Econoclasm Chapter Two, continued: Medical externalities

 I've had a request to say more about inflation. That's a bit off topic for the time being, but I'll get to it.

Medicine is also unlike most other goods and services in the extent to which it has important positive externalities – that is, benefits for people outside of the transaction, who are not the providers or consumers. (Of course it has negative externalities as well, including carbon emissions and notably, a huge quantity of plastic waste.) A straightforward positive externality is infectious disease control. Preventing or curing infectious diseases prevents them from being transmitted to others. This is an immense benefit to society that goes far beyond the direct value to people who are vaccinated or treated.

 

Another positive externality is that people with curable or ameliorable sickness or disability who might otherwise not be able to work can remain in or return to the labor force, and so improve the economic well-being of themselves and their families, and the productivity of the entire economy. They can also better take care of their children or other dependents, maintain their households, volunteer in the community, pay taxes, give to charity, and whatever other good things healthier people are better able to do. And obviously it is distressing to people when their friends and loved ones are sick, disabled or in pain. It may even require them to give up other productive work to care for someone else.

 

Even if they aren’t directly affected personally, many people are disturbed by the thought that people who are in dire need may go without care that could cure or succor them. It would constitute a great public offense if people were dying at the doors of the hospital because they could not pay, as would the sight of seriously ill or injured people on the streets. Or rather, we do see such sights all the time, but homeless people’s illnesses and injuries are mostly psychological, and for some reason the public seems willing to tolerate that. We’ll get to this problem later.

 

For all of these reasons, ever since the turn of the 20^th Century there have been advocates for universal health insurance in the U.S. There has even been legislation introduced more than once, but it never happened, although Medicare and Medicaid (passed in 1965), and the Affordable Care Act (passed in 2010, implemented in 2014) have gotten us closer. Most European countries in fact established one form or another of universal health care, at least for people of limited means, early in the 20^th Century, and all affluent countries had done so for everyone by the mid- to late century, with the single exception of the United States. Before we consider why this is, we need to get familiar with some basic facts about how health insurance works.