Years ago, Kenneth Arrow, an economist who was joint winner of the Nobel Memorial Prize in Economics in 1972, argued that Pareto optimality (a situation in which everyone is as well off as he can possibly be from his own point of view—given the constraints of the system) is a good thing. Unless you are willing to systematically deny people whatever it is that they want, he said, Pareto optimality would seem to be a value we all should endorse. And almost every economist I know does endorse it.
Yet, in the world of health policy, I can introduce you to a whole slew of folks who are perfectly willing to deny people whatever it is they want. For lack of a better term, I will call them “paternalists.” One of the most controversial decisions made by the Obama administration in implementing its health reform has been the notion that health insurance should cover something almost everyone can easily pay for out of pocket: contraceptives.
Why, you might ask, does this decision have to be made in Washington? Why can’t decisions like this be left to individuals and the marketplace? Why not let people who want contraception coverage pay higher premiums and get the coverage they want? Why not let everyone else pay lower premiums? In deciding to intervene, the administration paid a heavy political price. Forcing Catholic universities, hospitals, and charities to provide health insurance that includes free contraceptives (as well as sterilization) produced a reaction that was poignant and hyperbolic.