Current Events Economics - General

Becker-Posner debate Bush healthcare plan

Below are some quotations from Gary Becker and Richard Posner’s debate on the Bush healthcare plan.


“Since under present tax law, medical expenses has to exceed 71/2 % of a family‚Äôs taxable income before this spending begins to be tax deductible, it is very hard to get any tax benefits with individual health insurance. This aspect of tax law helps explain why so many Americans do not have any health insurance. The proposed tax deductibility for persons with their own health insurance plans would sharply reduce the net cost of getting private health insurance for many of the almost 47 million Americans who presently do not have such insurance, Medicaid, Medicare, or are under the 10 year old State Children’s Health Insurance Program. It would also contribute to leveling the playing field between persons who get health coverage through jobs, and those who must get insurance as individuals, perhaps because they have no job, or are self-employed, or their employers do not provide health insurance.”

“The main reason usually given is that since all persons must be accepted for treatment by hospital emergency rooms, regardless of whether they have insurance, taxpayers and other hospital patients who do have insurance bear the cost of treating persons without insurance. Due to this ‘externality’, persons without health insurance impose costs on others whenever they use emergency health care facilities…Yet this incentive is limited since emergency room care is neither the most effective nor the most pleasant. A few studies indicate that emergency rooms are not used disproportionately by the uninsured, probably because they are mainly young and healthy, so the total cost imposed on others of emergency room visits by the uninsured is likely not large…a better way to handle that would be to mandate that everyone purchase basic health insurance that covers catastrophic health problems.”


“I cannot think of a good reason for subsidizing health insurance, or, indeed, for the demand for noncatastrophic health insurance. The economic explanation for insurance is that because of diminishing marginal utility of income, people will pay to avoid a big financial loss (e.g., will pay $2 to avoid a 1/100,000 prospect of a $100,000 loss, even though the actuarial cost of such a prospect is only $1), but most medical expenses are modest. So if there were no tax subsidy for health insurance, probably much less would be purchased, which would be fine. People might even be healthier, because diet and other life-style choices are substitutes for medical care and thus for health insurance.”

“The fact that millions of people have no health insurance does not strike me as a social problem. It is true that they are free riders, … [and] the quality and conditions of charity medical treatment (such as long queues in emergency rooms) discourage overuse of “free” medical care–it isn’t really free, because the nonpecuniary costs are substantial.”

“The best, though politically unattainable, reform would be to abolish Medicare, brutal as the suggestion sounds. Then people would purchase catastrophic or other medical insurance for their old age, or depend like the young on charity. If it were thought “unfair” to make elderly people of limited means pay for their entire costs of health care, there could be a subsidy, but it should be means-tested, unlike Medicare.”