health care and wages

Health care and wages

Posted by The Barefoot Bum at 7:48 AM

Mike the Mad Biologist brings up the connection between universal

health care and wages: a letter to the editor of the Boston Weekly Dig

complains

Thanks for leaving us with the mandatory health insurance law. I

really appreciate being told that I'm legally obligated to have

health insurance by January 1st (which I don't), and pay $196/month

(which I can't afford), or be subject to a $219 yearly penalty

(which will soon be $912). To repeat: I can't afford to spend

$196/month for health insurance, so somehow I can afford $912 for

the year for nothing???

So basically, because of your landmark law, I can now look forward

to bussing tables at Applebee's, or whatever mid-level chain

restaurant I'll be forced to work at for a second job.

There are two distinct dimensions to this question, the

ethical/political dimension and the economic/systems dimension.

The ethical/political dimension is simply this: Should everyone have

health care, or should we deny health care to some people in the same

way that we deny Maseratis to some people? Health care is expensive

and valuable, why not simply provide it to only those able to pay for

it?

This is an ethical question; it's not a matter of truth. You either

approve of or don't approve of providing health care to everyone. If

you don't approve of giving health care to everyone, I can't say

you're mistaken, all I can do is call you a heartless bastard and wish

I were religious so that I could really believe in a hell you could

rot in.

Having summarily dismissed half* my readership with an exhortation

regarding sand, asses and pile-drivers, I'll talk about how to provide

health care to everyone. And I mean everyone: not everyone wants

health insurance, but everyone wants health care.

*I kid! I don't think even my conservative and Republican readers

would actually countenance throwing sick people out on the street en

masse, and I doubt I've retained many Libertarian or neoconservative

readers.

The free market is simply not going to work. There are too many points

of market failure. First, health care is infinitely valuable: No

matter how rich you are, you'll certainly trade all your wealth and

pledge your future to save life and limb. Second, health care is

inherently expensive; it's physically impossible to give even basic

health care on the cheap. Third, health care requires extensive

expertise, expertise that the lay person cannot efficiently analyze in

sufficient detail; we can't just count on random people filling the

gap between supply and demand.

Because health care is infinitely valuable, people can't simply opt

out if the price is too high; by definition, the price cannot be too

high. Because health care is inherently expensive, there's an enormous

economic barrier to entry. And because health care requires extensive

expertise, it's trivially easy to bottleneck the market in the

evaluation and certification of that expertise: Physicians control

medical certification; in economic terms, the fox is guarding the hen

house. Add to this people's seriously deficient ability at

probabilistic reasoning and you have a recipe not just for market

failure, but market catastrophe.

There's no possible way that a health care system will ever be truly

efficient in any economic sense; if nothing else, the infinite value

of life and health makes considerations of economic efficiency

ambiguous. Even if we could save half our health care costs at the

sacrifice of one life, the person being sacrificed -- and it might

well be you yourself, gentle reader -- would not consider it a

bargain. Still, we can do better than free market catastrophe or

abandoning any sense of humanistic values. So we have to do something

by noneconomic methods, and that means getting the government involved

(The only alternative is the church; I'll pick the government any

day.) Involving the government means some direct or indirect form of

regulation and taxation.

It's worth noting again that we presently have "universal" health care

and it seems entirely implausible that we will abandon the notion

altogether. The problem with our current universal health care system

is that tens of millions of people rely on bankruptcy-producing

private care and/or pure government charity. It's simply moronic even

from a cold-eyed macroeconomic perspective to bankrupt tens of

millions of people; the rich and middle class depend just as much as

the poor and working class on a wider distribution of wealth and

resources, and I think my Google PhDs in medicine and economics are

sufficient to conclude that healthy people are more productive than

sick people.

Because our health care system is universal, and it will stay

universal, any plan that doesn't talk about providing health care for

everyone must be viewed with suspicion. Those whom the plan doesn't

cover will be covered somehow, presumably by our present system of

ruinous private fees and/or charity.

The second question is: who pays and how much?

If everyone has to pay, then yes, our editorialist will have to pay.

But so will everyone he's competing with. He has a good chance under

universal payment for the market (freed of some market failures noted

above) to react by distributing the costs in the form of generally

higher wages. All employers will have to raise wages somewhat, raising

prices, reducing profits slightly, until a new equilibrium is reached.

Americans -- especially low-wage workers -- are already working about

as much as physically possible; it seems likely that this money will

not come entirely from squeezing even more productivity from low-wage

workers. (Furthermore, the plan as he describes it will actually cost

him a whopping $18.25 per month while the economy adjusts to its new

equilibrium.)

If people can arbitrarily escape payment, then there's zero pressure

to distribute the costs across the whole economy. If our editorialist

wants something more than bankruptcy and charity, he's going to have

to work a second job, for the rest of his life, because he'll be

competing with people who will make this trade-off.

A health-care plan that puts all the burden of health care on some

kind of tax, whether income/property/business taxes or universally

mandated payments has some chance of being widely distributed. A plan

which requires a non-trivial cost as an optional fee has zero chance

of being widely distributed. It will just take wealth from those

people barely able to afford the fees, and leave a class of low-wage

workers relying on the present-day system which has failed us so

badly, humanistically and economically.