To listen to the lecture, click here.
Four Scenarios for buying a coat. Match the scenario with the outcome.
When someone else pays for health care, then we will spend too much, and choices will not be optimal.
Three scenarios for paying for health care:
| Self | Private Insurance | Government | |
|---|---|---|---|
| Examples | HSA's | individual, corporate | Medicare, Medicaid |
Self is most efficient. However, it is risky and punishes the poor and the sick.
Government could reduce risk and inequality. But that gets the government involved in defining eligible illness and treatment. Erectile dysfunction? Facelifts? Obesity?
Using taxes rather than saving to pay for health care hurts the economy
Why not have government pay only for emergency care? Don't want people to skip on preventive care, or get emergency care for minor illnesses.
Why not require mandatory catastrophic health care coverage?
Ordinary coverage: $3000 annual premium, $3000 deductible
Catastrophic coverage: $1000 annual premium, $10,000 deductible
Perhaps insurance company will give you incentive for prevention
Once you are diagnosed with an expensive illness, catastrophic coverage becomes expensive
Government subsidies for catastrophic insurance--catastrophic "reinsurance"
Other problem with employer-provided insurance: harder to switch jobs