What Health Insurance Doesn’t Do

By ROSS DOUTHAT

IN one of the most famous studies of health insurance, conducted across the 1970s, thousands of participants were divided into five groups, with each receiving a different amount of insurance coverage. The study, run by the RAND Corporation, tracked the medical care each group sought out, and not surprisingly found that people with more comprehensive coverage tended to make use of it, visiting the doctor and checking into the hospital more often than people with less generous insurance.

But the study also tracked the health outcomes of each group, and there the results were more surprising: With a few modest exceptions, the level of insurance had no significant effect on the participants’ actual wellness.

Needless to say, experts have been arguing about what the RAND results mean ever since. But the basic finding — that more expensive health insurance doesn’t necessarily lead to better health — just received a major boost. The state of Oregon expanded its Medicaid program via lottery a few years ago, and researchers released the latest data on how health outcomes for the new Medicaid users differed from those for the uninsured. The answer: They didn’t differ much. Being on Medicaid helped people avoid huge medical bills, and it reduced depression rates. But the program’s insurance guarantee seemed to have little or no impact on common medical conditions like hypertension and diabetes.

As liberals have been extremely quick to point out, these findings do not necessarily make a case against the new health care law, which includes a big Medicaid expansion as well as subsidies for private insurance. After all, the first purpose of insurance is economic protection, and the Oregon data shows that expanding coverage does indeed protect people from ruinous medical expenses. The links between insurance, medicine and health may be impressively mysterious, but staving off medical bankruptcies among low-income Americans is not a small policy achievement.

This is true. But it’s also true that the health care law was sold, in part, with the promise (made by judicious wonks as well as overreaching politicians) that it would save tens of thousands of American lives each year. There was so much moral fervor on the issue, so much crusading liberal zeal, precisely because this was not supposed to be just a big redistribution program: it was supposed to be a matter of life and death.

But if it turns out that health insurance is useful mostly because it averts financial catastrophe — which seems to be the consensus liberal position since the Oregon data came out — then the new health care law looks vulnerable to two interconnected critiques.

First, if the benefit of health insurance is mostly or exclusively financial, then shouldn’t health insurance policies work more like normal insurance? Fire, flood and car insurance exist to protect people against actual disasters, after all, not to pay for ordinary repairs. If the best evidence suggests that health insurance is most helpful in protecting people’s pocketbooks from similar disasters, and that more comprehensive coverage often just pays for doctor visits that don’t improve people’s actual health, then shouldn’t we be promotingcatastrophic health coverage, rather than expanding Medicaid?

Liberals don’t like catastrophic plans because, by definition, they’re stingier than the coverage many Americans now enjoy. But this is where the second critique comes in: If the marginal dollar of health care coverage doesn’t deliver better health, isn’t this a place where policy makers should be stingy, while looking for more direct ways to improve the prospects of the working poor? Some kind of expanded health security is clearly a good thing — but if we want to promote economic mobility as well, does it really make sense to pour about a trillion dollars into a health care system that everyone agrees is deeply dysfunctional, when some of that money could be returned to Americans’ paychecks instead?

There are a variety of ways this could be accomplished — a bigger child tax credit for struggling families, a payroll tax cut to boost workers, an expanded earned-income tax credit to raise wages at the bottom, health savings accounts that roll over money left unspent. In each case, the goal would be to help people rise by giving them more money and more options for what to do with it, rather than just expanding 1960s-vintage programs that pay medical bills and only medical bills.

It’s to the Republican Party’s great discredit that these policies and goals don’t have enough conservative champions at the moment. But it’s to liberals’ discredit that they remain wedded to the dream of a health care bureaucracy that pays and pays and pays, when in all likelihood we could be spending much less with similar results, and finding better ways to help the poor.