Now that a Health Insurance guy has been whacked, it’s time to review. Here is an expanded version of a thread I did on Twitter—which is all a repeat of (ignored) arguments made back when Obamacare was being discussed.
Health Insurance should be, but isn’t, a bet you make that you hope you lose.
It has become instead an inefficient form of socialized medicine, increasing costs. Here’s how.
Here’s what insurance should be. You bet with an Insurer that you get cancer, say. If you get it, the Insurer pays costs of care X. If you lose and remain cancer free, you pay Y. You re-bet every month (or whatever). You pay Y every time you lose. The X and Y are negotiated between you and the Insurer, and the risk of cancer is decided by you and separately by the Insurer. That is the bare bones of true Insurance. Or, indeed, of any bet.
You can also group diseases, say cancer and CHF. Then you pay Y_1 + Y_2 (say) and the costs are X_1 + X_2. The result is a contract bet just the same. But with higher stakes for both.
Suppose you already have cancer and bet the Insurer you won’t get it. You immediately win the bet! The Insurer must pay X.
How much should the Insurer charge you for this sure-thing bet? X. After all, your “pre-existing condition” is a sure-thing bet the Insurer is bound to lose. There is no sense in you making the bet.
Unless a Ruler steps in and says “Insurer, you must take this bet!” Which, of course, happens. Then the Insurer must spread the costs of X to others.
If the Insurer doesn’t spread the costs, he has sure loss (assuming calibrate bets, about which more later). Which means if you bet you have cancer when you do, when your neighbor makes a bet for cancer when he doesn’t have it, he must pay Y+S, where S represents the spread. The more people in the system, the smaller S is.
Voilà! With coverage mandates Insurance automatically becomes socialized medicine. Very inefficient, too, because not only are we paying a private entity to manage this, and take his profits, we pay bureaucrats to monitor it all. Costs must increase. Health care won’t get better, but costs must rise.
It’s worse than all this, too!
It’s worse because people insist on having general coverage for an entire range of diseases without regard to whether they will get any of these diseases. To most, any risk is too large. Safety First! Which means that however the Insurer is reckoning probability for each disease, the more diseases you add to the bet, the greater the probability you “win” at least one.
Which means the greater the Y you must bet. Because, of course, the greater the X the Insurer might have to pay, which is now cumulative. And, of course, general coverage encourages people to “win” and claim their X, by going to the doctor for sniffles, etc.
Add to that employer mandates, which require employers because they are employers must pay the Y for their employees because they are employees—thus creating a serile, slave-like cast. These large additional costs must be spread by the Insurer. This point cannot be over-emphasized. This creates oligarchy.
Again, costs rise, medicine is socialized, and health care at least does not improve. Or gets worse because too many patients choke the system.
This is all before Insurer greed comes into the picture, which has the obvious effect of increasing Y for all. Again health costs rise, but health does not. In fact, mandates encourage Insurers to deny claims because there is only so much spreading that can be done.
What needs to happen, but won’t, is the elimination of this form of bastardized insurance. If it were made a true bet again, and all had to pay for losing this bet (monthly, or whatever), and for only a limited range of diseases (different per person). Costs would decrease on average.
It is an entirely separate question whether it is more or less moral for medical care, and to what extent, to be socialized.
Somebody reacted to the original thread saying how would you “feel” if it was your relative was denied “coverage” for some pre-existing condition. The kind of unthinking reply is common. But it’s wrong. The correct way to put this is that your relative has been denied having his medical care paid for by others.
Oh, calibrated bets. Roughly, for every probability of an outcome, you want to realize that proportion of outcomes. So if you say it’s 10% chance, then 10% of the time the event happens, you’re calibrated (at that level). Which is good. We’ll cover this in the Class.
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I think someone once opined that Socialism can never work because it requires angelic behaviors on three ( or more?) levels. The Leader (and his ruling class) must all be angels, the Guardians (police, enforcement) must be angels and the citizens must all be angels.
In Medicine today we have three levels of thieves: the practice, the insurer and the government. Add to this corruption the sluggards who seek constant medical attention and disability rulings. And add the horrific back breaking Medicaid fiasco.
Perhaps a nice high deductible and medical savings accounts could ameliorate the abuses.
The truly poor should be treated with clinics staffed by young docs and nurses to work off education expenses.
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My wife and I have been using a healthcare sharing program (Christian Healthcare Ministries) ever since Obamacare passed and made our insurance too expensive and blew our deductible up from $100 to $10000.
It works beautifully, we have to pay the first $500 of any incident (and any discounts we get apply to that $500, so we’ve never actually had to pay it). And we get to chose what doctors and procedures we get since we’re technically “self pay”.
You would be amazed how big the “self pay” discounts are with most providers, usually in the neighborhood of 50% (often more). My wife had an emergency room visit that the bill was ultimately $6500. After self pay discounts it dropped to $1400 (which CHM reimbursed us for)!
It doesn’t pay for “preventative care” or prescriptions, but when you add what annual checkups and our monthly CHM bill cost, we’re still paying way less than insurance.
Would be nice if we could change the law to allow more health sharing groups (ours only exists because its a religious exemption to Obamacare).
At the very least, we need to eliminate insurance paying providers directly. If you make a claim, the money should come to the patient, this will keep the doctors from gouging the insurance companies and empower patients to negotiate better prices. Because this is what makes health sharing work better.
when my wife and I first got married we could get catastrophic insurance for around $53 /mo. That was $30 years ago. Now insurance for my family costs (between myself and my employer) well over $1,500. That’s insane. My out-of-pocket costs are essentially another $6 on top of that since I have a high deductible plan with a HSA. I have literally ZERO reason to have insurance. I’m healthy. My family is healthy. The few times we’ve visited the doctor and hospital I’d STILL easily be better off just paying for everything.
Heck, after 30 years if I had just pocketed everything I paid in premiums and invested it I’d be able to cover any cancer treatments.
Our system is insanely broken – and I work in this industry.
My rough proposal would be to strip insurance back to true insurance. It should be a minimal bet. And if you screw up and are intentionally unhealthy or refuse to get insurance on your own (and it’s demonstrated that you paid $200 for cell phone coverage a month but not insurance) then you get put in a publicly funded, high-risk pool but the caveat is that you lose all your savings and your house, etc – until you pay it back. Or you get really crappy care in some publicly funded monstrosity because of your stupidity.
But we have to remember how we got here: too may people didn’t have insurance and hospital ER rooms were overwhelmed with people visiting for mild issues. They had no way to recoup the costs. So unless we as a society are willing to let people just die (unlikely) we need real proposals and we can’t treat insurance as just another form of automobile insurance.
But it’s not a conversation we’re even willing to have. And so now we’re in this inevitable death spiral.
We used that too when m company reneged on my wife’s health insurance two years before Medicare. It is great especially if you don’t have prescriptions – my wife did not. It is a great model. My crooked company said if I retired early we would get 3 years added to our service and medical benefits. Of course they had acres of small print to renege with impunity. The company is an electric utility = our little prince of a CEO thought he could be a player and nearly bankrupted Allegheny Power which was eventually gobbled up by First Energy. The CEO paid himself millions of dollars to wreck an Electric utility with over a million customers. Perhaps he would have been better placed with government given his propensity to egotistically make a bloody mess out of everything.
In theory public health insurance seems like a good idea – in practice it is not. The reason for that (see “Explaining the health care disaster in Canada (2011)” on my winface.com/node/6 site for details) is mainly that government, when it pays the piper, soon wants to call the tune.
In effect this replaces the patient as customer with the government as customer – the patient cares about outcomes and costs, but government cares about paperwork and compliance to expectation – e.g. government uses IBM mainframes, therefore hospitals need IBM mainframe data centers; Gov’t loves Microsoft, so docs must use MS etc etc with no consideration of costs or outcomes. As the system devolves away from healthcare and toward arm-of-government status executives find career advancement by moving back and forth between them – a process which further removes patient related issues from the decision process until – as in Canada and the VA in the US – the patient has no representation at all in GP, clinical, or hospital decision making.
Price controls always cause shortages. Its an iron law of economics. “Public insurance” (or whatever clever marketing term we want to use for socialized medicine) is ultimately built on a scheme of price controls and thus will always cause shortages of care. Private insurance that takes the actual consumer out of the loop of the transaction will mimic public insurance and cause the same problems (which it has done, along with incentivize providers to over-charge the insurance companies as much as they can get away with, thus driving prices up even more).
The less the market is distorted by the government (or insurance company) intervention, the better it will be for the vast majority of the people. Yes some people may “fall through the cracks” but that’s what private charity is for, and back when our economy was more market driven, was why the US became the most charitable society in human history (combined with the Christian foundation of our culture).
My wife and I had pretty good health insurance. As soon as Obamacare started, our premiums and co-payments doubled, and our deductible quadrupled. We couldn’t afford it anymore. Also, fewer things were covered, and the doctor we went to stopped taking our insurance. Thanks Obama!
Great opening line. I have not even read the ensuing article but had to stop and compliment your savvy opening hook. You are a cunning propagandist, Briggs.
You can’t fix it because it isn’t broken. The whole point is to syphon money from the middle class and taxes in general to the medical industrial complex. The American economy depends on scams like this. What are you, a commie?