Is It Health or Is It Wealth?

For people who get health insurance from their employer, it has long been the practice to consider the true value of the pay is the salary plus the cost of health insurance (and other benefits).  If we did the same for people on Medicaid, we would boost their income and some would no longer be in poverty.

Which raises an interesting question – who is truly poor?

According to Health Care as Income for the Poor (NYT 10/2/2012), classifying Medicaid benefits as “income” raises the poorest households’ income by 25 percent.  This pushes these households above the poverty line.   Similarly, we could consider lots of seniors to be richer since they get Medicare benefits.  This bar graph gives a great picture of the impact.

Ah, suddenly we are a richer nation.  Instead of the richest households earning nine times more than the poorest, it’s only 7.5 times as much.  In this way, public health insurance programs do a lot more than pay for health care: they also spread around income.  They boost both health and wealth.

But not all income is created equal:  you can’t eat health care, as Timothy Smeeding noted.  Smeeding is the director of the Institute for Research on Poverty as University of Wisconsin- Madison.  You can buy a new kidney, but not a yacht, a rain coat, or a laundry basket.  The people who are consuming the most health care “earn” more of the health-based income, but they are certainly not richer.

Uwe Rheinhardt’s column, Assessing the Value of Medicaid to Its Enrollees (NYT 10/12/2012) points out that two people could have the same money income but one could be severely disabled and the other healthy.  If you considered the disabled person’s health income, he would be richer than the healthy person.  But no one would consider the disabled person to be better off.

I say let’s approach this from the other way around: health is its own wealth.  It is the basis for any other forms of wealth that a person can have.  However a person achieves health – whether that is paid by a private or public insurer – is not as important as having this most basic asset.  We can juggle the numbers and make people richer or poorer, but that won’t change the central goal: having people lead fulfilling lives.


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