The Armchair Economist Blog

University of Rochester economist Steven Landsburg, whose book, The Armchair Economist, opened new parts of my brain, has a new blog.  I was comforted to read that he too is annoyed at the health reformers’ obsession with health insurance.  In his second post, he says:

Insurance is not part of the solution; it’s part of the problem. Many people—and especially poor people— get too little health care in this country. That’s largely because many other people—and especially rich people—are overinsured. People with insurance demand more health care, which drives up prices. More insurance coverage will make this problem worse, not better.

He’s right. When someone else pays, you don’t care how much things cost. That makes prices go up. In the few areas of medicine where patients pay their own way ­-- Lasik eye surgery or plastic surgery -- services get better while prices fall.

We need insurance to protect us against financial catastrophes like a stroke or heart attack. But today's demand that insurance cover everything, from pets to dental work, just increases our costs.

Nobody would want to live in a world where we all get unlimited health care, because in that world, health care would be all we could afford. That means we desperately need someone to say “no” from time to time. In a world of health savings accounts, we’d tell *ourselves* “no”; in the world we live in, our insurance companies do it for us.

Some people think public option would mean no one will say, no. Nonsense:

If public insurance is going to provide anything that private insurance doesn't already provide, it will to have to do it by dipping into general tax revenues‹maybe not at first, but surely soon. And that way lies madness.

Once those general revenues get tapped, all discipline goes out the window. With all that cash at hand, it becomes harder and harder to deny a claim. Nobody’s saying no, and the cost of health care spirals out of control.

Eventually you're left with the health-care equivalent of Fanny Mae or Freddie Mac …

Seems right to me. If a public option is passed, maybe we should call it what economist Steven Horwitz has suggested: Fannie Med.