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Insurance is not supposed to make routine things more affordable. It's supposed to spread the risk of catastrophic loss from unlikely events around to a large g

Insurance is not supposed to make routine things more affordable. It's supposed to spread the risk of catastrophic loss from unlikely events around to a large group of people so you don't have to worry about losing your house if you get struck by lightning. Everyone needs routine medical care at some point so an insurance model doesn't work there. You don't have gas or grocery insurance, do you? If that were a thing would we all expect to pay less for gas and groceries, or would we just be tacking on overhead for routine expenses for no reason? Using insurance for routine, affordable expenses is one of the problems. But it's a race to the bottom where insurance companies win, because everyone in the U.S. thinks "good" insurance pays for everything and makes a 17% profit out of nothing. In addition to the transparency the article advocates for, we'd probably be way better off with a universal health care stipend and very high deductible insurance for rare catastrophic events. Insurance should not be involved in routine care.

deleted 7y ago
[deleted]
habitue 7y ago
There's still a benefit in insurance for routine procedures to balance costs between the young and old. (As long as young people are required to have insurance)
- rossdavidh 7y ago
  ...but the fact that the median income of young people (at the beginning of their career, whatever it is) is much lower than old people, pretty much nullifies this. If you want to balance out the costs over a person's life, there are much better ways than making the coffeeshop barrista subsidize the middle-manager's health costs.
  - entee 7y ago
    The reason this logic fails is because income and healthcare costs are on different curves but of similar (or far greater in the case of healthcare) magnitude. Say you start out your career making $30K as a barrista and end up making $150K as a middle manager in your 60s. A single surgery can be $150-$300K and you're more likely to have them when you're older. Cancer patients can cost millions in a given year, again you're more likely to have that as you get older. I don't have the number for a diabetes patient off the top of my head but I think it's 10s of thousands a year. The income growth curve is far shallower than the healthcare cost curve, and the healthcare cost curve is essentially unbounded whereas for most people income doesn't go all that high. Remember median income in the US is something like $55-$60K. Most people won't ever see 6 figures and if they do, they'll see the very low end of that.
  - vkou 7y ago
    What about making the middle-aged middle-manager subsidize a retired grocery clerk's health costs?
rabidrat 7y ago
Agreed, calling it health 'insurance' is a horrible misnomer. But, I don't think that your solution (stipend + insurance) is good, since there are conditions that increase the frequency of 'routine' care. So, for instance, a diabetic with no income/wealth, who has to rely solely on their stipend for healthcare, would still be screwed with one of these conditions. You might say that insurance should cover this kind of condition and not consider it 'routine care', but we see how well this works in the current for-profit medical insurance system. Insurance providers seem to be okay paying out low-frequency high-cost events, since that's the risk profile they model, but they hate paying out recurring care costs. Once you become a recurring cost, it is in their profit interest to reduce your care, or get you off their rolls.
entee 7y ago
There's no reason an insurance provider can't manage a guaranteed cost every year. It's basically just an offset on the risk curve. You could look at health insurance like a buyer's club (we negotiate prices for a large group of customers) plus a true insurance (the unexpected happened, is expensive). The buyer's club portion can be useful in mitigating expenses for the unexpected. That said, nowhere in here is there a strong incentive to reduce costs (I go into this in more detail in a different comment on this topic). If you really think about it, an insurer just wants predictability, the actual cost is somewhat irrelevant as long as people can pay it. Because insurance is usually "purchased" and subsidized through your employer, you're somewhat disconnected from that price. Even if you weren't, you don't really have good alternatives. You can choose the private market (often less good plans without as strong a network) or you can choose no insurance at all. These aren't great choices, and frequently when you're making the "purchase" it's very very hard to know what you're buying. I've shopped around for insurance, it's quite difficult for them to answer, "I think I might need this thing, how much will it cost me with your plan?" The whole system needs to be rethought. Likely through a combination of forced transparency, mild price controls, breaking up monopoly-like consortia within the industry and forced standardization of some products to make them understandable.
octorian 7y ago
> Insurance is not supposed to make routine things more affordable. It's supposed to spread the risk of catastrophic loss from unlikely events around to a large group of people so you don't have to worry about losing your house if you get struck by lightning. Everyone needs routine medical care at some point so an insurance model doesn't work there. And this is why all of our heated political debates go nowhere in the US. You have Democrats ranting and raving over how they want to provide health insurance for everyone, even if private companies help provide it. (With their supporters full of sob stories.) You have Republicans ranting and raving over how great it is to keep everything private and allow insurers to not cover everyone. (With their supporters pretending its just "insurance" you can live without.) Meanwhile, its not really "insurance" at all. Its basically a cartel of companies that negotiate a situation where healthcare is effectively unaffordable without them acting as an intermediary.
jcl 7y ago
> You don't have gas or grocery insurance, do you? Some people do have analogous "insurance" for gas or groceries: Anyone with a Sam's Club, Costco, or Amazon Prime membership pays a subscription fee so that they can get a negotiated discount on routine, affordable expenses. So, yeah, I guess most "health insurance" could be more accurately called "healthcare buyer's clubs (that also happen to include some insurance)". Unfortunately, we're in the late stages of an economy where the buyer's clubs have eaten the entire market and are free to extract fat margins with little consequence.

deleted 7y ago

[deleted]

habitue 7y ago

There's still a benefit in insurance for routine procedures to balance costs between the young and old. (As long as young people are required to have insurance)

rossdavidh 7y ago
...but the fact that the median income of young people (at the beginning of their career, whatever it is) is much lower than old people, pretty much nullifies this. If you want to balance out the costs over a person's life, there are much better ways than making the coffeeshop barrista subsidize the middle-manager's health costs.
- entee 7y ago
  The reason this logic fails is because income and healthcare costs are on different curves but of similar (or far greater in the case of healthcare) magnitude. Say you start out your career making $30K as a barrista and end up making $150K as a middle manager in your 60s. A single surgery can be $150-$300K and you're more likely to have them when you're older. Cancer patients can cost millions in a given year, again you're more likely to have that as you get older. I don't have the number for a diabetes patient off the top of my head but I think it's 10s of thousands a year. The income growth curve is far shallower than the healthcare cost curve, and the healthcare cost curve is essentially unbounded whereas for most people income doesn't go all that high. Remember median income in the US is something like $55-$60K. Most people won't ever see 6 figures and if they do, they'll see the very low end of that.
- vkou 7y ago
  What about making the middle-aged middle-manager subsidize a retired grocery clerk's health costs?

rabidrat 7y ago

Agreed, calling it health 'insurance' is a horrible misnomer. But, I don't think that your solution (stipend + insurance) is good, since there are conditions that increase the frequency of 'routine' care. So, for instance, a diabetic with no income/wealth, who has to rely solely on their stipend for healthcare, would still be screwed with one of these conditions. You might say that insurance should cover this kind of condition and not consider it 'routine care', but we see how well this works in the current for-profit medical insurance system. Insurance providers seem to be okay paying out low-frequency high-cost events, since that's the risk profile they model, but they hate paying out recurring care costs. Once you become a recurring cost, it is in their profit interest to reduce your care, or get you off their rolls.

entee 7y ago

There's no reason an insurance provider can't manage a guaranteed cost every year. It's basically just an offset on the risk curve. You could look at health insurance like a buyer's club (we negotiate prices for a large group of customers) plus a true insurance (the unexpected happened, is expensive). The buyer's club portion can be useful in mitigating expenses for the unexpected. That said, nowhere in here is there a strong incentive to reduce costs (I go into this in more detail in a different comment on this topic). If you really think about it, an insurer just wants predictability, the actual cost is somewhat irrelevant as long as people can pay it. Because insurance is usually "purchased" and subsidized through your employer, you're somewhat disconnected from that price. Even if you weren't, you don't really have good alternatives. You can choose the private market (often less good plans without as strong a network) or you can choose no insurance at all. These aren't great choices, and frequently when you're making the "purchase" it's very very hard to know what you're buying. I've shopped around for insurance, it's quite difficult for them to answer, "I think I might need this thing, how much will it cost me with your plan?" The whole system needs to be rethought. Likely through a combination of forced transparency, mild price controls, breaking up monopoly-like consortia within the industry and forced standardization of some products to make them understandable.

octorian 7y ago

> Insurance is not supposed to make routine things more affordable. It's supposed to spread the risk of catastrophic loss from unlikely events around to a large group of people so you don't have to worry about losing your house if you get struck by lightning. Everyone needs routine medical care at some point so an insurance model doesn't work there. And this is why all of our heated political debates go nowhere in the US. You have Democrats ranting and raving over how they want to provide health insurance for everyone, even if private companies help provide it. (With their supporters full of sob stories.) You have Republicans ranting and raving over how great it is to keep everything private and allow insurers to not cover everyone. (With their supporters pretending its just "insurance" you can live without.) Meanwhile, its not really "insurance" at all. Its basically a cartel of companies that negotiate a situation where healthcare is effectively unaffordable without them acting as an intermediary.

jcl 7y ago

> You don't have gas or grocery insurance, do you? Some people do have analogous "insurance" for gas or groceries: Anyone with a Sam's Club, Costco, or Amazon Prime membership pays a subscription fee so that they can get a negotiated discount on routine, affordable expenses. So, yeah, I guess most "health insurance" could be more accurately called "healthcare buyer's clubs (that also happen to include some insurance)". Unfortunately, we're in the late stages of an economy where the buyer's clubs have eaten the entire market and are free to extract fat margins with little consequence.