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I'm crossposting my comment from a very similar Reddit thread (although that thread was more about "omg, insurance companies are teh evilz"). Hopefully I get s

I'm crossposting my comment from a very similar Reddit thread (although that thread was more about "omg, insurance companies are teh evilz"). Hopefully I get some more meaningful discussion about it here. ------------ Insurance companies are not money piñatas. They are insurance. The premise is that you have a low probability of having a massive expense. You pool your money with others (via the insurance company) to cover it if it happens to be you who gets unlucky. The insurance model falls apart when somebody is already sick. Then it's no longer a low probability of having the expense, it's almost guaranteed. So now insurance is the wrong financial model. Charity, or a publicly funded option is, since it becomes a moral issue (we don't let people die of stuff we can fix), rather than a financial (I pay in a bit, possibly need large payout). That's not to say they aren't evil, and want their profits, and go out of their way to be dicks about it, but all the hubbub about existing conditions just shows that insurance is the wrong model for health care coverage. I fully support a public option, which is effectively an insurance company that also has the moral backing of paying for blatantly unprofitable cases. It won't be perfect, and might suck in many cases, but it sure would be much better than any insurance based health care system could be.

akeefer 17y ago
Exactly: the incentives are wrong for everyone under an insurance model. Healthier people have an incentive to leave the risk pool and/or only keep catastrophic coverage, increasing premiums for everyone less fortunate. Insurance companies have no incentive to insure anyone who seems like a high risk, i.e. due to a pre-existing or likely-to-emerge condition. Consumers have no incentive to manage their own care expenses or make decisions for themselves, because if they have insurance they're not really paying the full costs. Insurance companies have incentives to deny care whenever possible. Hospitals and doctors have an incentive to charge uninsured people more than insurance companies so that the insurance companies can provide a value-add and because they have to make up for all the care provided to un-/underinsured people who can't pay their bills. If you believe that a wealthy society like ours has a moral imperative to take care of its poor and sick and elderly, then the insurance model is hopelessly broken. It doesn't mean there's some perfect model out there that has perfectly aligned incentives and no moral hazard, just that this one is probably one of the worse ways to organize things. If you don't believe that there's any such moral imperative, then that's an entirely different debate.
lutorm 17y ago
Yeah, when I moved to the US I was wondering why everyone called it health "insurance" since it basically works completely opposite from how "real" insurance (home, liability, etc) works. Maybe this is why people are hung up on it, because of the word? It's not insurance and it's never been intended to be insurance. IMHO, medical care is a basic human right, and needs to be treated as such. Whether people with "risky lifestyles" should be forced to pay something more is a separate issue. (Incidentally, smoking is a bad example, though, because lung cancer tends to kill relatively early and quickly. I've seen figures that it actually lowers the lifetime health care cost compared to decades of geriatric care.)

akeefer 17y ago

Exactly: the incentives are wrong for everyone under an insurance model. Healthier people have an incentive to leave the risk pool and/or only keep catastrophic coverage, increasing premiums for everyone less fortunate. Insurance companies have no incentive to insure anyone who seems like a high risk, i.e. due to a pre-existing or likely-to-emerge condition. Consumers have no incentive to manage their own care expenses or make decisions for themselves, because if they have insurance they're not really paying the full costs. Insurance companies have incentives to deny care whenever possible. Hospitals and doctors have an incentive to charge uninsured people more than insurance companies so that the insurance companies can provide a value-add and because they have to make up for all the care provided to un-/underinsured people who can't pay their bills. If you believe that a wealthy society like ours has a moral imperative to take care of its poor and sick and elderly, then the insurance model is hopelessly broken. It doesn't mean there's some perfect model out there that has perfectly aligned incentives and no moral hazard, just that this one is probably one of the worse ways to organize things. If you don't believe that there's any such moral imperative, then that's an entirely different debate.

lutorm 17y ago

Yeah, when I moved to the US I was wondering why everyone called it health "insurance" since it basically works completely opposite from how "real" insurance (home, liability, etc) works. Maybe this is why people are hung up on it, because of the word? It's not insurance and it's never been intended to be insurance. IMHO, medical care is a basic human right, and needs to be treated as such. Whether people with "risky lifestyles" should be forced to pay something more is a separate issue. (Incidentally, smoking is a bad example, though, because lung cancer tends to kill relatively early and quickly. I've seen figures that it actually lowers the lifetime health care cost compared to decades of geriatric care.)