it has been. Maybe markets can't do everything, but I think they can do pretty much anything the government can do better than the government. If not, then it probably is something the government should not be doing.

There is no one size fits all solution in the market place. For most folks, a Term Life kind of insurance policy would work. Now, my question is, what if the insurance company goes bust, before Tom has a chance to seek expensive old age care.

Tom assumes the only alternative is to go "hat in hand" to the government and throw himself on the mercy of the court. This also assumes that greed driven capitalism has no answer to the problems associated with the ravages of time. I think he is giving up too quickly.

The problem is a very straight forward application of price theory. The equilibrium price that clears the over 65 health insurance market is prohibitively high and no one is willing to stare reality in the mirror. However, there is a market based solution. The market price needs to grope to its equilibrium and the government can subsidize the purchasers (over 65s) so the price is not prohibitively high. That is, in a disguised manner, what is going on with Medicare and is the reason why its costs to society are so scandalously high. I wish it could be that we could sprinkle pixy dust and the problems of aging would just disappear.

To gain the efficiency of the private market over Medicare and yet subsidize the cost of over 65 health insurance we could take some or all of the public resources channeled into Medicare and provide a baseline voucher to seniors to buy basic health insurance in lieu of Medicare. As pre-existing conditions emerge and the over 65 individual is certified to have a pre-existing condition an annual indemnity premium for the condition would be added to the voucher. The number of people with the condition who are still unable to get a company to cover them would be evidence that the indemnity premium was insufficient to clear the market so the amount would be raised until the market cleared. This is what is called a tattonment process which is basic Economics 101.

I'll bet what you would find is insurers would specialize in specific over 65 maladies which they can gain a competitive advantage. I'll bet in short order you would find a vastly more efficient and consumer friendly result than we have under Medicare.

I would point Tom to John Cochrane's latest piece: http://online.wsj.com/article/SB100014240529702...

Most likely you could buy policies at younger ages that include the right to buy insurance in the future at a set price.

I have heard Rand Paul mention it on Glenn Beck, a few weeks ago.

One point for the commenters to consider:

1) for the previous commenters, you provide no solace for Tom (or anyone else) who has already lived into the late 50s. There is simply no time for his generation to retroactively invest in long-term insurance contracts.

One point for Tom to consider:

2) "Which insurer in their right mind would take on my risk?"

The answer is "none." However, that alone is not an argument for the government to step in and provide coverage.

Let's be honest. The government is not "taking on your risk." It is merely passing the cost of today's geriatric care on to the next generation. If the government were truly "taking on risk," premiums would be far higher than they are today. There is no bulk-volume discount that lets the federal government administer cheaper care.

So Tom, I know I haven't answered your question - but I hope to have recast it. It does not logically follow that just because a business "refuses risk" that government assume it... because our government has no intention of assuming the risk. Merely placating voters.

I don't know that giving solace to people is the answer. I think a dose of reality is better.
1) If you don't save for retirement, you will not have money at retirement.
2)If you don't save for health care, when you are older you will not be able to afford health care.
3)If you jump off a cliff, you will fall very quickly and injure yourself.

I don't mean this to be flippant or mean spirited, but I do want to get across that previous actions have consequences.

Phil, I agree with you completely about consequences.

Nor do I think we're in the solace business, per se. Might have been a lazy word choice on my part.

I was really directing my thoughts at the first three responses (the only ones visible when I started writing), whose solutions were dependent on having 40 years to plan for old age insurance.

The main point is that at NO point in time is Uncle Sam "socializing risk." The risk is never assumed, because it would have to be quantified and measured first. Instead, the feds are proposing the assumption of cost, which is the equivalent of signing a blank check.

Even the most ardent modern libertarians such as Milton Friedman argued that a gradual move away from these programs would be essential. How gradual would obviously depend on the program and the ability of the persons.

bravo!

A question on morality. If someone is dying a disease and cannot afford the health care needed, is the moral solution "legalized theft" of another persons assets through taxation?

To add to my earlier answer: For the sake of illustration, consider a "legal duty to rescue". The common law doesn't recognize such a right, except in certain specific cases. Many countries with the civil code do recognize such a duty.

Unless you pose yourself at "unaccaptable" risk or face some "unaccaptable" costs. Technically speaking, even a doctor is not obliged to help a person if he does not have equipment to avoid infection.

Yes, hence my qualifications.

Philosophers might answer this question in various ways. Many would insist that, if someone is suffering due to circumstances you can prevent by measures that are minimally harmful or pose little risk to you, you have a duty to take those measures. To use an "emergency" example, if you witness a hit and run, you have a duty to ensure that the victim is safe and that the authorities are notified.

The matter at hand isn't an "emergency" case but most philosophers would hold that the principle generalizes.

If you are remiss in your duty, you might forfeit any reasonable basis for appeal to your freedom, because you would have tried to exercise that freedom irresponsibly.

Some philosophers might say I have a societal duty, but the philosophers I believe in say this:
"I do not recognize anyone’s right to one minute of my life. Nor to any part of my energy. Nor to any achievement of mine. No matter who makes the claim, how large their number or how great their need.
I wished to come here and say that I am a man who does not exist for others."--Howard Roark

Except where your actions, including inaction, result in harm to another.

You can't be neglectful, if that is likely to result in harm to someone else. In this way, others have a claim on your time and energy for you not to put their lives or property at risk through your own negligence. They are not thereby "stealing" your time.

I suspect now that the question you asked in the first place was supposed to be rhetorical. Maybe you've made your mind up without considering the counter-argument. I would not be content to do that.

The counter-argument requires us to consider whether a duty to care or duty to rescue might fall into the same category as other recognized duties, eg. the duty not to be neglectful in your actions or in the care of your property. We have to identify the more basic principles at work in recognized cases, and then determine whether and how they generalize to the cases we've taken as our problem.

I do agree that one must not put others lives or property at risk. I do not believe in a duty to care or a duty to rescue. The difference comes in the idea of freedom. Not harming others ensures that their freedom is not violated. Requiring me to help someone that is in trouble impedes my freedom. Now, this is not to say that I would not help people in trouble, just that I am not obligated to do so.

By recognizing a duty to care or duty to rescue, you recognize ownership of my possessions. Also, how far would these duties extend? Do I have no right to any possession if there is one person in the world that is in need? If so, I do not believe this to be freedom.

Lastly, I want to say that I do not want to attribute these beliefs to you. You have asked interesting questions in an intellectual exercise, and I appreciate this. I frequently find it hard to fully express my ideas in these forums and want to make clear I am very willing to think through different ideas.

You're assuming what is at issue. Obviously, when we assert any duty, we are asserting a limit to freedom. That is true of the duty not to murder someone. It's true of the duty to maintain your property so that it won't pose a danger to others. What is at issue is *whether* your freedom really is impeded in a way that is morally wrongful by a duty to care or a duty to rescue.

Why would a duty to rescue involve asserting "ownership over your possessions" any more than would the duty not to be neglectful? In the latter case, you are required, at your own expense and possible inconvenience, to act and to maintain your property according to customary standards. But that is understood to be part of what it means to act so as not to harm others or, through your own inaction, to allow others to come to harm.

I'm inviting you to consider a duty to rescue in the same terms, as an exercise for articulating why the limits of freedom should lie precisely with a limit here rather than there.

The difference is what is in my control. I do need to maintain my property so it does not hurt someone else, but I I ever decide that I do not want this burden, I can get rid of that property and someone else will take that burden willingly, through property transfer. In the case of property, I am have an obligation to do something that I have volunteered for.

In the case of not murdering someone, this does not have to do with my property, it has to do with their property(their body). The obligation to not steal or murder lasts forever, but it is an obligation to not do something, unlike property maintenance. An obligation to not do something cannot grow to consume all your assets or time.

If I have a duty to care or rescue for someone,this is an obligation that lasts forever and is a requirement to do something. This is much heavier of a burden than the first 2 examples. This is an obligation that can grow to control all of my assets and time without my control. Through other peoples actions my obligation can increase and decrease. They have complete control over me. If their need doubles, I am obligated to attend to them twice as much. If the need grows to be equal to all my assets, then I must lose everything, unwillingly, with no control. I do not wish to live in a world that believes this is how a free man should live.

Negligence doesn't extend only to the maintenance of your property. Even walking down the street (or choosing not to) can involve you in situations where you need to pay attention and not be negligent. In one way, your duty not to be negligent is permanent; what changes, depending on the property you own, is what precisely you have to do to satisfy that duty.

When I am talking about a hypothetical duty to rescue or a duty to care, I'm not suggesting a duty where you become completely beholden — no more than, when I say you have a duty not to be negligent, I mean you are completely beholden to the task of guaranteeing that no one could ever possibly come to harm from any action you take. Avoiding negligence is about taking reasonable measures at minimal risk or inconvenience to yourself. The hypothetical duties I'm suggesting should have the same kinds of qualifications.

(Edited for silly typos.)

When it comes to health care, what is a reasonable taking of my assets? Is a $10 shot of insulin reasonable, but a $100,000 heart surgery not? Or is it based on how much I have in assets? Is 20% of my wealth a reasonable amount to take?

My original question was if legalized theft through taxation was the moral solution. None of your arguments have been against this.

My idea of morality is the free giving of my assets, not because someone makes me with the threat of a gun, but because I choose to because I believe it is the right way to live.

In a free and democratic society, you get to have a say in deciding what counts as "reasonable".

You don't, however, always get to have the deciding say.

My arguments were meant to highlight some of the judgment calls that go into deciding whether a particular case satisfies a general principle. Clearly we agree that freedom doesn't mean you never have duties that society might rightly force you to fulfill. The issue is whether this is an instance of that. You can't argue that it isn't simply by asserting that it isn't; that is the fallacy of begging the question.

This hypothetical "free and democratic society" could fall anywhere on a fairly broad spectrum of levels of freedom. While it is true that any one citizen will not have a decisive vote, there ought to be some serious constitutional limits to the government's ability to invade that citizen's sphere of individual liberty. He ought to have the final say over most of what happens in his life--including how he spends most of his wealth and income. Without these constitutional limitations, it won't be long before the society is unrecognizable as free.

Because growing old and the health problems that go with it are known, insurance companies will be incentivized to show that they will not drop old people from their plans. There will be demand for it, and I suspect people would be willing to pay more when they're younger for a plan that includes a contractural term placed on the insurance company to not drop a client when s/he gets old than they would for a plan which lacks these provisions. I know I would pay more now for such a plan.

1. Tom's concerns seem to call not for socialized medicine, which involves government control of the institutions involved, but subsidized medicine, which involves government providing the funds. It's an important difference; because of the knowledge problems arising from the lack of market signals, a socialized health care system is likely to cause more "preventable" deaths. Look at how slow the government has been to make good on cash for clunkers claims; imagine if there were human lives at stake.

2. Subsidizing health care tends to just result in raising the costs. This is basic price theory; give people more money to pursue an activity and you increase the demand for that activity, raising the price. If you were only subsidizing the elderly, then you would be imposing costs on everyone who was not subsidized but had to pay the new, higher prices.

3. If you look at areas in the health industry that are not covered by insurance (which is subsidized via a tax break), you see a lot more of the typical effects of technological innovation. Laser-eye surgery, for example, is usually not covered; and it has been continually falling in price and increasing in quality in order to get more customers. The health care industry can't make any money off of people who aren't able to afford their procedures; in a free market high costs present an opportunity for innovators that are able to find ways to offer comparable or higher quality products for a lower price.

Finally, the fact of the matter is that there simply are not guarantees. What is and is not a "preventable" death is not an easy thing to ascertain. All of life is trade-offs, and no amount of socialization or subsidization is going to change the basic reality of scarcity.

Who is subsidizing tom's medicine? Why is that not a form of health socialism?

I just meant that there's a difference between state-controlled health care, and state-funded health care. The words you use aren't as important as the underlying distinction.

The entity that controls the money controls the care. If you think otherwise, you are deluding yourself.

So you don't think that there's any difference between a government owned health industry and a largely private health industry in which some people's care is paid for out of tax dollars? You really believe that distinction to be delusional?

I agree with Adam that it's a key distinction. It's a similar distinction between food stamps and socialized agriculture. In both cases, the government controls the money. In the former case, however, consumers can shop around. In the latter, you don't get to shop, because the government has thoughtfully made sure that every single food provider is doing things optimally.

Doublin,

It depends on how they are subsidized. Food stamps don't prevent the buyer from using cash in addition to the stamps when buying groceries in a store. Medicaid prevents a doctor from accepting a cash payment for a procedure that costs more than medicaid is willing to pay for it. So, the patient can't shop around and can't choose his own level of health care consumption.

It's a fair point. But from the perspective of the distinction I'm making here, Medicaid as you describe it is definitely a form of sociailization. A straight subsidy would simply involve the doctor charging his price and the government footing the bill.

Well, that's pretty much what Singapore does. As government subsidies go, that one is pretty successful.

Personally, I see no way around a government subsidy in today's political environment. I vet charities carefully and choose to donate only to the most efficient apolitical charities and I'd prefer to redistribute my wealth to the medically needy that way. Unfortunately, I think I'm in the minority.

One way that it might play out in a "natural" market is similar to life insurance -- essentially that people would lock in rates early. I think it's safe to say that one cannot get life insurance at 65.

The even more difficult question: what if one is born with a costly illness? Obviously one cannot lock in rates as they're being born.

Assuming that many of the other market distortions (the tight regulations on everything from doctors, hospitals, procedures, and perhaps even patents) are removed as well, your savings would probably handle this better than it would now. If we go back to the time we had before, families were tighter and in exchange for helping with childcare families helped the elderly themselves. Philanthropy also goes further than many give credit for. Many homeless survive because of it. Many a hospital were built (and named after) with private money donated for use for the poor.

Also, if you enter a long term contract for health insurance that covers you at a premium set for your whole life you'd still have coverage in old age. Life insurance often works this way. The older you are when you start, the higher the monthly premiums.

Perhaps some of these concerns are mitigated through pre-purchased insurance. That is, one could establish early in life, when one's true state of health is far more uncertain. Companies would more than likely be willing to roll those dice. In addition, parents might be able to purchase for new born children lifetime health insurance contracts.

For those individuals who did not arrange for coverage prior to development of some serious condition, this is indeed a tricky question (though perhaps only applies to a minority). So, perhaps we could agree that government provided medicine for *all* old people is not the minimum policy needed to alleviate the main problem.

Why would life time health contracts solve anything? Companies with steady streams of income get lazy and their customer service, quality of coverage, etc. would simply vanish. The trick is to introduce more competition, not less. And the competition that is introduced cannot be a burdensome federal entity.

If we are concerned about an entity receiving a steady stream of income that leads to lazyness and lack of service/quality, then is not the government the ultimate example?

Also, they would receive steady streams from each customer, yes, but would still have large turnover as old customers.... pass on.... and new younger customers want in. Competition would exist for the new customers. Those companies with a bad reputation for treating the 40-50 year olds (or more) certainly won't attract new customers, and will eventually fold. So, we should expect companies to consistently offer poor service. This profit/loss check does not exist for government, however.

Tom,

There are several questions that need answering that you have not commented on.
Why would your savings run out? If you put away $5000 a year at 5% interest between 25 and 65 you would have over $600,000 in savings, plus any other assets you may have.

Second, why would an insurance company not insure you? High deductible and high premiums, but still insured.

Please note, I am not an economist, just a fan of the site.

Tom,

I will give one (out of many) potential solution. Will insurers simply stop offering coverage to these individuals less they pay very high premiums?

One solution to your problem would be to enter into an insurance contract today which guarantees you continued coverage when you reach that age. On one hand, such an insurance policy might have premiums that are, ceteris paribus, higher than other insurance contracts to compensate the insurer over time for the (increasing) probability of you developing a condition in the later stages of your life. On the other hand, the fact that you are committing to a very long-term contract benefits the insurance company - they will have a secure income stream for a long time. This would exert downward pressure on the premiums.

Along similar lines one might also imagine a futures market for insurance, i.e., you buy a contract today which guarantees you coverage when you reach a certain age, at an agreed upon price.