One argument put forth by opponents of the recently passed health care legislation is that they object to subsidizing others’ health care.  A common counter-argument, often made by intelligent people who should know better, is that you already do that for auto or homeowner’s insurance, and nobody complains about that.  The counter-argument does not bear close scrutinty.

As I’ve pointed out before, the idea behind insurance is that individuals voluntarily contribute to a fund that is used to reimburse members in the face of a catastrophic loss.  This works well in situations where catastrophic loss is relatively rare.  For example, you can get quite good homeowner’s insurance coverage on a $150,000 home for less than $1,000 per year.  If your house burns down (a rare catastrophic loss), you’re covered:  your participation in the insurance fund insures that you’re compensated for your loss.  This kind of insurance works well in any situation where there are large numbers of people who individually have a small risk of loss:  property insurance and auto insurance being the types of insurance most people in the U.S. will be familiar with.

There are three very important conditions that must be met in order for insurance to work in the long term.

1. The sum of the premiums (annual payments by those insured, plus expected income from investing those funds) collected must equal or exceed the expected cost of all losses experienced.
2. In order to be fair, each individual’s premium is calculated based on the calculated risk of loss and the expected cost of such a loss.  In the case of auto insurance, the premium is based on your age group and driving record (calculated risk), and the value of the car that you’re insuring (expected cost of loss).
3. The pool (the insurance company) must have the right to increase an individual’s premium as conditions change, or to refuse coverage (i.e. kick the person out of the pool) if the calculated risk for that person is unacceptably high.

If any one of those conditions is not met, then the pool will become insolvent because the accumulated cost of losses over time will exceed the premiums collected and any income generated from investing the collected premiums.

Note that insurance only covers unexpected losses.  Depending on your coverage (based mostly on how much you’re willing to pay), your auto insurance might cover glass breakage and hail damage, or it might cover just the cost of replacing the car were it to be “totaled” (cost of repairs exceeds the vehicle’s fair market value).  Usually, you choose your coverage based on two things:  how much you’re willing to pay for coverage (your monthly or annual premium), and how much you’re willing to pay out of pocket whenever a loss occurs (your deductible).

Insurance does not pay for gas, oil changes, tires, or other things that are considered normal wear and tear.

A health care plan is a much different thing than insurance.  The new health care legislation provides for the following:

1. Everybody contributes, whether they want to or not, based on their ability to pay.  And before you tell me that the new legislation doesn’t provide for this, you might read it again.  There are subsidies for people earning up to $88,000, and much of the additional cost is covered by increased taxes on people who earn more than $250,000.
2. All services are covered, with little or no co-payment (deductible) required.
3. The pool is prohibited from refusing anybody for any reason.

Let me point out here that the new health care legislation didn’t invent the health care plan.  Most people who currently have “health insurance” actually have a health care plan that’s similar to but much more limited than the one described above (i.e. participation is voluntary and there are limits on services).  They’ve been around for decades.

Health care plans under the new legislation are akin to a “transportation plan” in which you obtain whatever car you can get hold of and, in exchange for a token monthly payment, everything but gas is covered.  You don’t have to pay for oil changes, tires, or scheduled maintenance.  If you fail to check the oil regularly and your engine burns up, the pool is required by law to replace your engine.  If you buy a trashed out 1955 Mercedes Gull Wing, the pool is required by law to restore it to original condition and maintain it.  No matter what you drive or how you abuse your car, your token monthly payment (amount based on your ability to pay) ensures that you’ll always have a working car to drive.  In addition, even those who don’t drive are forced to contribute, again based on their ability to pay.

Yes, I and any person who accepts the responsibility for his own driving habits would object to being forced to pay for that kind of transportation plan.  And yet that’s the kind of health plan I’m being forced to contribute to.  Of course I object!

According to the Reuters article, Tax soda, pizza to cut obesity, researchers say

U.S. researchers estimate that an 18 percent tax on pizza and soda can push down U.S. adults’ calorie intake enough to lower their average weight by 5 pounds (2 kg) per year.

I’m not sure what “average” is supposed to mean here.  What little I can glean from the article indicates that they’re saying that the combined average weight of U.S. adults would drop by five pounds in a year.  That is, if you sum the weight of all the adults and divide by the number of adults, the result will be five pounds less than the previous year’s result.  That’s a pretty astonishing number, especially if they claim that those results will continue for any length of time.  That average five pound loss would be a higher percentage of the total weight every year and as the years go by there would be fewer people contributing to the loss.

I suppose I’ll have to find the actual research paper if I want to make any sense of things.  The reporting in this article is, like most medical or science reporting I see in the mainstream press, chock full of logical holes and “conventional wisdom” presented as fact.  For example, the article repeats the oft-reported statistic that two-thirds of Americans are either overweight or obese.  That statistic is based on a questionable sampling of BMI results, and the BMI standard is the subject of quite some debate.  That said, there does seem to be an overabundance of fat people.

That taxation is successful in changing behavior is no big surprise.  We’ve seen government attempt to limit teen smoking by making it more expensive, and it appears to work.  Although it never works as well as proponents say it will work.  And, if our experience with taxing tobacco is any indication, it’s unlikely that taxing “unhealthful foods” will have anywhere near the effect that these researchers claim.

I can imagine new Food Taxation Boards popping up around the country, contracting with Certified Food Health Consultants whose team of researchers investigate the Healthful Food Score of every type of food imaginable.  They’ll change labeling requirements so that every box of anything you buy at the supermarket, convenience store, or vending machine will have a letter grade indicating its Healthful Food Score.  Of course, due to political considerations (i.e. powerful representatives from states like California), foods made with organic sugar will have a higher score than foods made with plain old sugar.  That’s what we need, another obese bureaucracy whose mandate is to make us healthy.  Oh, the irony.

I wonder if the article’s mention of the estimated $147 billion annual cost of obesity in the same paragraph advocating taxation was meant to imply that taxation could offset those costs by any significant amount.  Probably not, although I suspect a lot of people will read that paragraph and think that the taxes will raise $147 billion per year.  I’d be surprised if the taxes raised even ten percent of that.

The researchers did raise an interesting point, though:  government subsidies of the corn industry artificially lower the cost of corn syrup, making sodas and other sweetened foods much less expensive.  But then they make a mistake when they recommend that federal subsidies should go to producers of more healthful foods, rather than suggesting that government eliminate food subsidies altogether.  All too often, as in the case of tobacco, government can’t decide what it wants to do.  It props up the tobacco industry with subsidies and then taxes the heck out of it in order to limit consumption.  Wouldn’t it be more reasonable to just eliminate the subsidy?  Or is that too sensible a thing for a government to do?

I don’t know about anybody else, but I’m more than a little uncomfortable with the idea of yet another corrupt bureaucracy sticking its hand out, this time demanding tribute if I decide to indulge in a bit of junk food.