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You are here: Home / Anderson On Health Insurance / Epidemics and externalities

Epidemics and externalities

by David Anderson|  March 4, 20207:00 am| 17 Comments

This post is in: Anderson On Health Insurance, COVID-19

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Truly stunning to hear some Republicans advocate for free Coronavirus testing and treatment for the uninsured.

Rep. Ted Yoho (R-Fla.), one of the most anti-ACA members:

“You can look at it as socialized medicine, but in the face of an outbreak, a pandemic, what’s your options?”

— Matt Fuller (@MEPFuller) March 3, 2020

Epidemics are full of externalities. An externality is a benefit or loss that is not received by the entity paying the price for a change in status. Positive externalities which distribute net benefits to the non-payer will be systemically under produced while negative externalities which shifts costs to entities that don’t collect revenue from the primary process will be overproduced.

Most of our medical finance system is premised on the idea that there are few externalities. If I get my knee repaired, I, or my insurer, bears the full price as I, presumably, will bear the full benefit of a knee that would not make funny noises as I try to dance.

Infectious diseases have some benefits and costs that can be interalized. An individual who goes to the hospital and whose treatment enables survival is alive. However, the decision to be screened and if positive with low acuity symptoms, to self-isolate/quarantine has small internalizable benefits, large costs borne by the patient as their life and the lives of their family and close associates may be thrown up in the air. However, quarantine and other social isolation measures are intended to produce large social externalities. An infected individual who is in contact with people who are either already infected OR are taking appropriate precautions is unlikely to infect other people. Those people who would have been infected if the currently quarantined individual went about their daily life but aren’t infected because of an effective quarantine, benefit without paying for the quarantine.

Breaking potential infection chains is a key to stopping potentially epidemic infectious diseases. Breaking those chains can occur through vaccinations or quarantine or burnout. Vaccinations and quarantines rely on the production of significant positive externalities. If we want lots of positive externalities, we, as a society, should be willing to pay for them through our collective resources of the federal government. Paying for medical care is a way to buy both internalizable gains for the individual patient and publicly consumable externalities.

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Reader Interactions

17Comments

  1. 1.

    Another Scott

    March 4, 2020 at 7:31 am

    +1.  Well said.

    Thanks.

    Cheers,

    Scott.

  2. 2.

    AnderJ

    March 4, 2020 at 7:33 am

    To state the obvious (which is implied in your post), your analysis does not only apply to costs related to Corona. Moreover ad hoc deciding to reimburse costs related to Corona is presumably more expensive than doing so ex ante (for example by requiring such costs to be reimbursed through insurance or by the government). Further, such ad hoc decisions do not provide for any assurance for future outbreaks and is also therefor rather poor policy.

  3. 3.

    Princess

    March 4, 2020 at 7:34 am

    This is great. Can you turn it into a comic strip or maybe a simple diagram that our president could understand. Asking for a nation full of vulnerable, scared people.

  4. 4.

    PSpain

    March 4, 2020 at 7:45 am

    It is so logical and necessary I am shocked a Republican has advocated for it.

    Head in the sand is not keeping the virus out. Testing has been too slow in the US.

    Here in Valencia Spain there have been 19 cases, most linked to family and friends of a journalist who went to Milan for a soccer match and others who went to Northern Italy. Everyone connected is being tested and even back cases are being tested. They just found a new case in someone who died 3 weeks ago.

    Testing is free of course and they will come to your home. Most of the cases are mild and patients are at home isolated. With a socialized medical system it is much easier to coordinate.

    So far so good, but they are not cancelling the Fallas Festival that just started and goes to 19 March. 2 million participants. It is short sighted but too much money involved.

    I have a Real Estate Business and also do short term lets. Since last week business has stopped cold. Only one cancellation so far but no one is planning a holiday now.

    Anyone else hurt or going to be hurt financially?

  5. 5.

    TS (the original)

    March 4, 2020 at 7:50 am

    Truly stunning to hear some Republicans advocate for free Coronavirus testing and treatment for the uninsured.

    I do but wonder if this is election year related. If people cannot afford to be tested, the campaign ads against the republicans will be brutal.

  6. 6.

    SFAW

    March 4, 2020 at 7:57 am

    So Ted Yahoo appears to want to do the right thing — or at least say that he does — but can’t be bothered to vote for the Anti-Lynching bill? I think he should go on a fact-finding trip to Wuhan, South Korea, and Iran, just to make sure he has his “facts” straight, maybe gain some first-hand experience.

     

    And then be prevented from re-entering the US until the danger has passed, like maybe in 50 years

    ETA: Yes, I realize the Emmett Till Law comment was gratuitous. So?

  7. 7.

    SFAW

    March 4, 2020 at 8:00 am

    @Princess:

    Can you turn it into a comic strip or maybe a simple diagram that our president could understand.

    Good one!

    Wait — you’re serious? You really think the Moron-in-Chief “understands” anything that does not directly benefit him? It appears (based on some reporting/comments the other day) that he does not know what a vaccine is or does, so …

  8. 8.

    Chris Johnson

    March 4, 2020 at 8:10 am

    @PSpain: Yeah, I am. I’m Patreon-supported for open source software, and I’m going to be asking people, if they are getting financially unstable, to cut me loose for a time and take care of themselves first. I may back it up by slow-walking some of my work or doing Patron-only things,

    I’ll survive the hit, but right now for me to NOT lose ground, would require me to become a predator and actively be pressuring/guilting people who are less secure than me, and I’m not OK with that. So I’ll burn my own resources for a while and cut my supporters a break. I do intend to tell them, to come back when they’re doing better. But I’m actively going to cut some folks loose for their own good, and it’s gonna cost me, perhaps a lot.

  9. 9.

    Enhanced Voting Techniques

    March 4, 2020 at 8:24 am

    why is it a stunner some Free Market worshiper wants all the socialized medicine in the world in the face of  a life or death situation? Conservatism is nothing but kayfabe now.

  10. 10.

    Bruce K

    March 4, 2020 at 8:36 am

    @Enhanced Voting Techniques: Yeah – it’s similar to reactionaries beating the drum on homophobia until they realize that someone they care deeply for is gay and therefore put at risk by those homophobic stances.

    Or, alternatively, socialism is evil if it’s taking MY money and giving aid to the CLANGs, the HONKs, and the AWOOGAs, but if it’s benefiting ME, then it’s just fine.

  11. 11.

    eldorado

    March 4, 2020 at 8:58 am

    post isn’t wrong, but jfc, can our side please hire some messaging consultants?

  12. 12.

    JPL

    March 4, 2020 at 9:17 am

    @PSpain: The travel industry is going to suffer for awhile.   Major companies are not allowing any type of international travel.   CNN is limiting all travel.

  13. 13.

    David Anderson

    March 4, 2020 at 9:40 am

    @eldorado: I speak wonk, I am not writing for a broad audience today.

  14. 14.

    gvg

    March 4, 2020 at 11:00 am

    Yoho is my rep and …I do not like him and always vote against him, however he was a Veterinarian, so that may be why he is for treatment and testing no cost.  When it’s available, he may also support free immunizations or low cost.  He might back down though, I’m unsure how well he resists his party when he knows they are wrong.

  15. 15.

    Feathers

    March 4, 2020 at 11:18 am

    I was fascinated to read that a good deal of what we know about the Seattle outbreak is because some scientists did an end run around the CDC by doing “research” into the coronavirus, which doesn’t require CDC approval for the tests or who you are testing.  Hope other universities step up.

    I really hope someone is drawing up articles of impeachment over this.

  16. 16.

    jl

    March 4, 2020 at 2:14 pm

    Contacting medical personnel and screening should be free. Treatment should be free, or maybe pay the patient to get treated, pay people to stay home. Early in an epidemic, the value of preventing one additional infection is truly immense. You can treat a relative small number of people and prevent a huge epidemic. The trade off is that, unless you can completely eradicate the disease, and prevent immigration of infected people, that process has to go on forever. But we do that now, at least screening and contract tracking to screen and if needed, isolate contacts  with TB and serious infectious disease now. The infrastructure and knowledge is there and has been developed and refined for over 100 year.

    At this stage of the coronavirus epidemic in the US, this stuff should not only be free, we should pay likely infected people to get screened, treated, self-quarantined, etc.

    The present value of preventing one infection right now is enormous.

  17. 17.

    David Anderson

    March 4, 2020 at 5:01 pm

    @jl: Agreed… need to share this paper later this week

     

    https://t.co/2xANUUdgAZ?amp=1

    and this

    https://doi.org/10.1016/j.jtbi.2014.08.003

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