5 ms·

Medical insurance in the US doesn't make any sense. Insurance is supposed to be a hedge against a large risk, but in the US we use our medical insurance to pay

by sna1l 11y ago

Medical insurance in the US doesn't make any sense. Insurance is supposed to be a hedge against a large risk, but in the US we use our medical insurance to pay for common visits and prescriptions. Everyone is so used to this model that it doesn't seem weird. Imagine if you used your car insurance to pay for gas. That would be ludicrous. No other "insurance" is handled in this manner.

bobbyi_settv 11y ago
> Imagine if you used your car insurance to pay for gas. That would be ludicrous. That's not ludicrous enough for me. Can the insurance be provided through my employer so that I'll need different insurance to pay for my gas if I switch jobs?
- progressive_dad 11y ago
  Only if gas stations can charge ludicrously higher rates to your provider but lower it to something reasonable for uninsured drivers.
  - mcherm 11y ago
    No, that's backwards. The gas stations charge ludicrously higher rates to the uninsured drivers, but charge less than the wholesale price of gas to the providers. I think. I can't be sure because the price of gas isn't posted, and the gas station attendants don't even know the price. All you can do is pump it, then see what number pops up afterward. And everyone thinks this is "normal".
ma2rten 11y ago
Car insurance is worse actually. In the US if you have an accident with bodily injury the settlement can go in the millions, but the legal limit for car insurance is as low as 20k. They do the opposite of what insurance should do, hedge against a small risk and leave you unprotected from big risks.
- thaumasiotes 11y ago
  > They do the opposite of what insurance should do There are a couple of points you seem to be missing: - This insurance works precisely as you say it should, but on a lower scale. In exchange for a fee, it protects you, the holder, from losses too large to easily absorb. If those losses aren't too large for you to absorb, you can post a bond instead of having insurance. - You don't have car insurance for your own benefit. You have it for everyone else's benefit (that's why you're required to have it). It doesn't matter if you get wiped out by the fines resulting from an accident because that's not why you have insurance. The point of your insurance is to make sure that the parties you injure can recover something. The legal limit is therefore set at an appropriate level for that goal. If you want insurance that protects you at a higher level than that, you can easily purchase some with a higher cap.
  - jacalata 11y ago
    The point of insurance is to protect the person you hit by ensuring someone will pay their costs. If the legal minimum is far below the potential costs, then the insurance is failing at that purpose, because it doesn't matter how many millions you settle for, most people can't pay it to you and being owed by a deadbeat doesn't pay hospital bills.
    - xtreme 11y ago
      Should the legal minimum be close to the highest potential cost? You can cause massive damage if you hit a luxury car, or are involved in a multi-vehicle accident. Should you be forced to carry insurance that would cover these scenarios? That would drive up the premium of the legally required insurance, and likely increase the number of uninsured motorists. Considering most accidents result in rather small payouts, there must be a cost-benefit analysis done to determine the legally required minimum.
      - nommm-nommm 11y ago
        I think a fair legal minimum is the average price of a new car.
tikhonj 11y ago
That's the thing: medical insurance in the US is a weird hybrid between actual insurance and a complicated web of collective purchasing agreements. They let large organizations, companies and even individuals to get together by proxy to get bulk discounts on health costs. You can see why this second function might be useful, although it also does weird things to the market. But it feels like it should be fundamentally distinct from insurance against risk. Having both functions in one line-item just makes everything more complex and confusing. It also makes sense because medical insurance is a special channel for companies to give additional compensation to their workers. I've heard this originated from salary caps during WWII—turns out that if you try to ham-fistedly control the markets, you'll get weird ripple effects. If you're just channeling money to your employees, paying for their routine expenses makes sense especially since people can appreciate immediate benefits like that a lot more than the abstract benefit of having a low-probability risk hedged for you. If you were actually going to design a system for managing health care from the ground up in the US, this is absolutely not what you would come up with. It's hideous legacy code. And it's just as hard to update as legacy systems, with the additional barrier of politics thrown in. It doesn't really make sense, but you can sort of trace the reasons it evolved the way it did. And it's not changing significantly any time soon.
- maxerickson 11y ago
  It's not apparent to me that my insurance company is engaged in attempting to get bulk discounts. I have some recent bills that are 4x or 5x the supposed national rate for the services, having that hospital in their network appears to be a choice to try to collect premiums from people that live near it rather than the result of any sort of negotiation on my behalf. I have the idea that we should ban networks. Not that we should ban insurance companies from trying to negotiate, but that we should prevent providers from charging arbitrarily different rates to different people. Especially hospitals that benefit from exclusive licenses, they should suffer under price regulation in exchange for those licenses (never mind that those licenses are intended to allow them to charge more for those services and "cost shift").
  - jrockway 11y ago
darawk 11y ago
I wish I could upvote this more than once. In my view, this is one of the fundamental problems with the healthcare system in the US. People may not love car insurance - but it's a far cry from the vitriol reserved for medical insurance. And I think this issue is the fundamental cause of that problem. I want to be insured against rare, ultra high cost events that would otherwise wipe me out financially. I don't want to be insured against the price of my yearly checkup or an antibiotic prescription. I'm happy to pay for that out of pocket, and do my own price shopping for it.
- chefkoch 11y ago
  And do you want to be insured against a chronic illness that will require regular not that expensive doctors visits like rheumatism or gout?
  - darawk 11y ago
    I mean, obviously it's a spectrum. I think for me personally i'd opt not to be insured for that. But I wouldn't say that someone who does is being unreasonable. My point is just that with insurance companies being expected to should literally all medical costs, price signaling is taken out of the market, and that is a bad thing.
- Spooky23 11y ago
  Google for State Farm customers with personal injury claims. Plenty of vitriol out there.
IndianAstronaut 11y ago
The vast majority go for regular visits, so the small copay makes it seem they are getting good value.
- dexterdog 11y ago
  But regular visits for me were cheaper when I had no insurance and told the doc that up front. Now I pay $350/month so that I can pay more for my regular visits.
KKKKkkkk1 11y ago
Health care works using a subscription model all over the world. You are simply confused by the word "insurance".

by sna1l 11y ago

bobbyi_settv 11y ago

> Imagine if you used your car insurance to pay for gas. That would be ludicrous. That's not ludicrous enough for me. Can the insurance be provided through my employer so that I'll need different insurance to pay for my gas if I switch jobs?

progressive_dad 11y ago
Only if gas stations can charge ludicrously higher rates to your provider but lower it to something reasonable for uninsured drivers.
- mcherm 11y ago
  No, that's backwards. The gas stations charge ludicrously higher rates to the uninsured drivers, but charge less than the wholesale price of gas to the providers. I think. I can't be sure because the price of gas isn't posted, and the gas station attendants don't even know the price. All you can do is pump it, then see what number pops up afterward. And everyone thinks this is "normal".

ma2rten 11y ago

Car insurance is worse actually. In the US if you have an accident with bodily injury the settlement can go in the millions, but the legal limit for car insurance is as low as 20k. They do the opposite of what insurance should do, hedge against a small risk and leave you unprotected from big risks.

thaumasiotes 11y ago
> They do the opposite of what insurance should do There are a couple of points you seem to be missing: - This insurance works precisely as you say it should, but on a lower scale. In exchange for a fee, it protects you, the holder, from losses too large to easily absorb. If those losses aren't too large for you to absorb, you can post a bond instead of having insurance. - You don't have car insurance for your own benefit. You have it for everyone else's benefit (that's why you're required to have it). It doesn't matter if you get wiped out by the fines resulting from an accident because that's not why you have insurance. The point of your insurance is to make sure that the parties you injure can recover something. The legal limit is therefore set at an appropriate level for that goal. If you want insurance that protects you at a higher level than that, you can easily purchase some with a higher cap.
- jacalata 11y ago
  The point of insurance is to protect the person you hit by ensuring someone will pay their costs. If the legal minimum is far below the potential costs, then the insurance is failing at that purpose, because it doesn't matter how many millions you settle for, most people can't pay it to you and being owed by a deadbeat doesn't pay hospital bills.
  - xtreme 11y ago
    Should the legal minimum be close to the highest potential cost? You can cause massive damage if you hit a luxury car, or are involved in a multi-vehicle accident. Should you be forced to carry insurance that would cover these scenarios? That would drive up the premium of the legally required insurance, and likely increase the number of uninsured motorists. Considering most accidents result in rather small payouts, there must be a cost-benefit analysis done to determine the legally required minimum.
    - nommm-nommm 11y ago
      I think a fair legal minimum is the average price of a new car.

tikhonj 11y ago

That's the thing: medical insurance in the US is a weird hybrid between actual insurance and a complicated web of collective purchasing agreements. They let large organizations, companies and even individuals to get together by proxy to get bulk discounts on health costs. You can see why this second function might be useful, although it also does weird things to the market. But it feels like it should be fundamentally distinct from insurance against risk. Having both functions in one line-item just makes everything more complex and confusing. It also makes sense because medical insurance is a special channel for companies to give additional compensation to their workers. I've heard this originated from salary caps during WWII—turns out that if you try to ham-fistedly control the markets, you'll get weird ripple effects. If you're just channeling money to your employees, paying for their routine expenses makes sense especially since people can appreciate immediate benefits like that a lot more than the abstract benefit of having a low-probability risk hedged for you. If you were actually going to design a system for managing health care from the ground up in the US, this is absolutely not what you would come up with. It's hideous legacy code. And it's just as hard to update as legacy systems, with the additional barrier of politics thrown in. It doesn't really make sense, but you can sort of trace the reasons it evolved the way it did. And it's not changing significantly any time soon.

maxerickson 11y ago
It's not apparent to me that my insurance company is engaged in attempting to get bulk discounts. I have some recent bills that are 4x or 5x the supposed national rate for the services, having that hospital in their network appears to be a choice to try to collect premiums from people that live near it rather than the result of any sort of negotiation on my behalf. I have the idea that we should ban networks. Not that we should ban insurance companies from trying to negotiate, but that we should prevent providers from charging arbitrarily different rates to different people. Especially hospitals that benefit from exclusive licenses, they should suffer under price regulation in exchange for those licenses (never mind that those licenses are intended to allow them to charge more for those services and "cost shift").
- jrockway 11y ago

darawk 11y ago

I wish I could upvote this more than once. In my view, this is one of the fundamental problems with the healthcare system in the US. People may not love car insurance - but it's a far cry from the vitriol reserved for medical insurance. And I think this issue is the fundamental cause of that problem. I want to be insured against rare, ultra high cost events that would otherwise wipe me out financially. I don't want to be insured against the price of my yearly checkup or an antibiotic prescription. I'm happy to pay for that out of pocket, and do my own price shopping for it.

chefkoch 11y ago
And do you want to be insured against a chronic illness that will require regular not that expensive doctors visits like rheumatism or gout?
- darawk 11y ago
  I mean, obviously it's a spectrum. I think for me personally i'd opt not to be insured for that. But I wouldn't say that someone who does is being unreasonable. My point is just that with insurance companies being expected to should literally all medical costs, price signaling is taken out of the market, and that is a bad thing.
Spooky23 11y ago
Google for State Farm customers with personal injury claims. Plenty of vitriol out there.

IndianAstronaut 11y ago

The vast majority go for regular visits, so the small copay makes it seem they are getting good value.

dexterdog 11y ago
But regular visits for me were cheaper when I had no insurance and told the doc that up front. Now I pay $350/month so that I can pay more for my regular visits.

KKKKkkkk1 11y ago

Health care works using a subscription model all over the world. You are simply confused by the word "insurance".