Monday, June 16, 2008

Universal Health Care?

Should we have universal health care? Well in an ideal world everyone would pay for their own. But what tends to happen in that case is that every rational individual would only buy health insurance when the expected to gain more from it than what they put in. Of course, companies are much better at being rational (i.e. profit maximizing) than individuals. Insurance companies aren't going to sell to those who would benefit so they raise their price on these people which causes another set to stop getting insurance and the cycle continues the only people that have it are those that are paying to much for it. This is wasteful. How group health plans work is by pooling the risk of payouts among all those in the group. Some will over pay and some will benefit. But doesn't it tend to lower the cost overall? Isn't the cost of an individual policy in a group plan better than an individual policy without a group plan? Wouldn't average fixed costs be lower for group plans as well as the marginal cost of care when the service receiver comes from a group plan due to increased negotiating power? And wouldn't the largest group plan possible come from a "universal program"? I'm not even mandating that the government run it, just pay for it, but from where.

People say they are for lower taxes, but that's really just a proxy for either wanting higher net income or lower government waste. The average health care plan for an individual costs $4479, with the vast majority coming from a firm's contribution ($3785). Essentially this is additional compensation. Are those that are against their tax dollars contributing to a universal program worried about their taxes being raised 6% ($4000 on an average gross income of 60k)?

We'd still have to tackle the government waste aspects but how could a pooled version be any better than one a market could propose?

BTW. Here's an analysis of McCain's health care plan (a plan under which he wouldn't even be covered due to pre-existing conditions).