Other People’s Money

Published August 30, 2002

On Capitol Hill, members of Congress are continually increasing the price Americans pay for health care. They do this by giving away benefits and, in some instances, by making people buy unwanted benefits. Mental health parity, a patients’ bill of rights, a prescription drug benefit tacked onto Medicare—the expenses are endless.

One would expect taxpayers to be outraged, but they’re not. For the most part, Americans care little about the rising cost of health care … because they think they don’t pay for it. Most Americans think health care should be paid for with “other people’s money.”

No Such Thing as Free

There’s also no mystery why 39 million people lack health insurance. Coverage mandates—for everything from fertility treatments to baldness treatments—have driven up premium prices beyond the reach of many Americans. Those debating whether they can afford insurance quite often decide to forgo it, knowing they can still obtain care without it.

For instance, many low-income children (and some adults) are eligible for government-subsidized insurance through Medicaid. Many who are eligible for this subsidized health insurance don’t bother applying. In the event of a major illness, they can obtain completely free medical care if needed. Hospitals are forbidden by law from turning away patients in need of emergency care for which they are unwilling or unable to pay.

Of course, these services are not actually free: Someone has to pay for them. They are paid with other people’s money.

Even Employers Don’t Pay

The poor are not the only ones seeking health care paid with other people’s money. Many happily employed people think their employer should pay for employee health insurance. Some politicians have even suggested a law requiring it.

Of course, when all is said and done employers do not pay for health insurance: their employees pay for it. If an employer is required by law to provide health insurance coverage, he’ll simply offer his employees less in cash wages, or he’ll hire fewer people. Employers have a personnel budget: increase the costs in one part of that budget, and other parts will be cut back.

A young woman complained to me that her husband’s employer-sponsored health insurance lacked family coverage. Since they were ready to start a family, she needed an individual health insurance policy with maternity coverage. Maternity benefits raised the price of her insurance policy to about $1,000 per month.

There ought to be a law, she thought, requiring insurance companies to sell individual policies (with $12,000 in maternity benefits) to any couple willing to pay $2,000 in premiums. In other words, she wasn’t willing to pay the price for having a baby: She wanted that paid with other people’s money.

Senior Rights

Our greed only gets worse as we get older.

Although senior citizens, as a group, are the wealthiest population in the U.S., they receive generous government-subsidized medical benefits. The Economist reported today’s seniors could expect to receive $2.50 in benefits for every dollar they paid into Medicare … and that’s under today’s set of benefits. Both houses of Congress are currently trying to add a prescription drug benefit to Medicare—even though two-thirds of senior citizens already have drug coverage.

A recent poll by National Public Radio, Kaiser Family Foundation, and Harvard’s Kennedy School of Government confirms the “other people’s money” attitude. The poll asked seniors what proportion of their annual prescription drug expenditures insurance should pay. Almost half said at least 50 percent, and 41 percent thought insurance should cover substantially more than that.

When asked how much they would be willing to pay out-of-pocket toward such a benefit, 69 percent said only $30 a month or less. Ten percent were willing to spend $30, 14 percent were willing to spend $20, and 15 percent were willing to spend just $10. Nearly one-third (30 percent) of the senior citizens polled were not willing to contribute anything toward helping themselves and their fellow seniors obtain affordable Medicare drug coverage. They wanted expensive drug coverage paid for with other people’s money.

When those same senior citizens were asked, in the same survey, what would be a reasonable amount to pay for a prescription drug benefit, only 16 percent thought it reasonable to expect that benefit for free—although 30 percent had said they weren’t willing to pay anything. That’s an awful lot of people admitting they’re being unreasonable!

Sadly, the same survey found few adults understand what health economists have long known: A large portion of the rise in health care costs is explained by demand. People tend to spend a lot more, expect a lot more, and care very little about prices, when health care is paid for with other people’s money.

Devon Herrick is research manager at the National Center for Policy Analysis, Dallas, Texas.

For more information …

on NCPA and its health policy work, visit the group’s Web site at http://www.ncpa.org.