In my last post, I nominated my candidate for the Biggest Problem with Health Insurance, which is that in most cases it’s not insurance at all but rather a pre-paid medical services plan. This has had at least four extremely unfortunate consequences.
- Because most plans now cover not just catastrophic expenses but also routine and even elective expenses, almost all health care transactions are marked up 30 to 50 percent to cover the “insurance” company’s administrative expenses.
- Because health care services are almost entirely pre-paid, people have a tendency to think of them as cost-free and use them far more often than they would if price mattered to the patient.
- Because we persist in calling this arrangement “insurance,” we delude ourselves into thinking that drawing the uninsured into the risk pool will somehow lower per capita costs.
- Because the whole system runs almost entirely on the principle of cost-shifting rather than risk-spreading, people are now basically addicted to Other People’s Money.
In addition, another very serious problem arises from the fact that so many people receive their health care as a condition of employment. This causes people to worry that losing their job will cause them to lose their access to health care. And the worry is most acute for those who already have a chronic disease or other health condition that may be uninsurable under a new plan sponsored by a new employer.
Partisans on both sides of the current health care “reform” debate agree that the status quo is unacceptable. Partisans on both sides also tend to agree that the status quo is more or less the result of private enterprise. The debate is about the extent to which today’s free-market failures can or should be corrected by more government intervention. The history of private health insurance, however, seems to me to cast serious doubt on the premise of free-market failure. Read the rest of this entry »