Bill D. commenting on Uwe Reinhardt's post on community rating in Economix offers a plan that will allow us to have our Individualistic cake - that is to avoid paying for health care for sick people through our health insurance premiums - and still preserve our self-image by pretending that we really do care for those who are less fortunate:

Why not consider explicit subsidies to those who truly need them rather than opaquely hide such wealth transfers in premiums. Should a rich elderly woman receive subsidies? Should a smoker who deliberately ignores the advice of his doctor also receive a subsidy? If the answer to either of these questions is no, should we not just focus on those who actually need our help (or are just truly unlucky) and avoid much of the moral hazard issue?

So you can't pay for treatment? Could you please fill out these forms? Oops, you made $50,000 last year before your illness disabled you and you have $400,000 equity in your house. You are going to have to wait a year and sell the house. You can use the proceeds to pay this round of bills.

By the way your medical history shows that you had treatment for alcoholism and used to smoke. Yes that was 10 years ago and you have not had a drink or a smoke since but our scientific estimates show that your bad behavior is responsible for 50% of your medical costs. When you start getting subsidies we will only be paying fifty cents on the dollar.

More on this to come.