Is Buying Healthcare For Individuals Necessarily A Bad Investment?

DrRich | April 25th, 2011 - 7:12 am


In response to DrRich’s recent post on good debt vs. bad debt, Liz writes:

Is the survival of the individual, after consuming healthcare, necessarily neutral to our national economic health? On the one hand, if an individual is saved from death by consuming healthcare and goes on to be very productive in life, then that healthcare would have been a good investment. On the other hand, if someone else is saved by doctors, only to go on to require more and more medical care without contributing anything to the collective, then the individual’s survival has a negative impact on the nation’s economic health. . . . Some people will argue that keeping people healthy is a good investment for our country.

This comment was triggered by DrRich’s premise (modeled after Alexander Hamilton) that for the federal government to acquire certain kinds of debt – say, borrowing money to build a new hydroelectric plant that will supply electricity to a large region of the country and thus enable sustained economic expansion – is truly a positive investment for future generations, and is thus justifiable; while aquiring certain other kinds of debt – for instance, purchasing goods or services for individuals, which the individuals then consume in the normal course of their lives – leaves nothing for future generations aside from the accumulated debt, and thus is fundamentally unjustifiable.

Liz rightly points out that not all the debt we accumulate to pay for Americans’ healthcare is of the latter variety. It is certainly true, for instance, that going into federal debt to purchase a liver transplant for Steve Jobs would end up being a positive investment over time. There are certainly many people less notorious than Mr. Jobs – possibly millions – who might also fit into this “good investment” category.

So, Liz’ comment implies, it may be that increasing the federal debt to buy healthcare for Americans – at least some Americans if not all* – actually constitutes a good investment, and therefore good debt.

* Progressives, despite their protestations to the contrary, have actually given a lot of thought to which individuals should receive priority for healthcare services once they have the single-payer (centrally controlled) system they have long desired. They have occasionally, in unguarded moments, opined publicly on which sorts of Americans should receive expensive healthcare services and which should not. Their proposed rationing methodology indeed shunts healthcare services to those individuals who are judged to be “productive” by the Central Authority.  In their 100-year history Progressives have never been slow to pass harsh judgment on the worthiness of various groups or individuals, and there is no sign that they will behave any differently going forward. (DrRich, even if he were not an old fart, fears he would not wind up in the Central Authority’s “good” list.)

There are certainly examples of Americans happily agreeing to pay collectively for services consumed by individuals, because doing so is a good investment for the future. Chief among these is public education. Unarguably, an educated public is critical to continued economic growth and development, so (leaving aside for now the actual effectiveness of public education) paying collectively to educate all American children unquestionably benefits all current and future Americans.

Some would even argue – and DrRich would agree – that maintaining a certain level of health among the population is just as important to continued economic growth as is public education, and so paying collectively to achieve such a thing is equally a good investment. This is why DrRich fully supports many collective efforts to assure public health, such as assuring clean water, keeping air pollution to a minimum, and maintaining a healthy and safe food supply.

But DrRich’s thinking on the matter is even more radical than that. DrRich believes that it is indeed reasonable, and likely a good investment for the future, to use collective funds to pay for some of the healthcare consumed by individual Americans.  If Americans know that, no matter what their socioeconomic status, they are unlikely to become financially ruined because of some expensive medical catastrophe, they will be more willing to take the risks one traditionally takes (under a vibrant capitalist system) to grow one’s own wealth – and the overall economy.

So, to some extent, DrRich believes that collective spending on the healthcare of individual Americans can indeed be an investment for the future, just as President Obama says.

But the key phrase here is “to some extent.”  That is, we cannot furnish every bit of desirable healthcare for every individual, because that way lies ruin. We must set limits. DrRich has a simple rule for determining when our collective spending on healthcare is “too much.”  Our collective spending on healthcare is too much when the level of debt we’re accumulating to pay for healthcare is sufficient to threaten the economic destruction of our society. Triggering societal collapse, DrRich thinks, completely negates any “investment value” we might obtain by purchasing healthcare for individuals.

The healthcare system we have today, and the one we will have under Obamacare (at least, the kind of Obamacare that Progressives will admit to at this point), exceed even this very modest definition of “too much.”

DrRich has proposed a structure for an American healthcare system that would offer healthcare to each individual, without accumulating an unsustainable debt, and he has described it in detail in his book. Simply put, it is a 3-tiered system. In Tier 1, individuals would pay for (say) the first $3000 per year of their own healthcare expenses. Tier 1 spending would be funded from a tax-deductible, self-funded, self-owned Health Savings Account. Individuals below a certain income level would have their HSA funded by the government. Tier 2 would be a government-funded universal basic health plan, under which most additional healthcare expenses would be covered.  However, in the interest of keeping federal debt to a manageable level, Tier 2 would function under an open, completely transparent system of rationing. While most things would be paid for, some would not. The rationing system would allow the government to control how much it spends on healthcare each year, thus avoiding the crushing debt burden we are accumulating today. Tier 3 would be an optional, self-funded health insurance product that would cover extraordinary expenses that exceed the $3000 per-year individual limit, and are not covered under the Tier 2 rationing plan. Tier 3 would return the health insurance industry to the business of selling an actual insurance product (that is, a product that prevents individuals from financial ruin due to relatively unlikely future events), instead of whatever it is they’re selling today.*

* Thus, DrRich’s plan would give the insurance industry what it desperately needs – a new business model – without having to sell out to the Central Authority and survive under the diminished status of public utility.

Conservatives hate DrRich’s system because it includes a universal health plan. Progressives hate DrRich’s system because it does not offer enough centralized control, and indeed encourages (even demands) that individuals take chief responsibility for their own healthcare. So DrRich does not reiterate his plan for healthcare reform because he thinks it is even remotely possible that such a thing will ever be adopted, but simply to illustrate that it is indeed possible, with just a little effort, to imagine a healthcare system that actually meets the goals that Progressives and conservatives will admit to in public – and that honors the worthiness and the potential of each individual.

4 Responses to “Is Buying Healthcare For Individuals Necessarily A Bad Investment?”

  1. Doc99 says:

    I’d offer a small alteration … let tier one be a govt-financed high deductible plan plus covering for vaccinations. Tier two would be a tax credit for those well off and outright voucher for those not so well off of say 3000 – 5000 dollars to set up HSA, purchase insurance, etc. Anything above that is truly optional.

  2. Liz says:


    I am honored that you answered my question with an entire blog post. Thank you!


  3. Chad says:

    Do any countries use a simialr QAL figure (as proposed in your Tier 2) that are not single payer? I think this is the hardest selling point of your proposal.

    • DrRich says:


      The method for calculating QALY which I proposed is my own invention – aimed at converting the QALY calculation into one that does not implicitly assign a level of “worth” to each individual, and that makes each individual equally worthy. My method is not being used anywhere, and indeed is being completely ignored everywhere.

      The main point is that the rationing in Tier 2 must be done openly. If you don’t like the specific method I proposed for open rationing, that’s fine. There are plenty of others that could be used.


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