Universal Health Coverage: The Cure or the Disease?

Dr. Paul Cleveland,
Professor of Economics, Birmingham Southern College

Calling our nation's health care system "badly broken" and in need of repair, President Clinton recently outlined his plan for a reform package based on universal health insurance coverage for all Americans.

This plan would put the federal government at center stage for funding health care services by creating a new law restricting private choice and forcing both individuals and employers to make payments to cover the cost of insurance.

Considering the ramifications of this proposal, it is important for us to consider the issue carefully before we either lend our support or work in opposition to this reform plan.

To examine the issue, we must answer several questions: What is the crisis in health care that requires fixing? Why did this situation arise? And, will the proposed plan actually provide a remedy to the problem?

In addition to these questions, we must also ask: Is the proposed legislation just? If the answer to this question is no, then all else is irrelevant from a Christian point of view.

The crisis in health care is centered around several areas of concern. These include the rate at which health care costs have risen in recent years; the relatively high proportion of income that Americans spend on medical care; the high administrative costs of the system, and the large number of Americans who have no health insurance coverage.

According to one source, an average of 11.1 percent of an individual's income is now spent on medical care, and it is projected that this percentage will rise to 17 percent during the next 15 years. In addition to this, administrative costs account for almost 12 percent of health care expenditures and, at any given moment in time, roughly 13 percent of Americans are without insurance.[ 1]

Why did this situation arise? Like any other economic product, the provision of health care services requires the use of scarce resources. Since all resources have alternative uses, during any limited time period we must give up the consumption of some goods if we are to consume more of any other good. The actual consumption choices we make reflect our own set of preferences or values. Put more simply, we purchase products on the basis of our priorities. Furthermore, when the price of some economic good rises we tend to conserve that product.

However, suppose someone else were paying for your use of a particular item. How would it affect your consumption of this product if in fact someone else paid for it? Likely, it would increase.

For example, consider children. Since their parents provide for all their needs, children have little natural inclination to conserve. As long as parents are willing to foot the bill, then children will never learn the true value of the things they consume. Thus, one important task all parents face is to teach their children the value of work and the value of saving for the things they wish to buy.

Comprehensive Health Care

A current problem in the provision of health care, which has been identified as one reason for escalating medical costs., is that health care tends to be paid for through some form of comprehensive health insurance. In particular, a third party pays for the product that the individual consumes. To understand why this is a problem we need to consider why we purchase insurance.

We buy insurance typically to protect ourselves financially from the small possibility of a catastrophic loss. In such cases, we find it advantageous to our peace of mind to contract with an insurance company who is willing to underwrite the risk of our loss for a fee. The insurance company sets this fee for any particular policy holder at a rate larger than the expected loss per person to ensure the company a profit. Since the probability that any one individual will actually suffer a loss is low, the premium charged is generally an agreeable one to most risk averse people.

However, we should not use insurance to purchase goods and services we regularly use. We're actually better off by planning for our purchases, since the price of an insurance policy which would cover the cost of the product must always be greater than the price of the product itself. Why would someone knowingly spend $1,100 for an insurance policy to pay for a product which cost $1,000? Yet, this is exactly what is happening with comprehensive health coverage which pays for routine medical care.

Within certain bounds we expect to be ill occasionally during the year. In addition, we all recognize the value of regular checkups, immunizations, and other medical care and can plan sufficiently to pay for that care.

Therefore, on the surface it seems odd that the current system of comprehensive health insurance developed. Based upon what we know about insurance, a practical choice of coverage would lead us to consider policies that only cover unexpected major medical expenses and catastrophic health care. Yet, most people in the U.S. today are covered by some comprehensive health plan provided by their employers.

How did this system develop? Our current system really began to develop in response to the U.S. tax laws. The tax code currently limits the taxpayer's ability to deduct medical expenses incurred during the year. In fact, the current law only allows an individual to deduct expenses in excess of 7.5 percent of adjusted gross income and that only as an itemized deduction. This floor is up from earlier versions of the tax code. The floor itself has not always existed in the tax code, but itemization of medical expenses has.

Consider the incentive such a provision creates. Suppose you are buying health care. You have a choice of paying for health care out of pocket or seeking to have your employer purchase comprehensive health insurance for you. Under the tax law which is better? If you are in the 28 percent tax bracket, you must earn almost $1.39 to pay for each dollar of health care you consume assuming you never overcome the tax floor.[ 2]

On the other hand, if your employer provides comprehensive coverage, the cost of the plan is non-taxable. Thus, as long as the fees charged by the insurance company are less than thirty nine cents per dollar of coverage you would be better off with the comprehensive plan. Historically, the actual fee insurance companies have charged is about 11 cents per dollar of service provided.

Once the individual possesses comprehensive coverage, he no longer has any incentive to conserve the resource. As a result, the demand for the service increases, causing prices to rise.

This effect has been magnified by Medicaid and Medicare, which are two government programs extending essentially comprehensive coverage to the poor and the elderly. These two programs effectively subsidize the medical care of qualified recipients. The institution of them has been like throwing gasoline on a campfire. As a result, and as we might expect, the rate of increase in the costs of these programs has substantially outstripped the cost escalation in the private sector of the health industry.[ 3]

Therefore, it seems beyond the boundary of reason to proclaim that creating universal comprehensive health insurance will do anything about controlling the costs of health care. Rather, we would expect the opposite result to occur.

A Shortage of Health Care

A close examination of President Clinton's plan reveals that he understands this fact since the administration plans to cap total health care expenditures. The result of such a policy will be to create a shortage of health care services in the United States, which will ultimately result in queuing for medical treatment.

On an economic basis, if the president's plan is implemented, it will fail to achieve its desired results and will lead to a poorer health care system, resulting in greater pain and hardship than presently occurs.

There is another issue however which is more important than the economic workings of this plan. That is the justice of the plan. Is the plan moral? It is perhaps tempting to say that the ends aimed for are good and argue, therefore, that the plan is good. After all, what decent person would not desire to see needed medical care provided for those who cannot pay for it themselves? But to conclude this is to conclude that the ends justify the means. If we examine the president's plan closely we will find that it is not only unsound economically, but that it is immoral as well.

I recently had a conversation with a colleague about the health care situation. My colleague expressed a view that is common today. She said that adequate health care is a "right." I asked her where that "right" came from, to which she responded, "Because we're human."

But such a statement begs the question: How does being human, in and of itself, generate any rights? The clear answer is that being human alone cannot justify any rights for humans.

David Hume once noted that "the rules of morality are not the conclusions of our reason." Therefore, if we carry Hume's statement to its logical conclusion, we must conclude that humans have rights only as they have been endowed with such by their Creator. Thus rights must be defined by Him who has the power of being in and of Himself, since He alone is in a position to establish the rules. We are then dependent upon His proclamation of right and wrong to discern the rights of the individual. Apart from such an endowment, there are no rights.

The Bible and Medical Care

Does the Bible declare that there is a right to medical care? The answer is no. At best we can only say that the Bible commands us to show mercy to others as we have been shown mercy by Christ Jesus. On the other hand, the Bible also requires us to respect the property rights of others. "You shall not steal."[ 4] Thus we are prohibited from the use of force to obtain what we wish to consume for ourselves.

But is not the use of force to gain for ourselves what we want at the expense of others exactly what transpires when government mandates a plan to provide health care services to everyone? After all, the government by definition employs force. It is a coercive institution.

According to the Bible, the government's use of force has been ordained by God. The government is to be an institution to punish wrongdoers.[ 5] It has not been ordained as an agent of mercy to provide people with the necessities and luxuries of life. Furthermore, when it attempts to operate with compassion it actually ceases from its original purpose in order to engage in the type of behavior it was supposed to stop-that is, wrongdoing, in this case theft.

There are two reasons why our government has moved in this direction.[ 6] The first is selfishness. People would rather steal health care from others than to work hard and purchase it for themselves.

This was demonstrated during the last presidential campaign when a man called into a radio talk show. Bill Clinton was well ahead of George Bush in the polls and he had promised to bring about government mandated universal health insurance. To this situation the man proclaimed, "I can't wait 'til Bill Clinton is elected president and gets his health care reform through Congress. Then I won't have to pray to God that my children don't get sick."

The caller had no intention of revealing his true character that day; but he did. In this man's proclamation we find his real problem. It is not that he lacked health insurance or that he could not afford medical care. His real problem is that he did not want to pay for it himself. Rather, he wanted someone else to pay and that, not as a matter of mercy shown to him, but as a matter of coercive force.

The second is perhaps the most pervasive reason for the government's drift towards mandating the provision of universal health insurance. Americans have traditionally been compassionate. Generosity for those in need has been a hallmark of the American experience. Private charities, churches, nonprofit organizations, and the volunteerism associated with them have been a salient feature of our culture.

Stated simply, the American people have a passion for helping out those in need. It has been this spirit which is the reason why most of our hospitals developed as nonprofit institutions.

Yet, it is this very passion which threatens to undermine the fabric of our society-when charity is pursued by way of governmental mandate.

A Temptation to Lobby

It is not hard to see how this situation can arise. As we have discussed, at any given point in time the resources available to us to meet our ends are always limited. That is, we can always imagine a better circumstance than the one we are presently in. If this is true for individuals, how much more true is it for voluntary groups seeking to do good unto others?

It is, therefore, easy to see the temptation people face who desire to show mercy and compassion to others. Namely, we are tempted to use voluntary contributions to lobby the government rather than devoting them to the causes we have in mind. If our efforts are successful, we can tap into the much larger pool of resources available in the public treasury to promote our cause.

If passion for the cause should blur our vision, then we may well use government force and, as a result, inflict harm upon the neighbors we aim to help. Such is the state of American "do-goodism" in the twentieth century-coercive charity.

The provision of universal health insurance by legal mandate is economically unsound. Since this program is a type of middle class welfare, it will drain America's individual initiative and will ultimately fail to deliver the goods. Furthermore, it is unjust. It is nothing more than a forced charity, which is no charity at all.

In this vein we might flatter ourselves into believing that we are doing good works, but it simply is not true. True mercy and true compassion are extended as a matter of voluntary choice. They are not forced. The president's health care reform plan is fundamentally selfishness unleashed and it will thwart the provision of medical care in general. The end result will be pain and hardship.


  1. Jarret B. Wollstein, "National Health Insurance: A Medical Disaster", The Freeman, The Foundation for Economic Education: Irvington, New York, October 1992, p. 381.

  2. An individual with an adjusted gross income of $35,000 could only deduct medical expenses in excess of $2,625 as an itemized deduction.This is a substantial barrier to overcome.

  3. The economic analysis presented here is based upon chapter 6 of Edgar K. Browning and Jaquelene M. Browning's book, Public Finance and the Price System, Macmillan Publishing Company: New York, 3rd edition, 1987, pp 161-188.

  4. Exodus 20:15

  5. The apostle Paul deals with this issue in the 13th chapter of his letter to the Christians in Rome.

  6. Frederic Bastiat refers to these two reasons for government involvement beyond its real purpose in his book, The Law, The Foundation for Economic Education: Irvington, New York, 1987.