Healthcare Assumptions

In Slate magazine, Michael Kinsley responds to a Paul Krugman/Robin Wells article in the New York Review of Books that argues that complete government control of healthcare -- where the government is the only insurance company, and maybe even all doctors work directly for the government -- is the only system of healthcare delivery that can work. (h/t Mickey Kaus).

Kinsley points out flaws in a number of Krugman's and Wells' assumptions. First, the argument for forcing everyone into a single government-run insurance pool is no more compelling for health insurance than it is for any other insurance sector...

Krugman and Wells note repeatedly that 20 percent of the population is responsible for 80 percent of health-care costs. But that doesn't explain why health insurance should be different from other kinds. The small fraction of people involved in auto accidents in any year is responsible for almost all the cost of auto insurance. You insure against the risk of being in that group.

Second, Kinsley argues that advocates of government controlled healthcare too uncritically assert that centralizing bureaucracy is automatically a good thing...

Even the most competitive industry can seem wasteful and inefficient when described on paper. Dozens of computer companies making hundreds of different, incompatible models, millions spent on advertising: Wouldn't a single, government-run computer agency producing a few standard models be more efficient? No, it wouldn't.

Third, Kinsley questions the argument that high-risk individuals will be left uncovered in any system not tightly controlled by the government. As he points out, this is based upon the assumption that there can be only one cost for health insurance...

Krugman and Wells say that private insurance is flawed by "adverse selection": Insurance companies will avoid riskier customers. Only a single payer (that is, an insurance monopoly) can insure everybody and spread the risk. But anyone is insurable at some price -- a price that reflects the cost they are likely to impose on the insurer. Adverse selection is only a problem to the extent that insurance is not really insurance, but rather a subsidy.

Unfortunately, Kinsley doesn't tell us exactly what a health coverage system based on his adjusted assumptions would look like (except to say it would be something more incremental than a complete government takeover of healthcare). So, after minutes of thinking about this particular article, I'll propose a system...

1. Either government or mandatory catastrophic insurance for everyone from the moment they're born.
2. Health-savings accounts (even with tax-breaks!) for preventative and routine measures.
3. A robust, competitive private insurance market for stuff in-between.