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Taking it a step further, I would argue that it ceases to be an 'insurance' product if allowed to purchase after the insured event has passed. Our failure to f

by Judson 10y ago

Taking it a step further, I would argue that it ceases to be an 'insurance' product if allowed to purchase after the insured event has passed. Our failure to find a non-insurance 'hammer' with which to hit all of the health 'nails' is a larger issue.

chimeracoder 10y ago
> Taking it a step further, I would argue that it ceases to be an 'insurance' product if allowed to purchase after the insured event has passed. You can offer insurance against an event that has already occurred, but the insured price will always be slightly higher than the uninsured price. One could call that insurance, but it'd be a degenerate case, so at that point it's more of a word puzzle than a real question. > Our failure to find a non-insurance 'hammer' with which to hit all of the health 'nails' is a larger issue. Exactly - the problem is that people talk about health insurance like it's supposed to solve the problems that a wealth redistribution program would. Except, insurance is not a wealth redistribution mechanism - it has a completely different goal - and trying to turn it into one just results into the worst of all worlds (expensive and ineffective at achieving either goal).
- jameshart 10y ago
  I'm not sure what you mean by 'wealth redistribution' in this sense, unless you regard 'good health' as a form of wealth. The only wealth redistribution that is facilitated by insurance is from sick people to medical insurers and providers.
  - chimeracoder 10y ago
    > I'm not sure what you mean by 'wealth redistribution' in this sense, unless you regard 'good health' as a form of wealth. The only wealth redistribution that is facilitated by insurance is from sick people to medical insurers and providers. Pretend for a moment that everyone receives their annual physical, as medical guidelines recommend. (They don't, but it makes our example simpler.) And let's say that the fair-market price of providing the physical, accounting for all costs borne by the provider and their practice, is $100. (That is an arbitrary number I have chosen, also to make our lives easier). What will be the co-pay for the annual physical for an insured patient? The answer is that it will be $100 - there is absolutely no risk involved in this situation, so the expected payouts of the insurance company will be $100, and therefore they will incorporate that into their price. (The consumer will actually pay a bit more than $100 in total, because the insurance company has overhead costs, which are ultimately paid by the consumers as well). But of course, that's not the case, because the expectation is that health insurance will reduce these costs, and that people who can't necessarily afford $100 will still be able to have their physical. That's why health insurance isn't really insurance, except in name - we talk about it as insurance, but in reality, it's a wealth redistribution program tacked onto a risk smoothing product. By definition, insurance is literally not intended to save the insured person money, in expectation. The expected value of all claims will always be less than the expected value of all money paid to the insurer by the insured entity. (This does not hold for every individual, but it does hold in the aggregate - that's where the risk smoothing comes in). The insured person pays the insurer a premium[0] in order to reduce the uncertainty in how much they would have to pay on any given month without insurance. [0] Not as in "monthly premium", but as in "a premium on top of the expected value"
    - jameshart 10y ago
      I don't follow, unless you regard 'health insurance subsidies' as a part and parcel of 'health insurance'. Means-tested health insurance subsidies are absolutely a form of wealth redistribution, no doubt, just like housing subsidies are wealth redistributive - but that doesn't mean that the home rental market is wealth redistribution in disguise.
    - asdfasdfa11112 10y ago
      This only holds true if the physical only identifies disease that have downside risk. More realistically, most early identification situations can greatly reduce the cost of future care, eg the overweight 40 y.o. who intervenes to avoid being the obese 60 yo. It also ignores a number of other selection criteria and behavioral issues, which you are honest enough to note in your pretend for a moment intros. However, people who proactively care for their health carry "upside risk" as well as downside, which your scenario does not account for.
    - abalone 10y ago
      > By definition, insurance is literally not intended to save the insured person money, in expectation. You fundamentally misunderstand the concept of insurance. Group insurance is, by definition, a way to spread the cost of rare catastrophes around the group so that the affected individuals don't bear the full brunt. There is the full expectation that in the event of a major medical event you will save money. Try reworking your example around major medical events (e.g. a $500K hospitalization) rather than preventive care (the function of which is to reduce the risk of certain controllable medical events).
    - reissbaker 10y ago
      > What will be the co-pay for the annual physical for an insured patient? > The answer is that it will be $100 - there is absolutely no risk involved in this situation, so the expected payouts of the insurance company will be $100, and therefore they will incorporate that into their price. No. Even pre-ACA, insurance companies offered low co-pays. How did they do that? Because your monthly fees will over the course of a year add up to far more than the cost of an annual physical. The purpose of insurance is to protect yourself against rare, but catastrophic events: you will probably not experience a wide variety of expensive medical ailments, but if you do they will likely leave you in financial ruin if you're uninsured, so you pay an insurance company money to protect yourself against that risk. (Or, alternatively, your employer pays a health insurance company money to protect you against that risk, and offers that benefit to you as part of your total compensation package. Which is essentially the same as you paying for it, with some amount of risk differences and thus potentially lower costs due to the pooled employee health insurance policies, but that's outside of the scope of this discussion. TL;DR: it's still regular market economics.) You might wonder why insurance companies offered low co-pays at all — was it just some marketing gimmick? But no, you can explain that with regular economics too: insurance companies are incentivized to make annual physicals affordable and attractive, because they can catch potentially-expensive medical issues when they're still much less expensive, thus lowering costs for the insurance company.

by Judson 10y ago

chimeracoder 10y ago

> Taking it a step further, I would argue that it ceases to be an 'insurance' product if allowed to purchase after the insured event has passed. You can offer insurance against an event that has already occurred, but the insured price will always be slightly higher than the uninsured price. One could call that insurance, but it'd be a degenerate case, so at that point it's more of a word puzzle than a real question. > Our failure to find a non-insurance 'hammer' with which to hit all of the health 'nails' is a larger issue. Exactly - the problem is that people talk about health insurance like it's supposed to solve the problems that a wealth redistribution program would. Except, insurance is not a wealth redistribution mechanism - it has a completely different goal - and trying to turn it into one just results into the worst of all worlds (expensive and ineffective at achieving either goal).

jameshart 10y ago
I'm not sure what you mean by 'wealth redistribution' in this sense, unless you regard 'good health' as a form of wealth. The only wealth redistribution that is facilitated by insurance is from sick people to medical insurers and providers.
- chimeracoder 10y ago
  > I'm not sure what you mean by 'wealth redistribution' in this sense, unless you regard 'good health' as a form of wealth. The only wealth redistribution that is facilitated by insurance is from sick people to medical insurers and providers. Pretend for a moment that everyone receives their annual physical, as medical guidelines recommend. (They don't, but it makes our example simpler.) And let's say that the fair-market price of providing the physical, accounting for all costs borne by the provider and their practice, is $100. (That is an arbitrary number I have chosen, also to make our lives easier). What will be the co-pay for the annual physical for an insured patient? The answer is that it will be $100 - there is absolutely no risk involved in this situation, so the expected payouts of the insurance company will be $100, and therefore they will incorporate that into their price. (The consumer will actually pay a bit more than $100 in total, because the insurance company has overhead costs, which are ultimately paid by the consumers as well). But of course, that's not the case, because the expectation is that health insurance will reduce these costs, and that people who can't necessarily afford $100 will still be able to have their physical. That's why health insurance isn't really insurance, except in name - we talk about it as insurance, but in reality, it's a wealth redistribution program tacked onto a risk smoothing product. By definition, insurance is literally not intended to save the insured person money, in expectation. The expected value of all claims will always be less than the expected value of all money paid to the insurer by the insured entity. (This does not hold for every individual, but it does hold in the aggregate - that's where the risk smoothing comes in). The insured person pays the insurer a premium[0] in order to reduce the uncertainty in how much they would have to pay on any given month without insurance. [0] Not as in "monthly premium", but as in "a premium on top of the expected value"
  - jameshart 10y ago
    I don't follow, unless you regard 'health insurance subsidies' as a part and parcel of 'health insurance'. Means-tested health insurance subsidies are absolutely a form of wealth redistribution, no doubt, just like housing subsidies are wealth redistributive - but that doesn't mean that the home rental market is wealth redistribution in disguise.
  - asdfasdfa11112 10y ago
    This only holds true if the physical only identifies disease that have downside risk. More realistically, most early identification situations can greatly reduce the cost of future care, eg the overweight 40 y.o. who intervenes to avoid being the obese 60 yo. It also ignores a number of other selection criteria and behavioral issues, which you are honest enough to note in your pretend for a moment intros. However, people who proactively care for their health carry "upside risk" as well as downside, which your scenario does not account for.
  - abalone 10y ago
    > By definition, insurance is literally not intended to save the insured person money, in expectation. You fundamentally misunderstand the concept of insurance. Group insurance is, by definition, a way to spread the cost of rare catastrophes around the group so that the affected individuals don't bear the full brunt. There is the full expectation that in the event of a major medical event you will save money. Try reworking your example around major medical events (e.g. a $500K hospitalization) rather than preventive care (the function of which is to reduce the risk of certain controllable medical events).
  - reissbaker 10y ago
    > What will be the co-pay for the annual physical for an insured patient? > The answer is that it will be $100 - there is absolutely no risk involved in this situation, so the expected payouts of the insurance company will be $100, and therefore they will incorporate that into their price. No. Even pre-ACA, insurance companies offered low co-pays. How did they do that? Because your monthly fees will over the course of a year add up to far more than the cost of an annual physical. The purpose of insurance is to protect yourself against rare, but catastrophic events: you will probably not experience a wide variety of expensive medical ailments, but if you do they will likely leave you in financial ruin if you're uninsured, so you pay an insurance company money to protect yourself against that risk. (Or, alternatively, your employer pays a health insurance company money to protect you against that risk, and offers that benefit to you as part of your total compensation package. Which is essentially the same as you paying for it, with some amount of risk differences and thus potentially lower costs due to the pooled employee health insurance policies, but that's outside of the scope of this discussion. TL;DR: it's still regular market economics.) You might wonder why insurance companies offered low co-pays at all — was it just some marketing gimmick? But no, you can explain that with regular economics too: insurance companies are incentivized to make annual physicals affordable and attractive, because they can catch potentially-expensive medical issues when they're still much less expensive, thus lowering costs for the insurance company.