Ezra, I found the attribution of the paragraphs hard to follow.

There are four persons mentioned here:
-Ramesh Ponnuru
-Michael Cannon
-Some Klein reader
-Klein

Did the Klein reader write everything after the Cannon quote?

A couple of points –

First, the homo economicus model faces no special problems in health care markets. If people sometimes fail to make rational calculations in health care markets, we should expect them to fail in similar ways in most other markets.

Second, I doubt that most economists believe that humans really make the kinds of rational calculations that the homo economicus model supposes. Instead, the point of the model is that market participants make rational CHOICES most of the time, whether or not such participants pursue the appropriate calculations to determine which choices happen to be rational. To appreciate this point, consider someone who wishes to purchase some stocks in the stock market. This person might not have a clue how to determine which stocks it makes sense to purchase, but might have a reliable friend who does. Or, perhaps, this person might pick up a dummies’ introduction to the stock market, full of pieces of conventional wisdom, shortcuts, etc., that have been developed by professional brokers from their past experiences of success/failure. Or, perhaps, this person makes a few bets, loses some but wins others, and then sets out to make more bets like the successful ones and less like the unsuccessful ones, etc. All of these examples show how a person who is far short of brilliant can make decisions that a brilliant person, starting from scratch, might take a lifetime to apprehend in the homo economicus fashion.

Third, let us suppose that, in spite of all of the shortcuts, consumers do continue to (appear) to make poor choices. Is it clear that the choices made are, in fact, poor choices? Might not these people just have very different preferences from the rest of us? How can we know such things, if not by their past choices? Can we be sure that our interventions, intended to benefit them, DO benefit them?

All of this is by the way of raising doubts about the behavioral economics approach. I am all in favor of furthering our understanding of the kinds of systematic mistakes people make in practical reasoning, but I think that much of the literature in this area neglects the possibilities that what appear to be irrational choices are really just rational relative to unusual preferences, and that the mistakes that people make in a laboratory setting do not show up in the marketplace, where all kinds of shortcuts and adaptive learning take place.

This is not an argument against universal health care, which I favor. The point is just that, if the behavioral economics argument is successful, it bites a lot deeper than health care, and so I think it is important that we recognize the limitations of that approach.

And for those consumers who opt to save by not paying for, say, bone marrow transplants, and then have their child diagnosed with leukemia, what then?

I would presume that they would set up a payment plan.

All I want from these right-wing blowhards is for them to face the future with a pre-existing condition. Then lets see how fucking sanguine they are.

Until Ponnuru et al. answer the following question, I won't take their position seriously.

(1) A young healthy male with very limited economic resources decides to forgo health insurance (after all, as Ponnuru claims, 100% coverage should not be a goal, especially because the young and healthy will overpay.)

(2) The young healthy male falls off his skateboard, hits his head on a concrete buttress (entirely at his own fault), and is delivered to the hospital bleeding, unconscious, and needing extensive treatment and rehabilitation.

Now, Mr. Ponnuru...what should the hospital do?

a. Having determined from his wallet that the young man is uninsured, he should be allowed to quietly bleed to death in the hall, or perhaps in a small room set aside for dying uninsured patients.

b. He should be treated with emergency care, including the surgery, transfusions, etc., that his case calls for.

If Mr. Ponnuru answers (a), he is consistent, but a monster.

If Mr. Ponnuru says (b), then we in fact DO have universal care -- we just have badly planned, inefficient and massively expensive universal care. After all, the young man's care will be paid for (he's broke, so it won't be him, and he's no longer capable of doing remunerative work), and will be paid for, one way or another, by a combination of other patients (by higher rates) or taxpayers.

If we are in (b) territory, then we should think about making the de facto universal care we have more efficient, and ensure that the risk pooling and distribution are equitable and workable. Saying that some individuals don't need health insurance simply makes the de facto universal care less efficient. Ponnuru, should be take (b), is arguing for lower efficiency and more perverse incentives (which may well, we note, enrich insurance company executives or hospital owners or others).

PQuincy, the simple answer to your "dilemma" is to have the young skateboarder buy catastrophic insurance. Of course, his risky behavior (skateboarding without a helmet) would have to be considered in the calculation of his premium. The insurance provider would be best equipped to handle this. I don't trust that the government will be able to make this calculation (remember, these are the same guys who couldn't read their own bill to prevent AIG from getting paid bonuses).

By the by, maybe you should research out the outcomes of those who receive socialized, er, I mean "universal", healthcare and see how those compare to what we get here in the U.S. AFAIK, no one is denied treatment simply because they can't pay (insurance paying is different story). However, there are several instances reported in countries with socialized medicine where treatment has been refused because the government CANNOT or WILL NOT pay. Be careful what you wish for when it comes to wanting government bureaucrats determine what amount of healthcare you can get.

As far as the game theorist goes, he exercise the "fatal conceit" of so many who go into the dismal science. No one can have perfect information on anything, but that is no excuse for having an even more imperfect entity - government - making decisions on behalf of people.

People will "rationally attach a value" to the potential for an unforeseen event outcomes and purchase catastrophic insurance.

The most rational policy for most people is the health savings account model. It requires the purchase of catastrophic insurance, it provides incentives for maintaining health, it provides price sensitivity, it's portable and it allows people to save money that would otherwise be spent on premiums for as long as they stay healthy.

That must be wy the Democrats are always trying to kill it.

Ram
After reading your response, I took a step back and said hmmm, maybe you have a point. But like many reads, a few minutes go by and it hits....

Buy Google or Amazon

Or

Wait a minute, there is a dead guy in the gutter with a head wound and no health insurance.

Right. I then come back down to earth. Lets agree to disagree.

Jesus Fuck, it's Night of the Libertarian Dead in here.

In addition, there is a feature of many health-care markets that is not usually part of the models used elsewhere in economics: namely, that the decision to demand a medical treatment may be made by, or strongly influenced by, the suppliers of that treatment (ie, medical personnel). In what other marketplace do suppliers get to decide both the level of supply and the level of demand?

brad,

I'm not sure what your criticism of what I wrote is. As I said, I support the idea of universal health care, but not because I believe that consumers of health insurance make irrational choices. Instead, what differentiates health insurance markets from most other markets is, in my view, the phenomenon of adverse selection. It is because insurers do not have sufficient information about the riskiness of the insured that it is not possible for insurers to set optimal premiums. This prompts insurance companies to invest in efforts to screen high-risk consumers out of their insurance pools, investments which raise the premiums of the insured, while preventing high-risk consumers who are willing to pay the optimal premium from acquiring insurance. This is a case of market failure. As such, most economists think that it can be corrected for with appropriate public policies.

Note that nowhere in this explanation do I depart from the presumption that consumers make rational choices. One does not need behavioral economics to defend universal health care, or most other center-left policy initiatives for that matter. What much behavioral economics does lend credence to is a level of paternalism that flies in the face of what we know public institutions do poorly. As such, it is important that we understand whether these considerations from behavioral economics have as much force to them as their proponents sometimes claim.

Ram,
Yes, I know, it does come off as criticism...and smugness. Sorry, you are advancing a legitimate debate.

My beef is being in the hospital trenches all day, and also having a public policy background, I get tired of the econometric analysis when folks are health illiterate by the hordes. Most are sick, clueless about health decision making (I am speaking from experience x years x 1000s of patients), and wouldnt know a thing about homo economicus.

It is the different between looking at a good steak, and tasting one. You can talk about it and theorize all you want about what it might be like, but the real deal on your taste buds tells you all you need to know.

Just go to an inner city hospital where the 20% spend 80% of the health costs, and you can throw away the economic text books.

Just as an aside, I am not a liberal, have taken economic courses, and yes, have read Nudge...and like it very much.

Best
Brad

I'm encouraged to see that Chris Bolts Sr. and Che-is-dead both favor government-mandated insurance for everyone :-) Now that we all are on the same page that some kind of universal mandatory coverage is on the table, we can start the complex and ultimately political process of shaping what that mandatory universal insurance will include.

But Ponnuru's article didn't call for mandatory insurance at all: it argued that some people would be best of if they stayed entirely uninsured. So, on Ponnuru's logic, we still have no resolution for that helmetless skateboarder, who didn't buy the available catastrophic care insurance because, well, he was 23 and wanted to buy beer more.

So he's still arriving uninsured -- an uninsured fool, to be sure -- and Ponnuru still needs to answer: do we treat this voluntarily uninsured person, or not.

If we don't, then 'no insurance' really means 'no insurance'. If we do treat him, then we ALREADY have universal insurance, but just don't call it that.

I agree that Chris Bolt's solution is a possible and rational one -- but it involves mandatory universal insurance for catastrophic care. (It also suffers from adverse selection issues: if the young man's habit of skateboarding without a helmet raises his individual rate for voluntary catastrophic insurance, he's less likely to buy it.) Still, mandatory catastrophic care insurance would be a big improvement from where we are now, so I'm not against it, even if it doesn't go far enough. Likewise, some combination of health savings accounts, mandatory university catastrophic care, and subsidies for the indigent and transient might be a real solution to our current mess, as che suggests...but again, that's not what Ponnuru is suggesting in the article that started this thread. Ponnuru argued that we should NOT require universal insurance.

Thus, my dilemma stands, and I refuse to take Ponnuru and his ilk seriously until the deal with it.