The Ethical Foundations of Health Policy

October 9, 2012

One thing that seems to be completely lacking in contemporary discussions of health policy is any discussion of what is and is not morally justified. In what follows I will propose some principles that should govern our thinking about the ethics of health policy.

I’m going to sketch out this topic in an informal way that won’t satisfy the philosophy professors. But I hope it will serve the lay interest, which is our normal way of communicating at this blog.

Foundations of Ethics. Consider this paradigm:

One thing that seems to be completely lacking in contemporary discussions of health policy is any discussion of what is and is not morally justified. In what follows I will propose some principles that should govern our thinking about the ethics of health policy.

I’m going to sketch out this topic in an informal way that won’t satisfy the philosophy professors. But I hope it will serve the lay interest, which is our normal way of communicating at this blog.

Foundations of Ethics. Consider this paradigm:

Ethics  → Choice  → Rights

Ethics implies choice and choice implies a right to choose.

Johnny being good

Ethics is about what you should or shouldn’t do. Ethical questions arise, however, only if people are free to make choices. What does “free to choose” mean? In this context it means politically free (uncoerced). Choices are meaningful only if others respect your right to exercise them.

The Context for Ethical Reasoning. Let’s pursue that last idea a bit further. Suppose you are chained to an oar on a trireme. Should you keep up with the others and pull your own weight? Or should you try to maintain your health and your energy by slacking off and letting others do more of the work? Or should you do more than your share?

I know what you’re thinking, “How can I answer those questions? I shouldn’t be chained up like a Roman galley slave in the first place.” True enough.

Context matters. So what context should we start with? There is a tradition in political philosophy of starting by imagining a world with maximum individual choice, then asking what role there is for government.

John Locke and Robert Nozick began their investigations by imagining human beings interacting in a state of nature. (Not a Hobbesian state of nature, but a classical liberal state of nature.) Classical welfare economics begins in much the same way. John Rawls accomplished something similar by imagining people free to choose political institutions while standing behind a veil of ignorance.

Ethics and Rights. In keeping with tradition, we begin our analysis of the ethics of health policy by imagining a world in which individuals have rights and they are free to exercise those rights.

As I explained in my essay on “Classical Liberalism,” if you have the right to do X, everyone else is obliged not to interfere with your doing X. So at a fundamental level, ethics is connected to our notion of individual, political rights.

Moreover, there is an ethical principle implicit in the writings of the philosophers that I want to make explicit.

Rejecting an Unwarranted Proposition. I am going to assert that ethical reasoning is almost impossible unless we accept this foundational principle:

Need is not a claim.

Other people’s needs, regardless of how they are expressed (wishes, hopes, fears, wants, desires, etc.), are not a claim on your mind, your body, your assets or your productive ability. The political version of this idea is well known and is reflected in the Declaration of Independence: Everyone has a right to pursue his own happiness. But underlying the political principle is a moral principle, without which the political principle would be largely vacuous.

If you do not accept the moral principle that need is not a claim, be prepared to get bogged down in a hopeless morass of competing claims, emanating from every direction. There are throughout the world about 1 billion people living on a dollar a day. There are about 2 billion people living on no more than two dollars a day. There are at least 5 billion people who are substantially less well off than you are. How would you cope with even getting up in the morning if you believed that all those people had a moral claim on your daily activities?

Throughout human history most people in most places have thought that need is a claim. But the claim typically did not spring from the needs of poor people. More likely it was the needs of the rich and powerful — like kings and queens and various tyrants. Or the needs of the race. Or the class. Or the clan.

Bottom line: if you can’t get past the idea that need is a claim, rational discussion is almost impossible.

Articulating the Problem. So what is the fundamental problem in health policy? The problem is not that other people have needs. It’s that we are not indifferent about their needs. In particular, we are not indifferent about other people’s ability to obtain health care. As with other people’s poverty, we care — or at least most of us care. It is precisely our concern for others that turns the relief of poverty and the meeting of the health care needs of the indigent into a classic “public good,” with many of the very features of the proverbial lighthouse.

As with all public goods, each of our actions (or failures to act) has external effects. If I take care of a needy person, you don’t have to. If you take care of the needy person, I don’t have to. My charitable activity doesn’t just affect the recipient of my charity, it also affects you. And your charitable activity affects me.

As with all other public goods, in a world with no coercion, each of us has an incentive to be a free rider and benefit from the contributions of others. Hence this classic conclusion of welfare economics: Public goods will tend to be under-produced and private goods will tend to be over-produced.

Does this make the case for coercive government action? Not by itself. The problem is that there are imperfections in the public sector that arise for the same reasons they arise in the private sector. (See my paper with Phil Porter on this.) In general, good laws are also public goods. They benefit everyone, including you and me, even if neither of us does anything to help get the law passed. By contrast, bad laws that benefit narrow special interests at the expense of everyone else tend to have more of the features of private goods. Hence this classic conclusion of public choice economics: good laws will tend to be under-produced and bad laws will tend to be over-produced.

Government action to deal with a public good can make us worse off than if the government had not acted at all.

Case Study: the Lighthouse. Let’s consider how theseconsiderations affect the classic lighthouse problem, for a moment — since I find that people are able to think much more clearly about lighthouses than they can health care. Once the lighthouse is constructed and starts emitting warning lights, all ship owners benefit whether or not they contributed to the costs of construction and maintenance. This doesn’t mean that there will be no voluntarily constructed lighthouses. In fact, historically there were many lighthouses built through voluntary action. Yet economic theory would lead us to believe that there were too few.

Now let’s suppose that a government could very carefully levy a tax on ship owners and build additional lighthouses, making sure that in each case the levy was less costly than each ship owner’s benefit. This is a case of government coercion that leaves everybody better off. Although the key is that everybody gains, there is no doubt that some ways of distributing the burden are better than others. In general, the more efficient the distribution of the levy, the better off everyone would be in the aggregate.

Rawlsian Choice. (Warning: this is Rawls ala Goodman.) Now suppose we all were standing behind a Rawlsian veil of ignorance.Each of us is about to be born into a new world in which we could end up as any of the people in that world. If you could choose the world you are about to be born into, wouldn’t it be rational to choose the world in which government was empowered to impose a carefully levied tax to build additional lighthouses as opposed to a world in which such taxes are not allowed. Of course it would. In the former case, national income will be higher. Everybody would expect on the average to be better off.

The ethical case for coercive, collective action then is straightforward: more is better than less.

Principles of Ethical Collective Action. Here are some suggestions. Coercive acts by government to produce collective consumption goods are generally permitted so long as:

  1. There is a rebuttable assumption that everyone is gaining in his relationship with the state. That is, the coercive cost to each citizen is less than the resulting benefit.
  2. The distribution of the coercively imposed burden is selected to minimize aggregate social cost. That is, among all possible taxes (all of which distort producer behavior) choose the one which causes the least harm (produces the most national income).
  3. Government is constrained in ways that prevents future policy from violating principles 1 and 2.

I believe these principles are explicit in the writings of Richard Epstein and implicit in the writings of Milton Friedman, Friedrich Hayek, Adam Smith and a long line of classical liberal thinkers.

Applying the Principles to Health Care. In contrast to lighthouses, it’s far more difficult to know how much the average person cares about whether other people get all the health care they need. In Characteristics of an Ideal Health Care System, I argued that an indicator of that concern is the amount we spend subsidizing the care of people who cannot pay their own medical bills (through private and public subsidies and through participating in price discrimination arrangements we could easily avoid if we felt strongly enough about it). At that time my back of the envelope guess was $1,500 per uninsured person, or $6,000 a year for a family of four. Today, I’m prepared to concede that figure may be as high as, say, $8,000 per family.

If we all agree on that ball park number, there is an efficient way of imposing and distributing the costs and benefits of a rational health care system. Let the government offer every family an $8,000 refundable tax credit to fund a basic amount of health insurance and a Health Saving Account deposit. For the vast majority of taxpayers, this credit would be a more efficient form of subsidy to replace the perverse tax subsidies already in the IRS Code. For the uninsured indigent, the credit would be a replacement of all the inefficient ways in which we now subsidize “uncompensated care.”

Funding the New Program. Where would the money to fund the $8,000 tax credit come from? The simplest and most straightforward answer is: from existing tax and spending subsidies and by making certain tax breaks ($1,000 child credit, standard deduction, etc.) conditional on proof of health insurance. (See my previous post.) Something no one in Congress seems to understand: there is no need for a higher tax burden in the aggregate.