Tyler Cowen writes
When people turn a certain age, allow them to trade in the current benefits package for a minimalistic package (set broken limbs and offer lots of potent painkillers), plus some of the rest in cash, doled out over the years if need be. For some people, medical tourism will fill the gap.
But if a person wishes, he or she can keep the extant benefit structure and forgo the cash altogether. No one is forced to take this deal.
Objections? You might think that “health” has a special moral status of some kind, but keep in mind “health care” is only one way of many to better health care outcomes, so you still can favor increasing the degree of choice.
So obviously I am wildly in favor of this idea. Cash rocks. Or to be more specific liquidity rocks. Both individually and socially. Its great for all your occasions, cancer and liquidity traps.
Its also great for decentralized exploration of creative ways to satisfy preferences.
The problem is that its bad for showing tribal allegiance. One can show up to a friends house for dinner with a bottle of wine as gift but not $40 in cash. I let everyone know that would gladly take the cash, but my wife says “this is why no one wants to have dinner with you.”
There is a similar problem replacing Medicare with cash.
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Thursday ~ April 14th, 2011 at 1:10 pm
Andy Harless
Aside from the political/tribal problem, there are several reasons why Medicare-as-cash is bad policy.
1. The current Medicare system redistributes wealth from the healthy to the sick. This is good, for the usual utilitarian or Rawlsian reasons. A cash grant would take away this redistributive advantage.
2. Adverse selection would result in healthier seniors’ remaining uninsured while the costs of insurance rise dramatically for the others. (OK, this is really the same as reason #1, but it deserves repeating.)
3. As Ryan Avent points out, we’re de facto going to be insuring the uninsured anyhow, because we have this thing against letting people die due to lack of necessary medical care.
It’s kind of like, the hosts didn’t bother to buy wine for the party because they figured somebody would bring some. If everyone shows up with money instead, it’s going to ruin the party.
Thursday ~ April 14th, 2011 at 2:24 pm
orlando
Actually, there’s another problem; we, as a society (ok, at least me and many others
, do NOT want anybody to die of hunger, or anybody to go without reasonable medical care; moreover, I really like the fact that I could go to the ER and get urgent attention without requiring a credit check, which means many time people that go to the ER can’t afford it, and so the ER ‘loses’ that money. I’m very happy to pay for my share of those loses, to be able to get immediate medical attention.
Basically, this means that, if people call out bluff and get the cash, we would still be providing them medical attention, regardless.
Thursday ~ April 14th, 2011 at 11:19 pm
JazzBumpa
Am I reading this right? Above a certain age, opt for less comprehensive coverage?
Andy Harless is exactly right, of course. The adverse selection point is particularly salient. But setting aside all the economic niceties, the idea is – and I’ll be polite – insane.
If you think even for a second or two about what getting older means, you might realize that it includes encountering more types of health problems, of greater severity, and the only thing predictable is that as time goes on you will deteriorate further.
My mother will be 90 next month. Had she opted for the Cowan plan some time in the past, can you imagine she would have had enough dollars in hand to pay for her bunion surgery, and/or hip replacement? Not after buying her blood pressure pills.
Further, she would be immobilized by now, since her foot would be close to non-functional, and the bone spurs on both parts of the ball and socket hip joint would have her in constant discomfort, and unbearable pain if she tried to move. An extra advantage would be that she couldn’t travel to the county senior center for a government subsidized lunch every day. Look how much that would save the taxpayers!
I’m not able to work this into your wine-dinner parable. The only good thing about this absurd scheme is that no one is forced to take it.
I guess the other alternative is to set her out on an ice floe.
/rant
JzB
Friday ~ April 15th, 2011 at 1:34 pm
Lord
I think the way you would have to implement this is offer rebates to those who keep their medical expenses below median since that is what most people have control over. One could also encourage medical tourism for expensive operations or offer cash for each years delay of them but it is difficult to structure a pure cash or care system.
Friday ~ April 15th, 2011 at 6:15 pm
nemi
How much (in present value) could we pay a six year old kid to not use the education system?
(Of course it will affect the amount of tax he will repay to the system but that will probably happen with people that don´t get health care as well and thus apparently isn’t relevant for the analysis. )
Tuesday ~ April 19th, 2011 at 2:53 am
The Limits of Cash : Organon
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