This is from a Republican presidential candidate debate:
Wolf Blitzer: You’re a physician, Ron Paul, so you’re a doctor. You know something about this subject. Let me ask you this hypothetical question.
A healthy 30-year-old young man has a good job, makes a good living, but decides: “You know what? I’m not going to spend $200 or $300 a month for health insurance because I’m healthy, I don’t need it.” But something terrible happens all of a sudden, he needs it. Who’s going to pay if he goes into a coma, for example? Who pays for that?
Most of the blogosphere — especially libertarians — thought Ron Paul’s answer left something to be desired. Check out suggested libertarian answers from Rod Long, Bryan Caplan, Robin Hanson, Arnold Kling and another answer from Scott Sumner. On the left, Ezra Klein sees the entire question as giving moral weight to the case for socializing health care, Austin Frakt says “your life is not your own,” and Paul Krugman (ever the intellectually dishonest attack dog) says that the “free to choose” crowd has morphed into the “free to die” brigade.
I’ll consider all this below. But first I want to make a point everyone else is missing: The best answer to this question has nothing to do with libertarianism. The problem Blitzer poses illustrates a defect in our current system that could and should be remedied without a great deal of effort.
A Non-Libertarian Practical Answer. Under the current system, you don’t get to be uninsured with impunity. Anyone who lacks employer-provided health insurance is forced to pay higher taxes than someone at the same income level who does acquire the insurance. Those higher taxes are a “penalty” for being uninsured; and the justification for this penalty, presumably, is that the uninsured may need health care that they cannot pay from their own resources. Either you buy private insurance or you pay taxes for implied public insurance.
What’s wrong with the current system is that it fails to formalize the system of subsidies and penalties in a rational way. For example, the penalty for being uninsured goes to Washington. But the free care delivered to those who cannot pay their medical bills is mainly funded by city and county governments. What should happen: The tax penalties the uninsured pay for being uninsured should be recycled back to safety net institutions in the communities where the uninsured live in order to pay for care that uninsured patients cannot pay themselves.
Let’s take some numbers. Since the man “makes a good living” let’s assume he is in the 25% federal income tax bracket and faces, say, a 5% state and local income tax. Like all other employees, he and his employer must pay a 15.3% (FICA) payroll tax. If his employer pays insurance premiums instead of paying taxable wages, the total subsidy will be about 45%. This implies that the tax subsidy for employer-provided insurance pays almost half the cost. The flip side of every subsidy is a penalty. The failure of the employer to pay premiums instead of wages means that (if insurance costs from $200 to $300 per month) the man will be effectively paying between $90 and $135 per month in extra taxes.
I would argue that these extra taxes ought to buy something. Specifically, they ought to buy access to a least some publicly provided care, if the man exhausts his own assets and cannot pay for all of the care he needs.
Turning the Practical Answer into More Fundamental Reform. Let’s take the answer I just gave and expand on it. The implicit premise is that society has a legitimate interest in whether you are insured. That’s why I called it a non-libertarian approach. Or, if you like, you can call it libertarian paternalism. Given that interest, we could take all of the tax and spending subsidies that encourage private insurance, including some of the new ones under ObamaCare, and give every family in America a refundable tax credit for the purchase of health insurance. This subsidy would be available regardless of how the insurance is obtained (through an employer, in an exchange, in the marketplace, etc.). Any extra premium for more expensive insurance would have to be paid by employees and employers with after-tax dollars.
In effect, the government would pledge to each individual adult, say, $3,000 and each family of four, say, $8,000. If people decide to get insurance, the tax credit would be applied against premiums owed. If they decide to be uninsured, the unclaimed credit would go to safety net institutions in the communities where uninsured people live. Money would follow people. If everyone in Dallas County opted to be uninsured, all the unclaimed credits for Dallas taxpayers would go to Dallas safety net institutions for unpaid care. If everyone changed his mind, and bought insurance, the government would use all the safety net subsidies to fund the tax credits for private health insurance.
This proposal is described more fully in “Characteristics of an Ideal Health Care System” and in “Applying the ‘Do No Harm’ Principle to Health Policy.”
My Libertarian Answer. I believe that a good society does not allow people to starve. A good society also does not allow people to go without basic health care. Or without reasonable shelter. If government does not get in the way, most human beings will help each other out. (Most libertarians seem to have trouble saying these things.) But as I have pointed out at some length, private sector charitable activities are never run like government entitlements. If you are away from home and lose your wallet, the local Salvation Army will give you a meal and a place to sleep and maybe even some cash. But they will not do this day after day, night after night. It’s probably fair to say that all private charities seek to give aid without encouraging dependency.
Non-libertarians sometimes ask: What if someone is in desperate need and nobody will help him. My response: Who among all these nobodies unwilling to help is going to offer to be taxed to help? Answer: Nobody. Neither public nor private aid will be forthcoming if the vast majority of people are indifferent to the suffering of others.
Some years ago the Council for Economic Advisors did a forecast of where the poverty rate would have been in the 1980s if the (Lyndon Johnson) War on Poverty programs had never been enacted. Answer: The predicted poverty rate based on economic growth alone was below the rate that we actually had (see chart below). In other words, after spending trillions of dollars combating poverty, it’s tempting to conclude that government intervention not only failed to make things better, it appears to have made things worse.
Ron Paul’s Answer. He has a three-part answer: (1) The young man should have been more responsible, and strangers shouldn’t be forced to bail him out; (2) private charity will help; and (3) regulation makes health insurance needlessly expensive.
Other Answers. Rod Long thinks Paul should have reversed his three points by (1) explaining that the lack of insurance is caused by government regulation that prices people out of the market, (2) arguing that private charity is more efficient than government and (3) asserting that peaceful, voluntary actions are morally superior to coercion. Bryan Caplan responds:
When you really think about it, Blitzer’s “gotcha” for Ron Paul was actually a “softball.” Blitzer could have asked Paul about an unhealthy man. Or a man without a job. Or a child. Or an orphan.
I wish Rod’s Three-Step Program had credible solutions for all these cases. But it doesn’t. Free markets quickly make life better in some ways, and gradually make life better in almost all ways. But critics of libertarianism will never run out of empirically plausible “hard cases.” When faced with these hard cases, the best response we’ll ever have is, “Charity can probably provide for the deserving poor. Everyone else should live with the consequences of their actions — and stop blaming total strangers for failing to help them.”
Here’s Robin Hanson:
So everyone agrees that we heroically help some, and leave others to die. We only disagree on who falls into which category.
Here’s Arnold Kling:
People are naturally collectivist at the level of family and others in their immediate vicinity. And that’s fine. But to libertarians, national socialism is a mistake. The way to behave ethically with distant strangers is to trade honestly with them and don’t steal their stuff. There is no reason to treat distant strangers that live within one political boundary differently from distant strangers that live inside another boundary.
Now, it might be good for some of us to be particularly generous to some distant strangers. But libertarians would argue that this should be done voluntarily, and that it does not justify employing the coercive apparatus of the state.
I don’t disagree with any of this. I just wish libertarians would refrain from sounding as though they have “charity toward none.”