A Flawed Case for Centrally Planned Health Insurance

By David Henderson. 

"In their recent book, We’ve Got You Covered, two health economists make their case for ditching the current system of health insurance in favor of a government-financed, zero-premium insurance for basic coverage. They would allow people to buy supplementary insurance to expand their coverage. The two economists, Stanford’s Liran Einav and MIT’s Amy Finkelstein, are well-known contributors to the literature on health insurance.

With their breezy and humorous writing style, Einav and Finkelstein make what seems at first like a compelling case. They may sway many readers, especially those who don’t know the literature on health economics. But a careful look at their case for ditching our current health insurance and starting over with a centrally planned system uncovers serious omissions and some tensions between their own views. Two omissions are: any mention at all of health savings accounts, and any mention, with a one-sentence exception, of possible reforms of the supply side that would increase supply and reduce the price of health care. One major tension is on their view of the importance of co-payments and deductibles; moreover, they seem to misunderstand the way to measure the impact of co-payments."