Universal Health Care and the Economics of Responsibility

By Champlin, Dell P.; Knoedler, Janet T. | Journal of Economic Issues, December 2008 | Go to article overview

Universal Health Care and the Economics of Responsibility


Champlin, Dell P., Knoedler, Janet T., Journal of Economic Issues


Nearly a century ago, the American Association for Labor Legislation (AALL) began a campaign for universal health insurance based on the notion that health care is the joint responsibility of employers, workers, and the state (Chasse 1994). At first glance, the current American health care system appears to exhibit the shared responsibility philosophy proposed by the AALL. The cost of health insurance is underwritten by all three sectors of the economy: 1) households; 2) employers; and 3) government. However, while costs are shared, responsibility is not. The steady retreat of private firms and government from assuming a substantial share of the burden of health care costs is based on an underlying presumption that health care is entirely an individual's responsibility, while the contributions of government and the private sector are basically optional--a matter of benevolence rather than responsibility. The likely outcome of the current complicated debates over health care reform will depend on this issue of responsibility. Who should pay for health care? Is it a collective responsibility or an individual one?

The presumption that health care costs are the responsibility of individuals is supported by orthodox economics, which treats health care as a consumer good. (1) In this framework, there is no shared responsibility for health care. There is only individual demand for health care with employers and governments in a supporting and, ultimately, market-distorting role. It is difficult to see how universal health care can be built upon such a philosophy. On the other hand, institutional economics views health care very differently. As Dennis Chasse (1991) notes, John R. Commons, John Andrews and other early institutionalists understood that the social and economic structure of modern capitalism left workers with little bargaining power. As a result, workers "bore an unreasonable share of the costs of economic growth and financial speculation--instability, unemployment, hazardous working conditions, and low pay" (Chasse 1991, 805). J.M. Clark also recognized that problems like poverty, unemployment and industrial accidents are systemic in nature and beyond the reach of individual choice and personal responsibility (Clark 1936). Clark also stressed that the benefits of good health accrue not only to individuals but to employers and the community as well: "there is a minimum of maintenance of the laborer's health and working capacity which must be borne by someone, whether the laborer works or not," or else "the community suffers a loss through the deterioration of its working power" (Clark 1923, 16, quoted in Stabile 1993, 173). More recently, institutional economists and others have questioned the applicability of the choice theoretic framework to health care, since the choice of health care services is, at best, a joint decision, and is often made by others (Bownds 2003; Keaney 1999; 2002). In short, in the institutionalist view health care is treated as a social good that is fundamentally a matter of collective responsibility.

We begin the paper with a brief look at the shared cost and responsibility aspects of the current American health care system. We then examine the economics of responsibility as it applies to health care. Finally, we close the paper with a brief assessment of the outlook for health care reform. All of the myriad health care proposals retain some aspect of shared costs. The difference comes down to how costs are allocated among the three sectors of the economy. In the institutionalist framework, any reallocation of costs must ultimately be driven by an underlying philosophy of shared responsibility. It is our contention that universal health care will only be achieved by recognition of collective responsibility rather than a reliance on the spurious notion that health and health care are purely matters of individual consumer choice.

Shared Costs in American Health Care

The drive for universal health care in the United States began in the early 1900s with the recognition that illness, accidents and poor health pose significant financial risks (Starr 1982; Chasse 1991; 1994; Rosner and Markowitz 2003). …

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