qotd: Tyler Cowan: Obamacare not as egalitarian as it appears

The New York Times
November 6, 2015
Obamacare Not as Egalitarian as It Appears
By Tyler Cowen

The Affordable Care Act has generated an enormous amount of partisan
rancor, but with more access to data, it is worth taking stock of how it
has actually been working.

We can safely say that the policy is costing less than anticipated,
perhaps 20 percent less, according to a Congressional Budget Office
estimate, and that it has reduced the number of Americans without
insurance. But the numbers also suggest that by some measures, the
Affordable Care Act has had only a limited impact on economic
inequality. In fact, I view the policy as an object lesson in the
complexity of reducing the harmful consequences of inequality in the
United States.

The act has many parts, but let's focus on the mandate, a core feature
that requires those without insurance to buy it. It was intended to help
millions of Americans who did not have health care coverage. Under the
program, government subsidies are available for the needy, and there is
clear evidence that the poorest people, who receive the largest
subsidies, are better off under the health reform law.

In that sense, the program has been a success. But whether other
individuals subject to the insurance mandate — those who qualify for
lower subsidies or for none at all — are also better off is much harder
to say, some recent research has found.

Of course, this question may seem simple if you consider health care
coverage to be an essential component of a good human life, and perhaps
of social justice as well. If you begin with those assumptions, you
might conclude that when you require people to buy insurance coverage
you are improving their lives — even if they are not willing to pay for
the insurance without prompting from the government.

But there is another way of looking at it, one used in traditional
economics, which focuses on how much people are willing to pay as an
indication of their real preferences. Using this measure, if everyone
covered by the insurance mandate were to buy health insurance as the law
dictated, more than half of them would be worse off.

This may seem startling. But in an economic study, researchers measured
such preferences by looking at data known as market demand curves.
Practically speaking, these demand curves implied that individuals would
rather take some risk with their health — and spend their money on other
things — partly because they knew that even without insurance they still
would receive some health care.

One implication is that the preferences of many people subject to the
insurance mandate are likely to become more negative in the months
ahead. For those without subsidies, federal officials estimate, the cost
of insurance policies is likely to increase by an average of another 7.5
percent; even more in states like Oklahoma and Mississippi. The
individuals who are likely losers from the mandate have incomes 250
percent or more above the federal poverty level, the paper said. (That
figure is $29,425; the federal poverty level is $11,770 for a single
person, more for larger families). They are by no means the poorest
Americans, but many of them are not wealthy, either. So the Affordable
Care Act may not be as egalitarian as it might look initially, once we
take this perspective into account.

It is a matter of philosophy whether we should help people even if they
may not want to bear the costs, or instead should honor their individual
preferences, but either way there is a sustainability problem. Consider
that the health law was enacted to replace an unsustainable system in
which uninsured people relied on last-ditch emergency room care. Yet
enrollment projections suggest that the Affordable Care Act's insurance
mandate may face sustainability issues of its own.

In short, while numerous government programs redistributed income toward
the poor successfully in the past, successive improvements, as
exemplified by the Affordable Care Act, have become harder to
accomplish, as many of the easiest and most efficient opportunities have
already been exploited. We have ended up at margins where political
divisions and interest group capture make further progress harder to
carry out, no matter how good the proposed policies may seem on the
drawing board.

(Tyler Cowen is a professor of economics at George Mason University.)

http://www.nytimes.com/2015/11/08/upshot/obamacare-not-as-egalitarian-as-it-appears.html

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Comment by Don McCanne

Is our health care system under Obamacare (ACA) an egalitarian system?
Although ACA includes numerous policies designed to improve health care
equity, it still falls far short. Conservative economist Tyler Cowen
agrees, although his proposed solutions may be somewhat different from ours.

For a health care system to be egalitarian, it must be equitable. A well
designed single payer system would achieve that equity. As an example,
the financial burden on middle-income families that Tyler Cowen and many
others have described would be lifted.

In the past, Cowen has supported "a Singapore-style system, with single
payer on the catastrophic side rather than mandates for private
insurance purchase." Thus he would move us toward a more egalitarian
system as well. But the many problems created by moving to the requisite
health savings accounts would threaten health care equity, and, thus,
threaten egalitarianism itself.

Single payer is the way to go, but let's make sure that the system
design maximizes egalitarianism.