No individual has an incentive to pay for providing the efficient quantity of a public good because each individual’s marginal benefit is less than the marginal social benefit. This is a primary justification for the existence of government. ~Paul Krugman (emphasis added)
The more I hear and read about opposition to health care reform the more I am convinced that the fundamental dividing line between proponents and opponents is a disagreement over the classification of health care as a public good. From a moral perspective, universal access to basic health care is extremely attractive to me. I understand that limited resources mean that not everything can be provided for everyone, but that doesn’t mean that we shouldn’t do what we can. But even if your moral sensibilities don’t cringe at the thought of raw capitalism barring sick people from their doctors, expanding access to health care is good economic policy.
Many people don’t see a sufficient incentive to purchase insurance. In the equation they see, their marginal benefit doesn’t equal their marginal cost. Consumers will (almost) always act in their own immediate best self-interest. They don’t have an incentive to insure themselves until they need it. But insurance works by spreading risk; it depends on having a large enough pool to ensure that not all participants are drawing funds out at the same time. Someone in the pool has to be healthy and paying in. As long as enough consumers wait until they are sick to get insurance, which is the economically rational thing to do, insurance premiums will increase endlessly because uninsured (or underinsured) consumers have little incentive to act against their immediate economic self-interest.
The trouble is that eventually even the healthiest people find themselves in need of a doctor’s services. And then, frequently, it’s a case of too little, too late. People without access to health care don’t get regular checkups, and they don’t seek preventative care. When they get sick, they tend to be sick longer and more severely. They work reduced hours and lose their jobs. They lose their businesses (leaving others unemployed) and their homes. More unemployed people mean less money spent, dragging down the economy. Uninsured people show up in emergency rooms, wracking up huge bills that are eventually passed on to insured consumers via increased premiums. They draw disability, social security, unemployment, food stamps, and subsidized housing. The very people most opposed to health care as a public good end up imposing the largest costs on society.
For this very reason – because the marginal benefit to the insured consumer will be less than the aggregate benefit to society of a healthy population – it’s time to bring health care into the realm of the public good. Both because it is a moral good and also because it is financially beneficial.