April 13, 2011

Horse 1173 - Does Universal Healthcare Need to Even be a "Right" to Make it Sensible?

An objection which comes up quite commonly (and particularly by Americans) on forums which I frequent, is the argument that Health Care is not a "right", and therefore society shouldn't be forced to pay for it. I believe that it is this sort of attitude which has led the US Health Care system not only being the most expensive in the world to access, but also not particularly very good value for money either. The system appears to be driven by more greed, grift and corruption than an actual desire to a) create a working health care system and b) the actual health of people using it.
To subvert the question entirely, I pose a very different answer as to why a public health care system is a better option and it has nothing to do with it being a right or not.

Insurance itself is a monetary hedge against the risk of a contingent, uncertain loss. This implies a statistical risk which can be calculated and measured.

The Law of Large Numbers states that the more times you perform an experiment, then the average of those experiments will tend more towards either a theoretical or statistical average.
To wit, for a very large rolls of a die you should end up with the average ending up at about 3.5 (because (1+2+3+4+5+6)/6=3.5). Likewise, if you take a very large sample size for other events, the more times you repeat the experiment then the closer you get to the theoretical or statistical average.

For a population of people, the statistical average for something medically bad happening to them (which is why you take out insurance in the first place) tends towards the statistical average for something medically bad happening to them with an ever increasing sample size.
Since the entire population is also equal to the the entire sample size, then the statistical average for something happening, is also equal to the statistical average for something happening (unity equals unity).
Therefore from a statistical standpoint, the best sample size on which to base and charge your insurance coverage, is obviously the entire population. It follows that Risk is best spread over the entire population on this basis (you can of course do a reiterative calculation on this or perhaps a differential calculus equation, however I find that this tends to cloud the issues somewhat).


There is a problem though:
The population itself isn't uniform. There are older people and younger people. The chance of a 21 year old person suffering from an age related cancer, is not as high as a 74 year old. Also the chance of a 83 year old lady being in a serious motor accident is not as high as a 24 year old male.

It follows that the people who would want to buy insurance are also the same people most likely to drain the pool of funds. From the insurance organisation's point of view, this poses a problem. If younger people are less likely to pay into the fund and older people are more likely to draw from it, then the premiums must be invariably higher than if everyone had been paying into the fund in the first place.

Insurance by its nature suffers from negative self-selection for the above reasons. The best way to avoid this is to spread selection of payers over the widest possible base. Since the widest possible base is in fact the entire population, then for this reason the best possible selection system is also the entire population.
In theory the best possible payers into the system are those people who are also least likely to want to claim from it because it helps to spread the risk (which is after all they very point of an insurance question).


There is also the issue of "economies" of scale at play, at which the factors that cause a producer’s average cost per unit to fall as the scale of output is increased. Admittedly, this doesn't always line up with the general practice but seeing as the idea of universal health care creates a Natural Monopoly, coupled with the fact that not everyone is actually using the system at once, does then to ameliorate it somewhat.

Those same people who usually denounce the idea of Universal Health Care usually also forget that it was Sir Winston Churchill who first publicly declared the idea of Universal Health Care to the members of Royal College of Physicians in London in March '44:
The discoveries of healing science must be the inheritance of all. That is clear. Disease must be attacked, whether it occurs in the poorest or the richest man or woman simply on the ground that it is the enemy; and it must be attacked just in the same way as the fire brigade will give its full assistance to the humblest cottage as readily as to the most important mansion. Our policy is to create a national health service in order to ensure that everybody in the country, irrespective of means, age, sex, or occupation, shall have equal opportunities to benefit from the best and most up-to-date medical and allied services available.
Obviously to come to such an opinion, Churchill must at some point have witnessed first hand the terrible suffering of people who had been injured during the Second World War. To make an "Big C Tory" come to such a conclusion must have required a situation so bad that it crossed all ideologies. Also remember that death, disease and injury respects no class, rank, or other social barriers.


Even if you allow for the "free rider problem"* (look it up you'll learn something), even Churchill realised that allowing dignity to all members in society was a far better outcome than having people excluded from the system because they couldn't afford it.

Or maybe you would prefer that people don't have decent health care, so long as their dignity doesn't impinge on your precious rights:
If they would rather die, they had better do it, and decrease the surplus population.
- Scrooge, A Christmas Carol, Charles Dickens (1843).

However setting this aside for a moment, it is very easy to draw a connection between the degradation of a working population even if you morally reduce them to little more than units of labour and Frédéric Bastiat's Parable of the Broken Window. It stands to reason that if the working units of labour are generally allowed to degrade through sickness and/or injury, then the overall utility of those units of labour decreases and hence the overall incomes of the nation falls; therefore not in a economic sense beneficial to withhold or deny the provision of health care to the working populace.

It is mainly for the reasons of the net insurance benefit, that extending the provision of health care on a universal basis, that people who deny that health care is a right should look at. Though if you really want include some sort of moral dimension, perhaps we should look at something else which Sir Winston Churchill said:
The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.
Maybe that is the crux of people's reasoning. Maybe they actually like to see people miserable.


*The Free Rider Problem. In a civilised and sensible society, we choose to value people 's dignity and are prepared to accept this cost.
http://en.wikipedia.org/wiki/Free_rider_problem

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