Why U.S. health care policy is especially egalitarian

by on June 6, 2009 at 7:53 am in Philosophy | Permalink

The "poorest" people are not those with low incomes but rather those with low human capital endowments.  That includes the elderly because, even if they are very talented, on average they will die sooner.  A typical 23-year-old lower-middle-class immigrant has a higher real endowment than does Warren Buffett.

Through Medicare, the U.S. government subsidizes the health care of the elderly.  Given the embedded incentives in the system, the subsidy is especially large for people in the last year of life or so, namely the very poorest.

Western European welfare states may be more efficient, because they do more to expand routine health care access for the relatively young and this may have a higher rate of return.  But those same systems are in critical regards less egalitarian.  Bravo to them.

Many people do not look at the contrast this way.  They wish to think they believe in egalitarianism, they wish to be skeptical of the United States, they wish to condemn the U.S. for its inequality, and they wish to raise the relative status of people who are not very successful under capitalism.  When you put all those wishes together, those people will be deeply allergic to my argument. 

A few of these people also confuse "high social status" with "well off."  Since old, high-bank-account white males have lots of social status and power, these onlookers cannot bring themselves to regard those males as holding very poor overall endowments.  They substitute in assessments of social status for assessments of absolute endowments (another sign of the claim that "politics is not about policy" but rather it is about whom we should admire and condemn).

I am amazed (but not surprised) by how frequently people think of egalitarianism in terms of social markers of status rather than actual forward-looking endowments.

It is common for more egalitarian policies to be less efficient.

From the comments: "Let us say you are a twenty three year old immigrant living in New York. Would you want to trade places with Warren Buffett?

My answer is this- you couldn't pay me enough to make the trade."

Andrew June 6, 2009 at 8:06 am

Wow. Good wow.

conchis June 6, 2009 at 8:14 am

From a life-time well-being perspective, that seems like a silly definition of poverty, and a consequently silly definition of egalitarianism.

Tim June 6, 2009 at 8:19 am

Wow, but not in a good way. This sounds like an opening salvo in the argument for euthanasia. It is a short step from elderly people have lower endowments and should not get heath care to since they have low endowments and consume resources the only “right” thing to do it off them.

LemmusLemmus June 6, 2009 at 8:29 am

In other words, when “poor” is redefined, things that didn’t look egalitarian before suddenly do. That’s not a very impressive trick in my book.

not_scottbot June 6, 2009 at 8:41 am

And just like the last time you were talking about individuals, you simply seem to completely disregard the idea of something larger than the individual.

Or to put it differently – those ‘old, high-bank-account white males’ not only have ‘lots of social status and power,’ it is difficult to imagine that their children were ever on an equal footing with the children of old, no bank account black females.

yoyo June 6, 2009 at 8:49 am

and now i have intellectual *** all over my face.

Solomon June 6, 2009 at 9:04 am

Perhaps at least some of the reason for this confusion of “social markers of status” vs. forward thinking endowments is the placement of the “Social bases of self-respect” among the goods to be distributed in Rawls’ theory of Justice as Fairness? That would certainly suggest to the mind of the egalitarian the need for status to become flatter between groups and individuals if it were to satisfy the maximin principle.

Also, there is the time-slice aspect of these sorts of social justice theories that by necessity see life as a series of times, any one of which could be examined for justice merely by observing it. If the past and future state of the system does not matter to equality now, naturally current stocks of human capital goods will matter much more than possible flows.

mrshl June 6, 2009 at 9:22 am

If I read you correctly, you’re not necessarily endorsing the US view but making an observation.

One that’s actually pretty simple: US healthcare policy (or more accurately Medicare, which is a proxy of it) looks at people who are most likely to be sick and least likely to be able to afford it (because of their low human capital endowments – not by looking at their balance sheet). This policy ends up covering many people who are actually quite wealthy, but it is nonetheless egalitarian because of its lack of bias against wealth. There is equal treatment for those with similar capital endowments. Medicare, of course, does have a mechanism for recouping money from relatively wealthy estates, but this recoupment is easy to avoid.

This point becomes a bit clearer when you consider the non-elderly covered by Medicare, including the disabled and those who suffer kidney disease and must undergo dialysis three times a week. These people, regardless of their wealth, have suffered amendments to their capital endowments. Earning power may be greatly diminished or lost altogether.

Let me know if I’m misunderstanding, because I’m confused about this point (and perhaps ignorant about how the European systems work). Wouldn’t a system focused on “absolute” endowments assess the endowment at the beginning of life? Rather than at particular points in time?

So that a perfectly egalitarian system would cover everyone who needs care, regardless of adjustments in wealth OR adjustments to human capital. My understanding is that European systems attempt this, but you seem to suggest they don’t achieve it. For sure the US doesn’t (not for everyone).

But if we accept the notion that Healthcare is too expensive to cover everyone in a perfectly egalitarian manner, because it must inevitably be rationed. The US Medicare system is more egalitarian because it largely avoids rationing and the inevitable discretion involved, and instead focuses on those with the least human capital endowments.

That’s something to think about. It seems more difficult to talk about the US Healthcare System meeting that characterization, because it forgets Medicaid, the program for the poor, and SCHIP (for children). But Medicare is unquestionably the largest piece of the pie.

I don’t know if I agree or fully understand, but then you didn’t give us much to work with.

david June 6, 2009 at 9:32 am

Since old, high-bank-account white males have lots of social status and power, these onlookers cannot bring themselves to regard those males as holding very poor overall endowments.

I daresay that there are young, low-bank-account individuals of assorted minorities who would love to trade places with such old rich white men, low endowment or not. What’s the relative value of money and lifetime at a given social status? Unfortunately, since such a trade is not presently physically possible, we don’t know. It does seem arbitrary to say that human capital endowment is welfare-superior over social status and power. One still has to work to make use of all that capital.

Tyler, do you happen to have a link to an ungated version of McKerlie’s “Equality and Time”?

Selfreferencing June 6, 2009 at 9:49 am

Here is an easy way to show how Tyler’s post is perfectly sensible: Stop judging impoverishment at highly individuated time slices. Most of you are judging whether someone is poor by their current income or capital endowment, or perhaps their income or capital endowment within a certain short time-span, like, say, three months. But Tyler (probably in part because of his extremely unusual view of social discount rates) wants to individuate time slices less narrowly.

Instead, to grasp Tyler’s view, consider someone’s income or capital endowments over a life, where younger people face a wider probability distribution because their futures are less determinate – and assume that this distribution is built into their lifetime income/utility expectations.

Tyler, unlike many in the comments, also wants to individuate time slices over a life from the present forward, whereas many of you seem to want to individuate time slices from birth to the present. I think Tyler’s view is more plausible, but I’d like to submit an addendum to Tyler: we should probably include at least some aspects of past factors when we estimate forward-looking endowments. They can give us evidence of whether the person will develop their endowments and inform our expectations about their incomes as a result. But you don’t disagree with this, do you? So it’s not merely forward-looking endowments, right?

Tyler is really making a Nozickian point – egalitarians tend to have a time-slice theory of justice; they’re only interested in a distribution at a particularly small time slice. But this is perfectly arbitrary. And that, I think, is Tyler’s point. He is precisely correct on this matter.

Edward Burke June 6, 2009 at 9:58 am

–or, as Flannery O’Connor put it: “You Can’t Be Any Poorer Than Dead”.

Bernard Yomtov June 6, 2009 at 10:09 am

I think there are two holes in Tyler’s argument.

The first is that when it comes to medical payments we are not comparing Warren Buffett with a typical 23-year-old immigrant, but with one who needs medical care and can’t afford it. That diminishes the value of the real endowment considerably. My initial thought was that I’d be willing to pay a lot to be 20 years younger, but that was based on being myself 20 years ago. If the choice were a poor, ill-educated, and unhealthy younger self, I’d have serious second thoughts.

It also overlooks utility. The money we spend on the old wealthy individual has much less utility to him than the same amount spent on the immigrant has to the immigrant. Buffett could do without Medicare just fine.

Also, I agree with those who question the use of the real endowment as the best measure of how egalitarian a policy is. It sounds silly to me, too.

David June 6, 2009 at 10:30 am

Somebody once defined wealth as the number of days you could avoid work before you run out of money. I think this definition covers why Tyler is right and also why he’s wrong. For Warren Buffet the figure is obviously the rest of his life (long may he reign), but for the 23 year old immigrant the answer might be less than a week. This definition is also independent of social status. If you have a simple lifestyle you can afford to work less.

Gary June 6, 2009 at 10:43 am

Is there a web calculator where I can enter age, financial endowments, educational endowments, etc. and it calculates my human capital remaining? That way I can rage, rage against the dying of my endowments.

Dan June 6, 2009 at 10:53 am

Possible explanations for Tyler’s post:

1. Tyler is angling for a job at Slate
2. The post was written 10 weeks ago, but was mistakenly not posted until today
3. Tyler has spent too much time around Robin Hanson
4. Tyrone has hacked into Tyler’s account

How else to explain a post that essentially defines egalitarianism as transferring benefits to those who are closest to death? Compared to Western Europe, the US health care system doesn’t do much for you until you’re about to die, but then it gives you tons of high-tech care to prolong your life a tiny bit. And that makes it… egalitarian.

Even if you take the health & longevity of the elderly to be the key determinant of a system’s egalitarianism, I don’t see how Western Europe ends up more inegalitarian, given their longer lifespans and (as far as I know) no-less-unhealthy elderly population. Is it somehow less egalitarian to improve the health of the elderly with “preventive” care (by providing good health care throughout their entire lives) than with expensive end-of-life care?

Erik June 6, 2009 at 11:27 am

Tyler – I enjoy your blog. For some reason, I found this post impenetrable.

It could be that I have poor reading comprehension. Or it could be that I simply don’t have the foundational knowledge to understand your argument. Or it could be that you didn’t care to influence my views on this subject.

Regardless, I usually find your writing much clearer.

FUtyler June 6, 2009 at 11:40 am

Wow, the kind of intellectual chicanery in Tyler’s arguments is exactly the kind of thing so pervasive among conservative circles of economists. It’s philosophical bullshit.

Jeffrey Yasskin June 6, 2009 at 11:52 am

“The “poorest” people are not those with low incomes but rather those with low human capital endowments.”

That’s an extremely unusual definition of “poor”, and one that has to be justified, not just asserted. My intuitive understanding of poverty is that it applies when one cannot get the things she needs/wants right now. For the young, that includes things like retirement savings and education, while for the old it doesn’t. You’d be right that people can, to some extent, borrow against their human capital endowment, but it doesn’t look like that gives them significantly more disposable wealth than someone with a large bank account. You might argue that a long time preference explains why people with “high” human capital endowments may have a low standard of living today, but that time preference itself seems like a negative entry on young people’s endowment ledger. Old people, with their shorter time preferences, have more ability to spend on the health care they need now, making them less poor by default.

“A typical 23-year-old lower-middle-class immigrant has a higher real endowment than does Warren Buffett.” is particularly absurd. Warren Buffett’s real endowment includes his current wealth, which is still well over $30 billion. A typical 23-year-old immigrant certainly does not have expected lifetime earnings nearly that high, let alone an expected lifetime profit that high. Have you redefined “endowment” while I wasn’t looking?

It’s also a poor argument to accuse anyone who disagrees with you of bad faith (“they wish to dislike the U.S.”) before you’ve even heard their argument. Are you so sure your position is wrong that you want to scare off disagreement before it arises?

matt wilbert June 6, 2009 at 12:02 pm

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”

Michael Foody June 6, 2009 at 12:19 pm

I strongly philosophically disagree. I think of egalatarianism as being evaluated over a life path rather than at a moment. I would not trade away 50 years of my life for Warren Buffet’s wealth, but I would probably prefer to live as he has lived than live how I will probably live. I would be all for treating present poverty as less important to egalitarian outcomes if present poverty wasn’t such a good proxy for future poverty.

not_scottbot June 6, 2009 at 12:23 pm

‘For a look at the relevant philosophic issues’

Maybe I’m missing the point then – are we talking about why ‘U.S. health care policy is especially egalitarian’ even when a significant portion of the American population is simply not receiving health care at the level a typical East European would consider normal?

Especially when this line – ‘and they wish to raise the relative status of people who are not very successful under capitalism. ‘ has nothing to do with ensuring adequate health care for all members of society.

Maybe you should choose another perspective to make your point, because pointing to neglecting the sick as being part and parcel of anti-American or anti-capitalist thinking is perverse.

Or to put is differently – I am allergic to someone able to so casually skip over real pain and human suffering while attempting to make a clever argument.

John June 6, 2009 at 12:44 pm

I think that this is what Tyler actually was trying to say:

The “smartest” economists are not those who make the most rational arguments but rather those who first names happen to be spelled with the following letters: “Tyler”

I am amazed (but not surprised) that so many people think of intelligence in terms of rationality, realism, and coherence rather than actually have the first name “Tyler.”

But, of course, we know that democracy is so much less efficient than doing whatever people named “Tyler” tell us to do.

Yancey Ward June 6, 2009 at 1:01 pm

Let us say you are a twenty three year old immigrant living in New York. Would you want to trade places with Warren Buffett?

My answer is this- you couldn’t pay me enough to make the trade.

not_scottbot June 6, 2009 at 1:09 pm

Rereading, I realize I really am missing the point being made – ‘It is common for more egalitarian policies to be less efficient.’ So something like universal vaccination is likely to be less efficient? Or providing natal services/care to all mothers is inefficient?

This post is even stranger than the one entertaining torture as policy if enough Americans believe it should be.

Russ R June 6, 2009 at 1:18 pm

Basically, I’m all for doing nothing and letting old people die.

It’s just as effective a trying to do something to keep old people from dying, but a lot cheaper.

Yancey Ward June 6, 2009 at 1:26 pm

I see Brian Kennedy had already reframed Tyler’s point about Buffett and the immigrant.

Michael F. Martin June 6, 2009 at 2:03 pm

Brilliant.

Laertes June 6, 2009 at 2:28 pm

A very smart man tells me that Warren Buffet is poorer than an impoverished child. I believe him. And yet, my moral intuition still insists that the child will benefit from some extra resources far more than the (poorer, I’m told) elderly financier.

I appreciate that there was nothing up your sleeve, and that the rabbit is now in the hand that’s above the hat, but I’m not yet persuaded that you conjured it by magic from out the hat.

taion June 6, 2009 at 3:07 pm

Speaking as an actual 23 year old immigrant in New York, I found this post very insightful, and I’m just fine with not trading places with Mr Buffett.

Mason June 6, 2009 at 4:08 pm

By this logic a 9-yr-old dying of leukemia is “richer” than T. Boone Pickens dying of systemic organ failure.

Heck, if we redefine wealth to be the level of increased happiness one gains from each additional unit ($10 say) of consumption, than billionaires like Larry Ellison are the poorest people in history.

Barry Kelly June 6, 2009 at 5:13 pm

Bye bye, Tyler.

Plamus June 6, 2009 at 6:38 pm

Bernard Yomtov said: “The money we spend on the old wealthy individual has much less utility to him than the same amount spent on the immigrant has to the immigrant.”

Congratuations, Sir! Now that utility is comparable among individuals, it’s trivial to finish the general equilibrium theory. Epic fail.

rluser June 6, 2009 at 8:05 pm

In what sense do youth have a greater human capital endowment than the elderly? Is wisdom without value?

Peter Muldoon June 6, 2009 at 9:06 pm

The thing about health care is that if you need it at any time in your life, and you can’t get it, you’re poorly endowed, to use your terminology. It does you no good to be 23 and have your whole life ahead of you if the rest of your life consists of three weeks of dying from a preventable disease.

The health care debate is not about equalizing people human capital. That is not going to happen. It’s just about keeping everyone relatively healthy. Let’s not make this more complex than it is.

anonymous June 6, 2009 at 11:38 pm

If I was a 23 year-old immigrant, I would very gladly trade places with Warren Buffett. Then I would tell Bill Gates that his charitable foundation was SOL, and proceed to redistribute $30 billion among my family, friends, home town and other worthy causes. Maybe I’d save the final few million for a little Hefner-style debauchery. Maybe I’d bail out Iceland in exchange for being named Emperor.

As Mexican drug lords would say, “mejor cinco años como rey que cincuenta como buey”.

Sean June 7, 2009 at 1:07 am

If money and power aren’t really worth anything, why don’t we just relieve those high-bank-account white males of both those burdens??

Hey Tyler, there are many thousands of young people throughout the world who are exploited, abused, and even enslaved by high-bank-account males who happen to be physically old and sick. After you manage to get your head out of your ass so that you can walk and travel again, perhaps you should go see how some of the exploited live so you can tell them how rich they are compared to the sick old men that run their lives.

Paul Gowder June 7, 2009 at 5:37 am

If money and power aren’t really worth anything, why don’t we just relieve those high-bank-account white males of both those burdens??

Sean wins the thread. Obviously, on Tyler’s theory, no amount of money can compensate for being old. At least, not the amount that Warren Buffett has over a lower-middle-class 23 year old, and, given the diminishing marginal utility of wealth, Buffett’s money is probably indistinguishable from infinity.

So let’s play the logic out some here. I submit the following as a quick-and-dirty refutation of Tyler’s argument.

1) No amount of money can compensate for the welfare loss of old age. (From the above, Tyler’s argument.)

2) Money can purchase health care up to the limits of medical technology. (Empirical fact about the country under discussion, viz., the U.S.)

3) Unlimited money can be used to acquire all at least as much health care as any government redistributive program could offer (call this “unlimited health care”) without paying any non-monetary costs (from 2)

4) If X can costlessly be used to acquire Y, then [if one has X, then one is in just as good a position as if one has Y]. (Uncontroversial, even trivial. Note that when one’s X has infinite or functionally infinite quantity, “costlessly” must mean “without cost other than in terms of X”)

5) If X can be used to costlessly acquire Y then [if Y can compensate you from welfare loss Z, then X can compensate you from welfare loss Z]. (From 4)

6) If X can be used to obtain Y, then [if X cannot compensate for welfare loss Z, then Y cannot compensate for welfare loss Z]. (From 5 via contraposition)

7) Unlimited health care cannot compensate for the welfare loss of old age (from 1, 3, 6, after substituting “unlimited health care” for Y, “unlimited money” for X, and “old age” for Z).

And now we reach a fork in the road. The following 8 and 8* occupy the entire logical space s.t. we must accept one or the other.

8) If X cannot compensate for welfare loss Z, it’s pointless to give X to someone suffering from Z, in that it does not make those suffers any more/closer equal than before.

8*) If X cannot compensate for welfare loss Z, it’s not pointless to give X to someone suffering from Z, in that it makes those suffers a little better off, although still not equal, and thus under egalitarianism they still have further demands.

9*) For all persons A and B, if B is worse off than A, and we can take something from A and give it to B such that B’s welfare is closer to A’s, then the state of affairs following that redistribution is more egalitarian. (Read off the notion of equality captured in 8*. Other objects of equalization could be substituted for “welfare” without losing anything.)

10*) If age and money were the only relevant goods to be equalized, the most egalitarian state of affairs achievable by distributing money only would be to give all of the money in the world beyond bare subsistence to the oldest person (from 9*, 1), condemning everyone else to a life of miserable poverty.

10* being false, we must reject 8*.

If 8 is true, then Tyler’s argument is wrong, for 8 entails that the U.S. health care system is not egalitarian in virtue of giving health care to the elderly. Giving health care to the elderly doesn’t make them any closer to equal.

So Tyler’s argument plus some uncontroversial premises either leads to a contradiction (via 8) or a false conclusion (via 8*-10*). It is thus refuted. There might be some room for quibbling around the edges with respect to some of these “unlimited” terms, but I don’t see any plausible way to make that quibbling into anything sufficient to object to the soundness of the above.

Yancey Ward June 7, 2009 at 12:08 pm

A redistribution of healthcare from the old to the young is not symmetrical. You are not redistributing expensive chemotherapy from a 75 year old cancer patient to a 23 year old cancer patient, nor are you transferring the quadruple by-pass- there are far more really ill old people than there are really ill young people. The redistribution is more on the order of denying the 75 year old the life-saving chemo so that you can provide ten 23 year-olds a yearly checkup. Which choice is more egalitarian?

And, Sean, death will soon do that anyway (which is part of the point). What you are actually proposing is taking it from his heirs.

sam June 8, 2009 at 12:26 am

Tyler, you fucking retard. This isn’t fucking Eddie Murphy’s TRADING PLACES!

That’s not what your argument is about, That’s not what the commenters are saying in general, and That’s not what egalitarianism is about.

Alan Brown June 8, 2009 at 5:24 am

The best way to raise the living standards of those who aren’t so successful under capitalism is to avoid interfering with capitalism as much as possible. For it is capital accumulation that makes for higher productivity and higher wages in the long run.

TurkoAmericano June 8, 2009 at 9:08 am

This seems rather silly to me. Of course a poor twenty year old is in a very real way better off than a rich eighty year old, and anyone, given a choice, would rather be the twenty year old. But directing public money to the eighty year old rich person who already has the ability to pay for his healthcare is not egalitarian in any meaningful way.

Ed June 8, 2009 at 5:10 pm

“As a government official, you have $3 million dollars to distribute amongst 3 people dying of cancer- a 23 year old engineer, a 23 year old cashier, and a 23 year old prison convict. For the full three million, you can save any one of them with 100% certainty, but at 1 million for each, the odds are that 2 die and 1 survives. Which is the most egalitarian choice? Which is the most efficient choice?”

I’ll comment on this because its actually a pretty good question, though I don’t understand what it has to do with the underlying post.

The egalitarian answer is to spend $1 million on each. The efficient answer is to spend $3 million on the engineer. However, the egalitarian solution is the better course.

There is an unknown chance that the engineer turns into a criminal, gets killed in a car crash in a year, or develops a drug habit and can only find employment as a cashier. Or maybe the engineer continues to work as an engineer and develops a superweapon for some dictator. There is an unknown chance that the other two lead highly productive lives. You also get into the business of defining what is “productive”. The egalitarian solution gives you a 1/3 chance of the engineer getting saved anyway.

I think the government official should be modest enough to limit the extent to which he is playing god. Distribute the money, but have some awareness of how precisely the government can really affect outcomes.

doctorpat June 9, 2009 at 12:36 am

What I find most interesting is how this post makes many people explode with rage.

If only I can use this power for good instead of evil.

(For “good” read “make money”;)

mpowell June 9, 2009 at 7:32 am

I just want to add another point for all those that like this post or think it’s clever or points to a problem with philosophy or whatever. It is none of those things. An argument along these lines probably couldn’t get published in a peer reviewed journal. This is a trivially easy line of argumentation to deflect and really poses no challenge to any serious modern political philosophers. Yes it’s an appeal to authority, but the simple fact of the matter is that this is not how philosophy works. I’m not sure what Tyler was thinking here. Too clever for his own good and I wouldn’t be surprised that if at some point he regretted making this argument.

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