November 21, 2007 § 3 Comments
I’ve done very little thinking about health care policy. I realize that it is important, but every time I’ve attempted to think about it I’ve just glazed over. It isn’t even that it is intrinsically uninteresting: as a key human concern in the modern world where technology, morality, life and death come together I am hard pressed to think of another subject that objectively ought to be more interesting.
But I haven’t thought about it much.
Nevertheless it is a subject of enough importance that you can’t help but encounter it periodically if you regularly read blogs with political and social content. And it seems to me that there are any number of quite distinct things which are entangled together in discussions about health care.
One thing to realize is that on average insurance is a lousy deal, on purpose, and that is a good thing. Much like Las Vegas and Atlantic City, it is designed to be a lousy deal on average. That is pretty much its central point. The risks insurance cover are small in probability, but large in terms of financial (and other) consequences. So when we buy insurance we intentionally pay more than we are statistically likely to pay if we didn’t buy insurance; but we are protected against catastrophic loss. That is pretty much the whole point to it: when we buy insurance we are betting against the house and hoping to lose. And it is worth it.
Another thing to realize is that modern health “insurance” isn’t so much. That is, it isn’t mainly insurance. It is more like a collective bargaining organization for consumers which negotiates pricing with health care providers. The standard pricing at a hospital is in my experience many times – literally several hundreds of percent – higher than the negotiated rates paid by the “insurance” companies and HMO’s. That is pretty much the only reason my family is enrolled in a group plan. In general I could save a lot of money by just paying directly if I could get the same price the “insurance” company gets. When I buy health “insurance” what I am mostly doing is paying a subscription fee for a service which gets me lower prices than I could get on my own if I paid for each use as a one-off. That still leaves the traditional insurance role – protection against major losses – untouched, but it is the primary use I make of health insurance.
A third thing to realize is that health care for the poor, for those who cannot afford it for themselves, is an utterly distinct subject which has virtually nothing to do with insurance (where we pay more than the actuarial expectation of what we will cost on average for coverage of high-consequence low-likelihood events) or with health cooperatives (where we also pay above actual cost but we have the advantage of collective bargaining as consumers). When things have virtually nothing to do with each other it is usually best to keep them distinct; otherwise we are creating a recipe for obfuscation, gerrymandering, and all kinds of political, bureacratic, and financial dishonesty, confusion, and other shenanigans. That doesn’t mean I am against health plans for the poor. But it does mean that if we don’t keep them distinct from insurance and health care subscriptions which are in fact paid for by those who use them we are opening ourselves up to corruption.