Monday, November 23, 2009

What Does Samuelson Think Insurance Is For?


Robert Samuelson feigns concern for the pocketbooks of our nation's youth - concern belied by his "blank check for wars he likes" - on the ground that an insurance mandate will cause healthier people to subsidize people who are less healthy. Specifically young people, who are a statistically healthier group, will effectively subsidize older people who are not yet on Medicare, a statistically less healthy group.

It's difficult in light of his history to view Samuelson's positions as genuine, as opposed to wedge politics - Samuelson has been a consistent opponent of reform while not once endorsing a viable alternative. He pretends to care about universality and cost control, yet rejects out of hand the tried and proved programs from other nations that do both, instead preferring a status quo even he appears to know is not sustainable - at least when he's talking about Medicare.

It should go without saying that insurance provides a subsidy to claimants, at the expense of people who don't pay claims. My auto insurance payments subsidize careless drivers. My homeowner's policy subsidizes people who don't feel the need to use smoke detectors, or who live in higher crime neighborhoods. It should go without saying - if you break the pool down into two groups, one that makes few claims and one that makes many, you'll find that the former "subsidizes" the latter. Samuelson would respond,
Auto insurance premiums vary by age; younger drivers pay higher rates because they have more accidents. Homeowners' policies for similar houses cost more in high-crime areas. This is not "discrimination"; it's a reflection of risk and cost differences. Insurers that ignored these differences would soon vanish because they'd suffer heavy losses and lose customers.
Yet still, insurance companies shift the cost of risk to safer neighborhoods and drivers. When they don't, state regulators often compel them to surcharge one set of customers in order to subsidize another, or to write policies for home and car owners in neighborhoods they would prefer not to touch. Maybe in the name of consistency Samuelson would argue that insurance companies should be free to refuse to insure inner city homes and drivers, or refuse to participate in state pools that insure high risk drivers, but that's not the country in which we live.

In Samuelson's mind, a healthy fifty-year-old would pay four or five times as much for health insurance as would a twenty-five-year-old with a costly chronic illness, just by virtue of his age. Why is that fair? It's still the healthy subsidizing the sick. Yet if you look at it that way, doesn't it reveal the absurdity of Samuelson's position? If premiums are to be tied to how much a person is expected to consume in health care services, why shouldn't that sickly person pay ten, twenty times what a healthy person would pay, consistent with her level of consumption?
On health insurance, we may choose to override some risk adjustments (say, for preexisting medical conditions) for public policy reasons. But the case for making age one of these exceptions is weak.
And yet... Samuelson can't articulate it. It's to be assumed. It's simply posited as "unfair" that younger people should, as a class, subsidize older people. A public policy analysis would look at costs and benefits, return on investment, etc. - or, accepting Samuelson's thesis, would propose alternative forms of funding that would not render health insurance unaffordable to people once they hit forty-five or fifty simply by virtue of their age. As policy analysts go, Samuelson drinks not from a deep well, but from a puddle.
Working Americans -- the young and middle-aged -- already pay a huge part of the health costs of the elderly through Medicare and Medicaid. These will grow with an aging population and surging health spending. Either taxes will rise or other public services will fall. Already, all governments spend 2.4 times as much per capita on the elderly as on children, reports Julia Isaacs of the Brookings Institution. Why increase the imbalance?
Leaving aside for a moment that we're not talking about the elderly, there's an obvious answer: we all get older. There are obvious rejoinders: people who don't have school aged children, or who send their kids to private schools, still pay taxes that support public schools. We fund police and fire services from broad taxes, as opposed to billing the person who utilizes emergency services.

Further, what's wrong with raising taxes to pay for health care? People above the age of forty typically earn a lot more than younger workers, so if you passed a tax to subsidize healthcare premiums you could shift some of that burden back onto older workers. Or implement a tax to recoup some of the cost of the wars Samuelson endorses, and give ourselves more latitude to pay for the social programs he supposedly opposes on the basis of their cost. A tax would also have the added benefit of minimizing or eliminating the disincentive for young people to enroll, based upon the difference between the cost of insurance and the penalty for not enrolling. Oh... but we have to pass reform without new taxes because, even if the net effect is the same or better, people like Samuelson insist upon it.

Do you think for a moment that "elderly", almost sixty-five-year-old Samuelson, who could easily pay his own way, has ever turned down a subsidy for the sake of the younger generation? Do you think he personally rejects Medicare? Or do you think he's in that special class of people who takes everything he can get - "sacrifice is for other people". I don't believe for a minute that he actually cares about deficit spending (he's admitted as much), the young subsidizing the old, the poor subsidizing the rich.... Is there somewhere I can find evidence to the contrary?

2 comments:

  1. Shocked. I am shocked and appalled that you wrote that entire column and didn't insert one Grandpa Simpson quote. : )

    CWD

    ReplyDelete