Death Panels in Britain?

A majority of British doctors polled call for denying medical care to smokers and the obese.

GovernmentIn the United States, we don’t have a British health care system. Yet. But the majority of private health care spending here occurs through a health insurance cartel. In a free market, there would be no such thing as health insurance.  Since health outcomes are explained by individual choice, they are not random and are therefore not insurable.  Nonetheless, in a system in which mandated health insurance companies are ostensibly in competition with each other, we would expect to see some companies competing for the business of customers who make unhealthy lifestyle choices alongside other companies that choose to reject such customers.  In this latter case, incentives would then exist, via market forces, to encourage people to eschew unhealthy lifestyles–incentives that do not exist in the present, hyper-monopolized and corporatist health care system present in the United States today.

Along with price controls and inflation of the money supply, this is one of the key reasons why the health care costs in the U.S. are escalating.  And yet, the officially acceptable solutions to problems resulting from years of interventionism in health markets are in the direction of more intervention.  Thus we see a specific case of many in which intervention leads to unintended consequences leading to broader intervention, as explained by Ludwig von Mises in the 1920s in his classic Liberalism.  I would add that the interventionists fully realize there will be unintended consequences but they ignore them since, in the long run, they play in their favor.

Mises understood this too.  ”There is no other choice,” he wrote later.  ”[G]overnment either abstains from limited interference with the market forces, or it assumes total control over production and distribution. Either capitalism or socialism; there is no middle of the road.” The World War II-era regulations that established the modern health insurance industry, Medicare and Medicaid in the 1960s, BushCare in the last decade, and ObamaCare today, all prove this point.

Comments

  1. I have a question for anyone willing to answer it. I should probably mention that I really don’t know much about economics. The real reason I’m here is because I’m a young man who simply loves freedom.

    Now, to get to my point. If the healthcare system is a socialist type and funded by taxes, then how fair is it to tax the obese and the smokers for healthcare but then to refuse them treatment? I don’t know about you, but even assuming I would consent to such a healthcare system, if I were in the position of the obese or the smokers, I would simply say, “That’s fine, just give me back all the tax money you stole from me. I’m not going to give away my hard-earned money for healthcare if I don’t enjoy any of the benefits.”

    Words cannot quite capture my outrage.

  2. Wildberry,

    I appreciate your comments. Just some quick thoughts:

    First, if a non-smoker developed cancer and then tried to purchase insurance, why wouldn’t he be pooled with other non-smokers who recently developed cancer?

    Second, this is not exactly the point. Your concerns only become an issue when we have a system in which, for all practical purposes, health purchases are mandated to be made through insurance. My original post focuses on how the flaws of this system, including the ones you have been pointing out, provide political incentives for further intervention so that, eventually, middle of the road policies lead to death panels.

    • Christopher,

      You cannot say what pooling would occur, since it would be an entrepreneurial function of the market, given the context in which the business was operating. The theory is that the market would offer competitive products along the lines of other insurance products.

      Of course that context is in large part determined by what “rules” the businesses must conform to through regulatory coercion. That framework is how we are where we are, and it is only becoming more significant under Obamacare.

      In any case, in a free market a person who is uninsured and has cancer would not likely be in any pool, since the risk is revealed that he is likely to consume more services than he will ever pay for in premiums. That is one problem with the pure free-market approach; you must buy in to insurance when you are healthy, or you will be locked out unless government “requires” you to be covered. Once this requirement is imposed on the market, the market responds by making others pay for that cost through their premiums. This issue does not exist (yet) in life insurance, because if a life-threatening condition if revealed before the time of purchase, the premiums will be very high (more than the benefit) or the policy non-existent. No one has an expectation that they are entitled to life insurance after they have advanced cancer.

      Your second point is well taken. In a market where insurance is not mandated, or unavailable, a different system would develop. It is a matter of speculation what that might be. I’m sure we could offer our personal speculations and recommendations, but we could never know for sure unless we saw them implemented.

      But one thing I think we can agree upon; as with any other form of intervention, if the government is the primary payer for services, and the resources are not infinite, then it is the government that will have to administer the criteria and decision-making as to when care is possible, but denied. That is the death panel.

      In an “ideal” free market (whatever that means), the death panels still exist, but would be populated by the patient and family members, and constrained by personal resources, i.e. it is a pay-as-you-go consumer model. That model could include some form of risk management in the form of insurance.

      It is a common interventionist scenario; if the government tries to manage market functions from a centralized model, it must fail in many cases because of the calculation problems. Therefore, some of us hold, such functions should be left to the market.

      Where we might disagree (I don’t really know) is on the issue of whether any role for government intervention is legitimate. That viewpoint would be an important foundation issue in conceiving of a model that reduces (or eliminates) any form of intervention enforced by government coercion.

  3. The product referred to as “health insurance” is a pre-paid health insurance service and has none of the characteristics of an insurance product. The original company health plans were priced on the basis that people healthy enough to work were healthier than the general public, an insurable sub set of the population.

    The first pre-paid health service plans were “major medical” plans which only covered accidents and illnesses that required an over night hospital admission. Routine doctor visits and treatments were not covered. In other words, they were an insurance product.

    That being said, if there is to be any sort of tax supported health service there must be some sort of limiting legislation because no government or public insurance company can afford to keep every person alive as long as it is technically possible. That ultimate sort of care can only be afforded by people who can pay for those services out of their pocket and don’t need insurance.

    If there is to be a limit then there must be a death panel, someone to adjudicate the legislation. The alternative is no government involvement and charity hospitals for those who can’t afford private insurance or a private pre-paid medical service.

    • Billwald,

      Your point about the distinguishing feature of insurance v. pre-paid service plan (to paraphrase what I understand to be your point) is a good one.

      Insurance really is an exchange of a regular payment to mitigate a catastrophic risk. Most people (or employers) pay much more per month for “insurance” than they would do for the services they actually receive. However, catastrophic health problems can mean financial ruin, so that justifies the purchase.

      If I received what my employer pays for insurance in my paycheck, I would prefer to pay as I go except for catastrophic events. That would look and behave much like life insurance, I think.

  4. “Voluntary pooling skews the tables in a different way, by selection and exclusion.” That’s not true. Voluntary pooling allows for individuals in different risk categories to obtain insurance with other individuals in the same risk category. If I must be coerced to use health insurance in order to receive health care, I would prefer not to be pooled with smokers. But smokers can access insurance with other smokers. Also, when individuals can effect certain health outcomes, the outcomes are not actuarially random and are therefore not insurable. We don’t insure suicide or arson for the same reason we shouldn’t insure health complications resulting fro the choice to be obese or to smoke.

    Meanwhile, access to the pill has now become a civil right.

    • Christopher,

      Do you not agree that it is the insurance companies that will construct their own products, based on whetever selection criteria they choose, in the absence of a statutory mandate? Purchasers of these products will only have the opportunity to buy or forgoe purchase, not join pools that they define themselves. It is that market behavior which will shape the nature of products offered and their price.

      Prior to Obamacare, you were not coerced, and could self-insure to your heart’s content. Also, you may have found that the only insurance you could afford has a lifetime cap, or some other limiting principle attached. This is one reason that medical expense is still the number one cause of personal bankruptcy.

      I don’t disagree that under our current system, there is a moral hazard problem, since poor health choices are not distinguishable by actuaries, by statute. (But they are in life insurance, right?)

      Finally, “we” don’t insure unless by that you mean indirectly through government mandates. For-profit insurance companies actually provide the insurance. You are talking about public policy. But you are confusing different circumstances.

      In the case of arson or suicide, an individual’s actions are the direct cause of the outcome. In the case of smokers, on the other hand, smoking has a statistical relationship to the probability of developing other diseases; there is no direct correlation between action and consequence. That is why it is insurable, combined witht the fact that when smokers and non-smokers are pooled, it is the actuarial risk of that pool that is insured, not the individuals. Predicting what will happen with any particular individual is impossible.

      I understand your point; if non-smokers are forced into an actuarial pool with smokers, the non-smokers will pay more than they would otherwise. The question I’m asking you is, what happens when the non-smoker develops cancer, and then wants to buy insurance. At that point the risk is known, and the individual in uninsurable. If you really want to give the insurance companies a leg up to pool risks, why not allow genetic testing prior to insuring individuals. Then you could really tell what pools they belong in. Therefore some individuals will be uninsurable from birth, and certain profiles will have cheaper insurance.

      My point is that your position is not a straight forward as you seem to think it is.

  5. “In a free market, there would be no such thing as health insurance. Since health outcomes are explained by individual choice, they are not random and are therefore not insurable.”

    Not true. Not all health outcomes are explained by individual choice, and those that are, are not certain. For instance, it’s far from certain that smoking causes lung cancer, though it does increase the likelihood of having it. Also, health insurance isn’t only about diseases. It’s also about consequences of accidents. Whether a piano falls on your head or not is pretty much random, but if it happens, you’ll need health care.

    Health insurance would exist in a free market, but prices would depend on calculated risk.

    • I agree Pedro. If outcomes were determined by individual choice, each choice would produce a certain outcome, which is obviously not the case.

      Mandatory pooling of risk accross all groups, regardless of lifestyle choices, skews the actuarial tables to the detriment of the young and healthy and to the benefit of the old and debauchee.

      Voluntary pooling skews the tables in a different way, by selection and exclusion.

      In all cases, the concept of insurance for profit means that the insured pool must in the aggregate pay more than the value of the services recieved.

      For productive members of society, a free market health insurance might be based on pay as you go with suplimental catastrophic insurance based on the best pool you can get into. But this does not mean this approach, also, has limitations. What happens when your health status changes? Do you get dumped into a pool that makes any insurance unaffordable? What about non-production members? Let them die a slow death? Any solution less absolute than this IS a form of insurance for those receiving care.

      There is no simple solution in either direction, but we can certainly do better than Obamacare!

      • You have a point, but it only refutes a little part of my argument. It’s still true that not all health problems can be directly traced to personal behavior. Causation is complex enough that it can be considered pretty much random, and statistics can be made so that probabilities are calculated and risks assessed. It’s not as if smoking will certainly cause lung cancer, for example. It will increase its likelihood, but that’s about it.

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