Friday, January 14, 2011

America's System of Wealth Redistribution

Most of the time when you hear someone use the term “the redistribution of wealth” that person is a conservative arguing against a social spending policy or tax increase on the wealthy. It has become a less than subtle euphemism for “this is kinda socialist;” another way to argue against a policy without actually arguing against the policy. Let's forget for a second that an economy is inherently based on the redistribution of wealth, on the movement of money from one entity to another in a process of exchange, and let's also forget for a second that any change in government spending and taxation is a redistribution of wealth; taking wealth from those whose programs were cut or who had their taxes raised and redistributing it to those whose programs were added or taxes were cut. In fact, any changes in government regulations that effect the making and spending of money are redistributions of wealth. It could be argued that no administration redistributed wealth more than the Reagan administration, but, even if you forget all that there is still a major aspect of the American economy that operates as a redistribution of wealth.

Some people have a level of wealth based on their health. Because of good lifestyle choices, a lucky draw in the genetic lottery, and a benevolent array of circumstance in the wider world, some people rarely have to pay health care bills. I'm one of them. I don't have any congenital diseases, or allergies, I eat alright, I exercise a bit, and I've never been injured enough to require serious medical care. I get check ups, I wear reading glasses, and I have to get some small fillings in my teeth, but on the spectrum of health I'm doing alright. Thus, I have a health based wealth. But I still pay healthcare premiums. 

My health insurance company redistributes my wealth to those who have a health based poverty; people who because of poor health decisions, an unlucky drawn in the genetic lottery, and an malicious array of circumstance in the wider world have to pay a lot of health care bills. Being a radical lefty, I don't have any problems with the idea of mechanisms that redistribute wealth from the wealthy to the poor...if they work.

The thing about the redistribution of wealth as done by the mechanism of health insurance (and all other insurance really) is how inefficient it is. How inefficient is it? Well, it's fairly easy to get at least a sense of this. First look at the profits taken in. One study stated that the five largest for-profit insurers “closed 2009 with a combined profit of $12.2 billion.” This means that, at an absolute minimum, health insurance companies redistributed to those with health based poverty, $12.2 billion less than what they took in from those with health based wealth. And this doesn't count the overhead; printing those extremely complex descriptions of benefits books, paying customer service representatives to answer questions about those extremely complex benefits, billing, mechanisms for denying benefits, lawyers if they are sued for denying benefits, janitors to keep their offices clean, executive and management salaries, office supplies, utilities... 

Despite what some might say, our health care system is already a system of wealth redistribution. Through the mechanism of private health insurance, the health based wealth of some is distributed to the health based poverty of others. Some might argue, with an eye towards critiquing the recent health care reform, that an individual could opt out of this redistribution by not carrying health insurance, and though there is some truth to this, those individuals (assuming they are able to pay out of pocket the costs they incur if they get hit by a car or diagnosed with cancer) wouldn't avoid redistribution all together. Since doctors and hospitals, by law, are required to treat people in need of care, whether they can pay for the care or not, doctors and hospitals must roll the cost of treating those who cannot pay into the fees charged to those who can. In the exact same way that the cost of all retail goods are slightly higher than they need to be to make up for lost inventory, the cost of treatment is slightly higher to compensate for treatment that is not paid for. In this case, the wealth is redistributed from those who have money to those who don't through a pricing mechanism.

There is nothing inherently wrong with a system of wealth redistribution. All economic activity, at it's core, is wealth redistribution. The problem with health care insurance as a system of wealth redistribution is its inefficiency; not nearly enough of the wealth actually gets to those who need it. Too often, people who carry insurance still can't pay their health care bills, even with the benefits from their insurance policy. Even if those massive profits (all those companies had enough to pay lobbyists, don't forget) were cut to nothing, the private insurance system would still be fairly inefficient as someone would have to administer it.

Soon, House Republicans are going to waste our time and tax payer money by bringing a bill to repeal the recent health care reform to the floor even though there is no chance such a bill could pass the Senate, and even if by some miracle it did, it would certainly be vetoed and Republicans do not have a big enough majority to overturn a Presidential veto. To me, this is more proof that they have no concrete policy solutions to the problems of the American health care system, and, frankly, only seem interested in the issue as a way to discredit, in general, the efforts of the administration. Regardless, as anyone with a lot of prescriptions or an impending surgery knows, the recent health care bill has not solved the problem of inefficient wealth redistribution.

1 comment:

  1. Nice post Josh. Conservatives always like to blow the "Socialist Whistle" whenever progressives put forward a policy that helps everyone. Conservatives need to remember that the only purely capitalist state out there is Somalia. Perhaps they should move to their capitalist utopia on the horn of Africa if they love pure capitalism so much. Gary