Why Health Insurance Belongs in the Public Sector

I finally got around to reading Steven Brill's compelling, depressing, and long article in the recent edition of TIME on the U.S. health care system and how providers take advantage of consumers in this grossly unbalanced marketplace.  (Let me tell you a joke:  perfect information.  Hahahaha.)  The article reminded me of an argument that I have made in the past---which often takes the form of a rant--about why health insurance does not belong in the private sector.

Now, if we are determining whether an industry belongs in the public or the private sector, we can debate on two planes:  that of facts and that of morals.  When I railed against the empty mantra of "common sense" in a recent post, I affirmed that all policy-making arises from an interplay of facts (data) and morals (priorities).  In the discussion of public vs. private industries and goods, the central point of the first debate is the question of efficiency, and the central point of the latter debate is the question of choice.

My discussion will continue under the assumption that universal health care is a universal and worthwhile goal.  Unfortunately in U.S. politics, that often seems not to be the case.  However, for a democracy to function well, its citizens must be healthy of both mind and body.  The former requires attention to public education, the latter to public health.  A democracy that does not guarantee universal education and universal health care is a democracy in name only.

Efficiency

Defenders of the market often claim that privately-run organizations are more efficient than their publicly-run counterparts, and if we are going to determine whether an industry should be state-run or privately-run, then we should ask under which control the industry is most efficient.

Total health expenditure per capita in the U.S. ($8,233) is over twice the average of the countries in the OECD ($3,268).  Despite such spending, the life expectancy at birth in the U.S. is still lower than the OECD average, the number of physicians per person is low, and the rates of asthma hospitalization and obesity are high.  We are spending a lot of money on health care but are not getting our money's worth.

Looking within the United States itself, Medicare is more efficient than private health insurance for reasons such as its greater bargaining power and its reduced costs in administration and marketing.  The executive administrator of Medicare also won't be making $7.3 million.

Choice 

Goods that resolutely belong in the private sector are those for which choice matters--that are a function of individual taste or desire or which facilitate individual self-expression.  Fashion, restaurants, and cinema all come to mind as immediate examples of industries that cater to individual tastes, and clothing in particular facilitates individual self-expression.  In such categories, the difference in people's preferences are qualitative above all:  they are not mere functions of price. (Within any given price range, there will be a lateral diversity in quality and character.)

Now, choosing between health insurer A and health insurer B is not a matter of individual taste or self-expression.  Health insurance is much more of a need than a desire, especially if we assume (as we do here) that all should be insured.  One's need, however, is not dependent on one's ability-to-pay.  You do not need less coverage  because you make a lower income.  Choice, in this case, means "you get only what you can afford" whether or not it meets your needs.  No one wants to have lesser coverage for reasons other than price constraints; the lateral diversity at each price level such as that which exists in restaurants and fashion does not apply.  In such a situation, choice lacks the moral quality that it has in the situations noted above; it does not facilitate individuality, but rather reflects and exacerbates poverty.

In cases like this in which everyone's needs are the same although their ultimate "choice" depends solely on their ability-to-pay, the state should provide the service in order to guarantee the highest level of service to all of its citizens and to provide the security needed to enable the free play of initiative and enterprise in other sectors.