Tax the Unhealthy? (Part 2) |
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[The following is part 2 of a two-part guest post by Adfecto from Aspire 2 Wealth. I recommend you read part 1 first. Though I initially disagreed with him, I admit that he made some great points. He was kind enough to consolidate many of those thoughts into two posts. If you like this article, consider subscribing to his RSS feed.]
The elephant in the room when considering multi-tiered cost structure for health insurance is that it all boils down to a form of discrimination. If we go down this path, it is the same as saying women should pay more for insurance because, “pregnancy is so darn expensive.” There are hundreds of studies that say this group or that group is more susceptible to disease XYZ. Some, but not all, of these groups are protected by our laws against discrimination, and to some extent so are their medical records, their genetic code, and their personal lifestyle choices. If we start picking and choosing which of these factors can play into insurance pricing, where do we draw the line on that?
Why are we so worried about upping the cost that unhealthy people pay for health insurance anyway? Of course, it is because if they pay more it is assumed I will pay less. A natural self interest makes us quick to raise rates for the other guy; especially if it is because that person is an irresponsible “fat person” or “dirty smoker.” What we forget is that this can very quickly turn on us. What happens when we get sick? We would quickly change sides in this argument if our own child was born with a predisposition for a certain expensive illness. Alcohol consumption has been linked to various diseases. How many people who fought to have smoking banned in bars would suddenly be labeled ‘unhealthy’ if alcohol consumption was considered? The six beers Joe had during the Super Bowl now mean he should pay more? Not in my backyard; in other words, it is all fine until your personal poison is singled out or you will be directly affected for the worse.
The last point I want to make is that there is even some evidence that in the end, it isn’t even more expensive to treat unhealthy people. A new study by a Dutch research team that finds it is actually cheaper to provide medical care for unhealthy people than those who are healthy has recently been published in the Public Library of Science Medicine journal. The study specifically looks at the usual scapegoats, smokers and obese people. It concludes that in the short run, they incurred more health care expenses, but in the long run they cost substantially less. The study found that the ‘unhealthy’ people had a shorter lifespan and this caused their lifelong health care expenses to drop well below those who were deemed to be ‘healthy.’ If the goal is to make people pay their fair share, it would seem that unhealthy people should actually pay less. This finding completely contradicts to the ‘common wisdom’ and shocked many experts. In spite of this data, I still contend that to properly share risk, everyone should pay the same.
My point it this, insurance is suppose to spread risk and keep health care expenses predictable and manageable for everyone. I don’t think an actuary’s model, a doctor’s subjective assessment, or a geneticist’s analysis should affect how much a person pays for health insurance. To do otherwise would undermine the very reason for insurance in the first place.
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Propeller14 Responses to “Tax the Unhealthy? (Part 2)”
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February 22nd, 2008 at 9:15 am
The study found that the ‘unhealthy’ people had a shorter lifespan and this caused their lifelong health care expenses to drop well below those who were deemed to be ‘healthy.’ If the goal is to make people pay their fair share, it would seem that unhealthy people should actually pay less.
You have to consider that since they die sooner that they pay premiums for a shorter period of time.
February 22nd, 2008 at 8:44 am
I agree with Kitty, I think we’re confusing two issues here. 1) Socialization and 2) incentive based premiums. Both of which I’d like to address.
Insurance is inherently socialization, and that’s good thing. I’m fairly affluent but I would be hard pressed pay the hundreds of thousands that it would cost if I fell victim to cancer. That’s why I have insurance as a precaution against that. It is always the case that the healthy pay an “unfair” share to ensure that the unhealthy get taken care of. Would it be better that anytime someone became unhealthy that they would have to pay the full cost of treatment? Given that we do have the concept of insurance, I think few of us think that people should get treatment for only what they can pay for at any given time. Insurance even private insurance is effectively a compact to enter into some form of socialization. Premiums are not so different from taxes. The question of the role of the Government is a trickier matter, and mostly exists because as society we are not so cold that we would are willing to to be people die quite so easily. Should hospitals refuse emergency room admittance to stabbing victims just because they don’t have insurance? While some would take a hard line approach and say they shouldn’t, I think most people are a bit kinder than that. In addition societal health like societal education has network externality effect in that society as a whole benefits from a better educated and healthier populace.
As for people paying more for being unhealthy. This is obviously a more gray area. I firmly believe that people need to be given incentives to do the right thing, i.e. not smoking, maintaining a healthy weight. There is no difference in the end making unhealthy people pay more vs. giving discounts to healthy people. That said, this could be dangerous territory in this day and age. Do we make people who are genetically predisposed to some disease pay more? Or deny them insurance completely? Obviously it’s cheaper for the lucky healthy ones, but taken to it’s extreme it defeats the whole point of risk pooling that is the basis of insurance.
February 21st, 2008 at 7:34 pm
I might be missing something, but I don’t think the subject here is socialization, but whether unhealthy should pay more for (any) health insurance. I have cousins in Germany, and I hear both good and bad stories from there, so I am pretty ambivalent about “single payer”. My cousins tell me there are discussions in Germany about switching to the US system all over their papers (the grass is always greener…). Not sure if it is true. In terms of denial of coverage for some procedures - it happens a lot with national health system like in the UK as well. The issue at hand is if “unhealthy” should pay more no how to improve the current system which is a whole different subject alltogether (and a complex one).
Besides, if it comes to the rich, given that I am in top 10% at least based on 2004 numbers, I’d probably be the one paying more…
February 21st, 2008 at 5:18 pm
I totally agree with Cameron. The socialization of health care would inevitably be very unfair. I don’t want the government telling me how much I have to pay and deciding what kind of medical treatment I can get.
Just look how well they handle our education system. The rich pay more in taxes for schools that are so bad that they must then pay even more to send their kids to private schools. I don’t want to be flying to Switzerland for a prompt surgery after paying $10,000/yr in health insurance taxes in the US.