It’s all about redistribution

Interesting post from Uwe Reinhardt, an economics professor at Princeton on the recently passed Senate health care bill. He writes that both the Senate and House bills appear to endorse this “solution” for health care costs:

Americans in the upper half of the nation’s income distribution will have to tax themselves in order to help subsidize the purchase of health insurance by families in the lower half of the income distribution.

The article is interesting, because Mr. Reinhardt is quite honest about the fact that the health care bill is mainly a way to redistribute the costs of health care. Another key quote:

This has meant that for young and very healthy individuals, premiums have tended to be relatively low. For older or sicker individuals, premiums have been high, sometimes prohibitively so.

Community rating is intended expressly to redistribute the financial burden of ill health from the chronically unhealthy to the chronically healthy.

Whether or not one considers that fair is a political call.

What he fails to point out is that in transferring the cost of health care from the elderly (what he calls the chronically unhealthy) to the young (the chronically healthy) we are actually transferring the cost from the (relatively) poor to the (relatively) rich. Who has a higher net worth, the average 65 year old or the average 25 year old? (Hint, it’s the one who has spent nearly five decades in the labor force accumulating capital).

It’s bad enough when we have to argue about redistributing wealth from the “rich” to the “poor”. But at least one can make a fairly consistent political or philosophical argument about why that would lead to more “fairness”. Transferring the cost from the young, who are on average far “poorer” than the elderly (who would be likely to benefit the most from health care reform since they are the biggest consumers of health care) is unfair and unjust. Too bad no one out there seems to be noticing.

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