Health-Care Reform

Americans Sure Seem to Like Universal Health Care

The average person understands what the free-market purists ignore.

Something for everyone.

Photographer: Andrew Harrer/Bloomberg

Americans, in general, support government-provided universal health care. A Pew Research Center survey taken in January found that 60 percent say that it’s the responsibility of the federal government to make sure that all Americans have health coverage. A Morning Consult/Politico poll in April found that support for a single-payer health system outweighs opposition, by 44 percent to 36 percent (with 19 percent unsure). A Gallup poll turned up similar results. In fact, support for universal health care isn’t a recent phenomenon; it was high before the bruising political battles over the Affordable Care Act:

This Isn't Like Food

Share of Americans in favor of government universal health care*

Source: Gallup

* No data for 2015

So recent enthusiasm for government intervention is just a return to the status quo ante.

There are several models of universal health care. The first is socialized medicine, where the government owns and operates all health-care providers. Essentially no one in the U.S. is suggesting doing this. The second is a single-payer system, where the government insures everyone. Usually, in this sort of system, people can also choose to buy supplemental insurance in addition to the government program. The third is a public option, where the government offers to insure anyone who wants it, but where people can choose to buy from private insurers. Obamacare, in which the government mandates that everyone buy private insurance and then provides subsidies for those who can’t afford it, is a fourth type of system.

Not all Americans agree, of course. In a recent blog post, Hoover Institute senior fellow John Cochrane likens single-payer health care to single-payer food:

"Is every American entitled to eat?" [really means] "Don't you think the Federal government should establish an entitlement that every American can have the Federal government pay for his or her food, from funds raised by taxation?"...Even to that one the answer has to be no. There is no such law, right, or entitlement. That is a simple matter of fact.

Cochrane is probably right in the narrow sense -- most people wouldn’t support putting the entire U.S. populace on food stamps, only those in need. But by drawing an equivalence between health care and food, Cochrane is ignoring the long history of economic research showing that the health-care market is very different from others.

In 1963, the great economist Ken Arrow published a paper explaining a number of reasons why health care is unusual. Arrow asserted that if economists care about human welfare, instead of just about overall economic efficiency, they should favor some form of government provision of health insurance. Without the government, he writes, we could easily end up with a system that uses resources efficiently but causes horrible human suffering.

One reason for this is the importance of moral norms. People have all kinds of moral considerations associated with health care. They expect doctors to act honestly and selflessly, and not just seek profit. Imagine if doctors were to advertise their services on billboards, like cell phone companies and personal-injury lawyers do. Would anyone go to those doctors?

Another problem is incomplete markets. Can people really know all of the possible health conditions they might get, including how much they would pay to cure or treat each one? Can insurers assess each patient’s risk of each one of these? The answer is certainly no.

A third issue Arrow cites is uncertainty -- in health care, people don’t know what they’re buying until it’s already too late to make a different choice. Unlike food, which you buy over and over, open-heart surgery tends to only happen once. This is also the case for college education, and may explain why top universities are all nonprofits rather than for-profit institutions.

One big problem with incomplete information is what economists writing after Arrow’s article have come to call adverse selection. People with health problems are more likely to try to buy health insurance; and since insurance companies know this, they have to charge everyone more. Economists have found evidence that adverse selection is a major factor in the health insurance market.

Another problem Arrow mentions is moral hazard. After you’ve paid for insurance, the insurance company has every incentive to deny as many claims as it can get away with denying. Patients can also have moral hazard -- someone who knows their insurance will pay for antibiotics might be more likely to travel in disease-infested regions. But this is probably a minor issue given the bodily harm involved.

There are so many problems with the health-insurance and health-care markets that it’s little wonder that they operate differently from the markets for food or cell phones. The health industry is full of things like doctor-patient trust and expectations of selfless morality, which operate outside normal market mechanisms. And it’s also full of dysfunction -- insurers denying claims, hospitals overcharging for everything, people using emergency rooms as expensive substitutes for health insurance.

To Arrow, it would probably come as no surprise that other rich countries, all of which use some system of universal health care, end up paying much less for about the same quality of care that Americans receive. Widespread popular support for universal health care would also come as no surprise to this master economist. Free-market purists like Cochrane may not acknowledge the power of Arrow’s reasoning -- and of the follow-up work of many excellent economists since -- but the American people seem to understand.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Noah Smith at nsmith150@bloomberg.net

    To contact the editor responsible for this story:
    James Greiff at jgreiff@bloomberg.net

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