Arnold Kling reacting to a piece by Ezra Kline writes:
My view of the American health care system is that it hardly rations health care at all. That is why we spend so much more than other countries. I wish we put more responsibility on individuals. Instead, we have this delusion that we cannot possibly afford health care if we pay for it individually, but of course we can afford it if we pay for it collectively.What's the fallacy in Kling's logic? The fallacy, quite simply, is that Kling does not understand the idea of shared risk. He does not understand the purpose of insurance. He does not understand why the collective might want to pay for services that are rendered, at any given time, only to a subset of that collective.
Medical treatment is expensive, and in many cases, treatments may prove too expensive for any one individual to afford. But accidents and illnesses are also somewhat random in their distribution across a population. Therefore, by creating a risk pool and having all members of that pool pay into it, society can ensure that the unlucky few who are stricken by disease or who are injured in an accident can pay for the medical treatment they need.
The question is not whether a "collective" can afford medical treatments that individuals cannot (this issue has been settled beyond dispute, and it is embarrassing to have to explain a concept so basic and trivial as "insurance" to an economist like Kling) the issue is whether a scheme of private, non-mandatory insurance coverage can do the job more effectively than a public, government-run, single-payer system.
(Note: This piece has been cross-posted to Stinque).