Recently, in a post on the Oregon Health Study, we briefly discussed why our public policy debates have focused so much on coverage expansion rather than expanded cash transfers. The results of the study suggest that many beneficiaries of subsidized coverage expansion report that they are very pleased to have coverage. What isn’t clear, however, is whether or not these beneficiaries would have been more pleased to receive cash transfers of the same magnitude. One reason the answer to this question isn’t clear is that most people actively engaged in political controversies share an implicit understanding that medical care is of unique importance.

Last month, Gabriel Rossman of UCLA addressed a related set of questions in an excellent post on the economics of relationships:

There is a certain logic to replacing in-kind programs with cash transfers that is very compelling on its own terms, but in practice few people would agree to it. One of our biggest transfer programs is Medicaid, and converting it to a cash transfer would mean that especially sick poor people would go without heath care, something the left would find unacceptable. (You can see this understanding implicit in the individual mandate, which not only serves the wonkish goals of avoiding the death spiral and cross-subsidizing the sick, but perhaps more importantly the political goal of including in universal coverage those people who would rather spend their money on something other than insurance premiums.)
Likewise, the right has a habit of objecting when welfare recipients spend transfers frivolously on either an isolated or widespread basis. In the 1990s it was a common trope to complain about welfare recipients who had cable television. More recently we’ve seen complaints about (and restrictions against) people drawing transfer payments from ATMs at casinos and strip clubs or using food stamps to buy junk food. That is to say, there is an implicit, pan-ideological consensus that transfers are about society providing the poor with that which we deem it appropriate for them to have and not that which they would purchase themselves if they had the money. A cash transfer welfare state would be politically untenable even though it is probably true that cash would be more efficient (as assessed by the utilitarian logic of market pricing). [Emphasis added]

There is a more cynical view: one of the reasons we might deem it appropriate for low-income adults to use transfers to purchase medical coverage from licensed practitioners rather than books, clothing, cigarettes, etc., is that licensed medical practitioners have a great deal of political power while low-income adults do not. This power derives in part from the cultural value we assign to medical care and the cultural prestige we afford those who provide it.

This, incidentally, is a reason we might consider making use of “middlemen” in structuring transfer programs. Practices, regulations, choices, and constraints that might be considered taboo in a universal public program might be given somewhat more leeway if implemented by an actor we understand as private. Eliminating for-profit lenders from the federal student loan program was seen (understandably) as simply a matter of getting rid of middlemen who exploited a lucrative government guarantee. Yet it also introduced a wedge between the democratic state and debtors. Persuading a for-profit lender to abrogate debts might prove difficult. Debtors might have a somewhat easier time deploying their collective political power to convince elected officials to do the same. Suffice it to say, some people think of this political dynamic as a feature of direct lending rather than a bug.

In a similar vein, an idea like Lorens Helmchen’s “cash-for-care” concept, which I’ve praised in the past, might be deemed obscene if implemented by the Medicare program but as (perhaps) somewhat less controversial if implemented by a private insurance provider one could actively choose.