8 ms·

Acts of God

77 points by llambda 14y ago

raganwald 14y ago
An enormous number of words just to say, "Health Insurance is anti-selective." Which reminds me of a Jazz story. Miles Davis was chiding John Coltrane for the length of his solos. John shrugged, "Once I get going, I don't know how to stop." Miles rasped, "Try taking the instrument out of your mouth."
- tptacek 14y ago
  Did you seriously just preemptively write the thread-leading snarky comment for your own post? Nice try, Reg Braithwaite. But it won't work: how dare you compare your blog post to a Coltrane solo?
  - raganwald 14y ago
    I'm sooooooooo busted! Off to listen to "Sahara..."
  - srl 14y ago
    And here I almost missed that, and was about to DV him for an unnecessarily high snark/signal ratio.
- Mz 14y ago
  Hey, I worked for an insurance company for five years or so. Nice try, but sloppy. Flood insurance, which is the main thing you talk about, isn't health insurance. Car insurance, at least in the U.S., is fundamentally different from both health insurance and homeowners insurance. Your remarks prompted me to finally start a stub on the topic, something I have wanted to write about for a long time. Thank you for the inspiration. If I wind up mentioning your piece, and possibly critiquing it, hopefully you can feel flattered rather than attacked.
- ChuckMcM 14y ago
  Well that particular religious 'homily/joke/parable' is one of my favorites. I'm guessing the Darwinians will jump in here with "Gov't Health Insurance" subverts natural selection. But frankly I find the whole insurance vs market economies question much more nuanced than that. Of course it is the heretical to suggest that health care, itself is the public service (you know the Army kills/wounds people, the Medics save/heal people kind of thing).
lutusp 14y ago
> Up here in Canuckistan, we do have private insurance. You must, for example, privately insure your own dwelling against things like fire or burglary. "You must"? Not really, unless you have a mortgage. If you don't have a mortgage, if you actually own your house, you aren't required to buy insurance, and you may be much better off self-insuring. And now for the best-kept secret in the insurance business -- if an insurer evaluates your true risk and offers a policy, it's not worth it. Why? Because on average, you will have paid out much more in insurance payments than you will get back in the event of a claim. You would be better off putting the insurance payments into an investment that (a) will grow over time and (b) can be used against future loss. Do you doubt this? Ask yourself why an insurer would be willing to issue a policy on which he expected to lose money. Are insurance companies profitable? Yes, they are. Any questions? If you have a mortgage, you are required to buy insurance. If you don't, by all means ask yourself why you are willing to give your money away to an insurance company instead of investing it by yourself, for yourself. More detail here: http://arachnoid.com/wrong/index.html#Insurance http://arachnoid.com/wrong/index.html#Insurance EDIT: If you cannot afford to lose the insured item, then the above doesn't apply. I should have said this at the outset.
- raganwald 14y ago
  Poorly worded, I meant that if you wish to insure it, you must insure it privately. Thanks for pointing out the balderdash.
  - lutusp 14y ago
    It was just an excuse to jump onto one of my favorite soapboxes. But if you can edit the article, by all means do it -- I don't like to see insurance portrayed as mandatory, or the obvious action of a responsible person. That's only true sometimes, and most people can't say when that time is. A classic scene, when a retailer is offering one of those useless electronic service plans: customer says, "Do I benefit from this offer?". Salesman: "Absolutely!". Customer: "Then why are you offering it to me?"
    - raganwald 14y ago
pmonks 14y ago
As an American friend of mine once said: "why would we let facts get in the way of our illogical obsessions with socialism, encroachment by the state on personal liberty, etc. etc.?"
- bmmayer1 14y ago
  True dat.
randallsquared 14y ago
> This actually makes sense, because the "free market" doesn't work properly when it comes to flood plains. "This item I want isn't cheap" does not mean that markets don't work "properly", except where you define "properly" to mean whatever you want to happen.
- jacoblyles 14y ago
  I think what he means is that the people living on the flood plain want protection from risk at below the price it costs to provide that protection. The only way to do this is with taxpayer money.
  - skylan_q 14y ago
    That's the correct conclusion. Now one has to ask why someone who didn't make the mistake of living in a flood plain has to pay for those who choose to continue to take that risk. This attitude is all about destroying the notion of personal responsibility. Let everyone else bail me out.
    - raganwald 14y ago
      Ayn Rand, is that you?
      - skylan_q 14y ago
        No, I just believe that this is an attack on personal responsibility. No need to demonize.
    - NateDad 14y ago
      This is a straw man. The point of the article is health insurance, and no one chooses to break their leg, get burned in a fire, or develop cancer. But I'll take you up on it anyway, because it's still BS. How about the people in tornado alley? Or hurricane alley? Or everyone in California with all those earthquakes? Or mudslides or forest fires or or or... can you tell me no one in your state/province/whatever has ever had a natural disaster destroy their home?
scottmp10 14y ago
1. Providing government insurance is somewhat equivalent to having private insurances that you buy into right before birth of a new child. The rates would be very low (assuming you agree to pay the monthly fee consistently for the entire life of the person, similar to taxes) despite full coverage for life. Unfortunately, many people would not opt for this coverage and would prefer to wait until they need good insurance to opt in. Then they call insurance companies greedy or unethical for not providing them inexpensive insurance. Somehow paying a little extra in taxes doesn't seem as bad as paying for the insurance. Although for most people, putting the cost to the taxpayer means that people with more money end up paying for them. So in reality, the most significant effect of government-sponsored healthcare, etc, is to have those with more money provide coverage for those with less. 2. The other effect is that buying into insurance makes people less risk-averse. For instance, they would be more likely to live on a flood plain if they know they will be compensated for damage to their house. This is a net negative for society since it is wasteful of resources. Someone who doesn't want to pay the extra taxes and instead live a more risk-averse lifestyle doesn't have that choice when they are required to pay taxes that cover insurance.
- philwelch 14y ago
  It's even worse when the government subsidizes flood insurance. Then it's not just adverse selection, but the whole premise of insurance--pay a premium to mitigate risk--is gone, since it's not even profitable anymore, leaving us with a needless subsidized incentive to waste public funds in the long run.
- NateDad 14y ago
  #2 is a fallacy, which is what the original author had said. Look at all the people buying mansions on the coast of Florida that then get wiped out by hurricanes. Humans are very bad at gauging long-term risk.
  - philwelch 14y ago
    Those mansions have their insurance subsidized by the federal government. The only foolishness is institutional--to the homeowner, the government just buys you a new mansion every few years for below cost. It's a fantastic deal for them.
andrewljohnson 14y ago
Did you get the joke from the West Wing, or from the place the West Wing got it from, which I don't know?
- raganwald 14y ago
  I strongly suspect that this joke predates not only the TV show, but also the construction of the West Wing.
jacoblyles 14y ago
I don't buy it. I get health insurance between jobs because I know American health care is very expensive. I know if I tear a knee ligament playing ultimate frisbee it could force me into bankruptcy. So I pay someone slightly more than the expected cost of sports injuries in a man my age to insure against that risk. The regulators force me to insure against a bunch of other risks too that I don't need. But other than that meddling, it's a pretty classical insurance market. The real problem with American health care is just that it is very expensive compared to the rest of the world. We get better health outcomes on the high-end stuff in exchange (our cancer survival is tops), but overall health outcomes aren't great.
- kevingadd 14y ago
  There's a lot more wrong with American health care than prices. I know a lot of people who simply can't get insurance in the US at any price because of how the market works - and some of them are in great health and have been forever. It's actually quite close to raganwald's 'flood plain' example, where the insurers will outright refuse or quote impossible rates. And, as it happens, I can't buy insurance on the free market anymore either. I've never been hospitalized or needed surgery or been injured, so I used to get pretty affordable insurance and have no problem paying out of pocket. Then I saw a therapist and that was enough for every insurer I've contacted since to blanket refuse to insure me at any rate. According to the state agencies that regulate this stuff, that's how the system is supposed to work. Now, you could say that this is how an insurance market should work - maybe the reason people like me can't buy insurance at any price on the free market is because it's not possible to turn a profit by insuring us, statistically, even if individually we are incredibly healthy and pay a ton. I can buy that explanation. But do you think it's morally right for people to be unable to access basic preventative care at reasonable cost, and be unable to afford emergency care, just because statistically 5-10% of the people in their group are expensive? I think it's also worth considering the counter-example: group health in the US is comparatively quite sane. If your employer has a reasonable group health plan, you can count on having basic coverage, even if a pre-existing condition gets excluded for a bit when you first enter the plan. The employer's overall cost for the group might go up, but that's about it. A friend of mine found out that his company's rate for group health was nearly $2000/mo - apparently they had lots of high risk employees - but my past employer's group health rate, in comparison, was around $400/mo for good coverage.
jdreaver 14y ago
> They're such high risk, that no actuary will quote them a reasonable price. That makes sense. There is such a high chance of the insurer losing out on flood insurance money, that no one would want to buy flood insurance. > Private insurers are unapologetic about this: The prevailing thought is, when nature strikes, the government must bail people out. > ...the "free market" doesn't work properly when it comes to flood plains... Let me get this straight. The author states that the free market fails when it comes to flood insurance, but in the next breath states why government is the problem. Private insurers can't possibly compete with a free service provided by taxation. If the government wasn't guaranteed to bail people out, then they would probably buy flood insurance in droves (or leave because, like the author said, it's expensive to live in a high-risk area like a flood plain), therefore driving the cost down. All of this could happen without government intervention. Furthermore, so many people have moved there because government intervention prevented the price system could not reflect the high risk of floods. I really don't see how to author can blame the free market for the lack of flood insurance when it is the government mucking up the price system.
- wisty 14y ago
  No, the point is - flood insurance (on a floodplain) is so expensive people simply don't get it. You can say people should leave if they can't afford it, or they should suck it up and buy it, but it's not going to happen. The USA has the same problem - you couldn't get people to move from New Orleans (until they were actually washed away), San Francisco (an earthquake zone) or Seattle (there's a massive tsunami waiting to go off there any time in the next millennia). People are stupid. They settle in dangerous areas, then the government will be forced to bail them out. It's not 100% efficient, but the alternatives (letting people suffer, or draconian regulations like compulsory flood insurance or strict zoning laws) aren't politically acceptable. And the costs of the government insuring people just isn't so high that it's completely unacceptable - especially when you consider the economic cost of them not covering people (e.g. homeless people clogging up emergency rooms because they couldn't get their cough looked at when it was simply a mild case of pneumonia).
  - jdreaver 14y ago
bmmayer1 14y ago
One question that no one asks: why do we insist on paying for healthcare with insurance in the first place? Imagine a world where everyone paid for health expenses out of pocket, where there was competition and price transparency for all procedures which means much lower prices (instead of prices being driven up by government-subsidized plans), and most importantly, doctors had to answer to us as consumers instead of insurance companies?
- raganwald 14y ago
  I think you need to first state what you're trying to accomplish. Is lower prices an end unto itself? if so, I doubt that you will get it from the "free market." It's too inefficient. When you slip and break your leg, you can't take your time shopping around for the lowest price care. You can't buy a lung transplant when it's cheap, save it, and use it when you need it. Some people simply want people to pay their own way for ideological reasons. I can understand that without agreeing with it.
  - bmmayer1 14y ago
    Insurance is a really terrible way to pay for any commodity. If I paid a fixed price to go to the grocery store every month and get everything I needed off the shelves, the grocery store would go bankrupt. Obviously, insurance works for event that are unlikely, as a way to mitigate risk. But everyone dies eventually. Everyone will need healthcare. Because of the nature of insurance, it drives up prices, it misaligns incentives, and our particular mode of insurance--subsidized employer-provided insurance--has the added injury of forcing people to stay in their jobs for the sake of their health and limiting mobility. Yet, not only do we accept insurance as the best way to pay for healthcare today, we just doubled down on it with Obamacare, requiring people who previously weren't in the insurance market to participate. My solution is to let healthcare be another commodity, like food, where there is widespread competition and choice, and thus lower prices and more transparency. With your example, it's not like someone makes a choice in emergency care right now either. But at least you could establish a relationship with a hospital ahead of time. How about an app that lets you join a hospital network for emergencies? What about an annuity plan that lets you save up for a lung transplant ahead of time if/when you need it? I don't know what health entrepreneurs would come up with. But there are solutions out there that will never be tried as long as insurance companies have a stranglehold on the health industry.
zacharyvoase 14y ago
The points I got from this were: 1) People enjoy living in flood plains; 2) People who live in flood plains can't afford flood insurance; 3) Therefore, it's everyone else's job to compensate them for the cost of flood damage. Finally, this is used (somehow) as an argument for universal healthcare. This logic seems faulty.
- raganwald 14y ago
  You seem to have an ideological objection to the argument. Maybe you should simply state that you are perfectly okay with a city of people being left in dire straits (heh) when the river overruns its banks or the levees break. I can understand that, even if I don't agree with it, and that makes a lot more sense than saying my argument is faulty when what you really believe is that a society that takes care of its own is faulty ;-)
  - SlackerATX 14y ago
    People are naturally risk adverse. Government subsidized flood insurance incentivises people into living in locations they wouldn't otherwise live. The free market is telling people not to live there because it's prohibitively costly. Government puts people's life in danger by manipulating the cost of living in dangerous places. It forces society to fit the bill for the endless cycle of destruction then reconstruction. Besides the fact government interference in the insurance market does more harm than good to those it intends to protect, the wealthy are the ones that most benefit from government flood insurance. The vast majority of people that live in places where insurance is unavailable or too expensive are those wealthy enough to build a house on a hurricane prone beach. (Think too of the fire/earthquake prone hills of glorious sunny California) What you're really asking for is those of average means to subsidies second beach houses for the rich. Not only is your argument faulty it's immoral. We're all better off taking care of ourselves than being taken care of by morons. The government solution to a problem is inevitably worse that the problem itself.
    - astalwick 14y ago
      The cities are already there. That's a done deal. And of the people that live there, not everyone lives there because they CHOSE it. Not everyone has the ability to up and move to a newer, safer city simply because they're worried about floods. It's just not that easy. So, given that cities ARE built on flood plains, and that flood insurance IS refused for those people that live there, what are we going to do? Abandon them entirely when a flood happens? Good luck with that. What do you think will happen to the government that says "too damn bad, you should've moved?" By the way, if you think Winnipeg is 'beach houses for the rich,' dude.. yeah..
chris_mahan 14y ago
Except of course that if person A chooses to be very health-conscious, exercises, eats healthy, and doesn't abuse coffee, sugar, salt, tobacco, and alcohol, and pays more for better food and gym membership that person B who eats fast food, drinks, smokes, and eats kit-kats all day long, then person A gets taxed to pay for person B's surgeries and other treatments. This doesn't seem fair at all. It makes it look like all the people living in the hillside because they didn't want to move to the floodplain have to pay for the guy's house in the flood plain even though they warned him not to build there. Seems to me that everyone would then say: "well, let's not be healthy, let's not eat well, since the government will pay for all our surgeries and medicine..." What happened to personal responsibility?
- waterlesscloud 14y ago
  And obviously we should include risky sexual behavior and unplanned pregnancies on the list of things people should be personally responsible for as well. And all sorts of sports and outdoors activities that raise risk. It's only fair.
- Falling3 14y ago
  And what about the (very common) scenario where person A actually contracts an expensive disease based on environmental factors that are largely out of their control and person B lucks out with great genes and has no significant health issues. I don't think most people have a problem with personal responsibility in this context (theoretically). But the healthcare debate is SO much more complicated than that.
- NateDad 14y ago
  Yeah, 'cause gastric bypass and daily insulin injections are gobs of fun. Humans are really bad at long term risk assessment. No one says "I'm going to eat 2000 extra calories every day because the government will pay for my daily insulin injections when I get diabetes". They say "bah, it won't happen to me".
- wisty 14y ago
  > Seems to me that everyone would then say: "well, let's not be healthy, let's not eat well, since the government will pay for all our surgeries and medicine..." The government might pay for your health care, but they can't reincarnate you if you die. So there's still a reasonable incentive to stay fit. There's some UK TV show where the government (I think) is paying for fat people to get stomach staples. Preventative medicine can save money in the long run, and public health systems are often more willing to do it (since the guys in charge care about the next election, and not just the next quarter).
tmoertel 14y ago
What worthwhile benefit does society receive for underwriting the cost of rebuilding property in flood plains? I mean, if you build a house where it's likely to be destroyed, it obviously benefits you to make your inland neighbors pay for your house, should it be destroyed. But how does it benefit your inland neighbors? What do they get that is worth the cost of underwriting your risky behavior?
- raganwald 14y ago
  As I noted above, after the 1957 Hurricane in Toronto, the city appropriated the floodplains. There was no benefit to rebuilding when people could easily be relocated. The trouble with Winnipeg is that it's an entire city. It's an economic engine that was built on a river at the time when river commerce was vital. Moving the entire city is infeasible at this point in time, so the givernment assumes some of the flood risk and mitigates some of it with civic projects.
untog 14y ago
The only criticism I have of this comparison is that, well, maybe people shouldn't be living in flood plains. Yes, I understand why people want to live near Winnipeg and that there's limited space, but we may reach a certain point where we say "tough, the government won't bail you out for living in an at-risk area". Certainly, in New York State the Governor has announced plans to buy up waterfront land from people wrecked by Sandy to make sure that others don't make the same mistake. Health isn't the same. We can't say "well, maybe you shouldn't have gotten cancer" to someone who develops it through no fault of their own. We can choose where to live, but we can't (often) choose our health.
- raganwald 14y ago
  There is a certain amount of that going on. After Hurricane Hazel in Toronto, the government did buy up a lot of land on the Humber and Don rivers where houses were swept away, they are now parkland. the trouble is, moving people out of a flood plain within a city is easier than moving an entire city that is a substantial economic entity in its own right. So I think you're right that where practical, people shouldn't live in flood plains, and perhaps they shouldn't even have a choice in the matter.
- bmmayer1 14y ago
  You can certainly choose not to smoke, and to exercise, and to take care of yourself in general. We do introduce a principal agent problem into the mix when we start letting people get their healthcare paid for by other people.
  - untog 14y ago
    Yes, and that's why I added "often" to my last sentence. But while you can certainly avoid some illnesses by making good life choices, it's still out of your control. You can have never touched a cigarette and still get lung cancer. In fact, that opens up another reason for public healthcare- many illnesses are caused by society as a whole. That second hand smoke from the man sat next to you at the bus stop is an individual thing, but the pollution coming out of the power station on the edge of town is a far broader issue. You could say "fine the power company!", but that's short sighted- everyone benefits from the power they provide. As a society we have decided that x level of pollution is acceptable in order for us to have y level of comfort. The side variable is the number of illnesses caused by that pollution, and I think there's a strong argument that the costs of that should be borne by society.
spenrose 14y ago
Really nice piece. Thank you.
deleted 14y ago
[deleted]
ctdonath 14y ago
This actually makes sense, because the "free market" doesn't work properly when it comes to flood plains. In theory, people would never put their homes on a flood plain if they couldn't get flood insurance. But the market for dwellings is highly irrational. Dunno about Winnipeg's historical geography, but take a look at old New Orleans maps: people didn't build in the floodplain, for obvious reasons. Once government stepped in with grand assurances of levees ("we'll stop the flooding") and welfare ("if that doesn't work, we'll take care of you"), buyers were blinded to the natural realities. For decades, I'd see annual magazine articles opining "ya know, New Orleans is gonna flood again" - then it did. It's not that "the free market doesn't work properly when it comes to flood plains", it's that government interference with its promise of what amounts to (and the article advocates) "free insurance" doesn't work properly. People build there because they're lied to: "yeah, sure, if something bad happens we'll confiscate the money you need from others and give it to you". We're now in a time where a whole lot of promises by a whole lot of governments - promises of "free insurance" included - are coming to hit the reality that "socialism fails when you run out of other people's money." People take risks of natural disasters (floods, tornados, ice, whatever) everywhere. Hurricanes in Florida, blizzards in Canada, tsunami in Indonesia, tornados in Kansas, flooding in Winnipeg... It's up to them to decide what risks they'll take, what potential losses they're willing to accept as tradeoff for what probable benefits, and how they're going to prepare for disaster. Free market takes the very real facts of availability & limitation and disperses it in a fair manner; government intervention all too often distorts these facts, overpromises, underdelivers, and on the whole operates by garnering the support of many by promising to take from few by force.
praptak 14y ago
You can move away from flood risk, you cannot move away from an unlucky mutation. So covering the former from public money feels less justified than the latter, at least from the veil of ignorance point of view.
- DannyBee 14y ago
  I'm okay with this, with the proviso that it may not have been a flood risk when you built there. I mean, there are plenty of houses that have been around 50-70 years, and with water levels rising, are now in flood plains that they weren't. This of course, could be taken care of by subsidizing it based on when you bought the place vs when it became part of a flood plain (FEMA issues flood maps, so you don't have to deal with local politics at least)
deleted 14y ago
[deleted]
snowwrestler 14y ago
Private health insurance works fine for a large percentage of the U.S. population. It's worked well for 3 generations of my family, for example, and there is plenty of data that shows similar successes for many millions of other people. There are situations where it does not work well, and it is appropriate that the government steps into those situations. The U.S. government already does this, with Medicare, Medicaid, and Social Security. Just like they provide flood insurance to the few people who need it. But neither the U.S., nor Canada, have stepped in to take over the entire homeowner insurance market. Why not? Because it works well enough the way it is. There's no need. Likewise, replacing the entire private U.S. health insurance industry with government-run single payer is not needed. It would be hugely risky, but with little marginal benefit for those who would be most affected.
- kevingadd 14y ago
  I don't think you can claim that it's not needed just because a 'large percentage' of the population is well-served. The United States' population is over 313 million people according to the last census. Would you be okay with 3 million people dying or living in perpetual poverty because they don't have access to preventative/emergency care? Politicians in the US regularly make a fuss about things that affect less than 3 million people. Now, you can argue that any government-run single payer system would have 'marginal benefit', but you'd have to work pretty hard to do worse than what we have now for those people.
  - snowwrestler 14y ago
    > Would you be okay with 3 million people dying or living in perpetual poverty because they don't have access to preventative/emergency care? Obviously not, which is why I said that it is right that the government should step into those kinds of situations. But now let's picture 3 million people for which private insurance works fine. Why should the government take over their insurance?
- mimiflynn 14y ago
  Medicare doesn't pay if the patient doesn't show improvement. If the person is dying, medicare will not pay for their care, leaving dying people and their families to choose between pain and debt. We will all die. Why, in this world of medical advancements, can't we all help each other die as painlessly as possible?
nagrom 14y ago
Whenever I read about natural disasters affecting some large urban dwelling, e.g. Winnipeg, New Orleans, I always wonder why we still have that problem. Not that people are building on that land, but that we haven't yet figured out how to live safely and conveniently on flood plains, etc. The health care analogy is rather than spending public money on fixing broken people, spend money on making fewer people broken in the first place. Better preventative measures, better safety rules, healthy eating campaigns, more anti-ageing research, etc. Surely when looking for 'stimulus' plans, this kind of thing that will work out net-positive financially for the government and result in a better quality of life for people in the affected area should be amongst the first thing getting funded? In short: why on Earth are we still subject to the whims of God?
- __hudson__ 14y ago
  I think you are right as there are ways to mitigate natural disasters. The question is whether or not there is political will to pay for the mitigation measures until the disaster happens. Winnipeg had been flooded severely several times in the last hundred years until the 1970s when a giant floodway was created which could divert a river's worth of water around the city. Since then the floodway has saved the city from numerous large floods and has just recently been expanded to provide protection for a 1 in 700 year flood. It seems unfortunate the city was catastrophically flooded several times before that monetary expenditure was politically acceptable.
pdeuchler 14y ago
A well written article but it seems mostly like a re-hash of the basic argument for government provided healthcare, not something addressing large, pressing problems facing implementations of public healthcare. I'll be the first to advocate the right to be treated, but this needs to be done extremely carefully. For example: - Government is notoriously inefficient. How can we fix government bureaucracy in a sector that requires speed ("Can we operate now?") and offers lean margins? - Modern insurance companies pay top dollar for mathematical modeling and financial services. Will/Can the government do this? - Does a morbidly obese person qualify for a life-saving liposuction on the tax-payers dime? - Do you perform life saving abortions on the tax-payers dime? - Do you tax progressively based upon risk and past history? If yes, does that mean that the poor are unfairly taxed vs. the rich since the rich have better quality care? If not, should someone who is a health nut be taxed the same as those who dismiss their body? Private companies can throw away people's morals, prejudices, philosophies. If you don't like it, don't buy it. But once you introduce government (and something mandatory) you encounter issues that were never even remotely related before. A lot more needs to be discussed on this topic than just "it's like flood insurance". Edit: Formatting
- raganwald 14y ago
  Now that you explain it like that, I see it's impossible to provide cost-effective health care for a nation of people with anything except staggering inefficiencies. I don't know why this isn't obvious to me, sitting here in Toronto. I clearly haven't thought this through. ;-)
  - pdeuchler 14y ago
    I can't tell if you are being sarcastic or not, but I'm just going to respond as if you are. Could it be impossible to provide cost effective insurance against "Acts of God" aka "Nature" to a nation of people without staggering efficiencies? I think it's a very real possibility that this could be a pipe dream right now for a country the size of the United States. Why is it so hard to believe that we may not ever be able to mitigate Nature? If you would like to draw comparisons between the US and Canada, the U.S. has 315 million people with a 34% obesity rate. Canada has 33 million people with a 24% obesity rate. That's a difference of ~99,231,174 obese people. If you notice, that difference is actually three times larger than Canada's entire population. I highly doubt we can apply very much of the implementation from Canada to the United States. The wheel very well may need to be re-thought. This is the equivalent of scaling any startup. Anyone can write a twitter clone in a couple hours, it's really not that hard. However, it takes some serious thinking, engineering, thought and complexity to scale that simple CRUD app to millions of users. Your comment seems rather like the owner of a small business complaining that the CEO of a Fortune 500 company can't control his employees as well as he can.
dougk16 14y ago
Insurance doesn't work, period...for anything. It's gambling in reverse, and the house always wins, especially in the last few decades when they can crunch so much data and know the price points with great precision. What's worse is that insurance companies are becoming even more monolithically inefficient than government agencies while still racking in obscene amounts of cash, without having to do anything more than bombard you with horrible advertisements featuring talking geckos. The fact that some insurances are required by law (in the US at least) disturbs me deeply.
jacoblyles 14y ago
There's not a lot of meat here. If you really want to dive into the details of the regulations, costs, and incentives of the US health market you can do so elsewhere. But this is just an eloquent expansion upon a particular political talking point. You won't learn much besides raganwald's political leanings. I buy arguments that health insurance breaks down for the very old and the very sick. But otherwise there is no theoretical reason for believing you can't insure health risk. However, there are seven decades of bad regulation which complicates the matter in the US.
deleted 14y ago
[deleted]
jeffdavis 14y ago
"They're such high risk, that no actuary will quote them a reasonable price." That is just plain wrong. The reason it's hard to insure people on a flood plain is not that they are high risk. It's because the risk of flood is too statistically dependent: if you get flooded, your closest 1000 neighbors probably also got flooded. Unless you are a very large insurer (to the point bailing out ten thousand homes is just another day at the office), it's just really hard to hedge that risk. Same thing for earthquakes. Insurance works best on independent risks: car accidents, major medical events, lawsuits, even fires. "The prevailing thought is, when nature strikes, the government must bail people out." So the author's claim is essentially that the people of Canada want to subsidize the risky lifestyle of people on flood plains? I guess it's probably true to a degree; people prefer to have costs hidden from them by indirection. But that doesn't mean that it makes sense economically. What might be a better analogy is flood insurance and insuring the health of people with unhealthy lifestyles. Do we want to subsidize people who eat junk food all the time and never exercise? For the most part, we are (in US and Canada, at least), but I don't think that's a good idea, either.
geoka9 14y ago
I wonder if the insurance payments (~$65 per month) is enough to cover the ongoing healthcare costs even when everybody has to pay up. I mean, if it was as simple as charging everybody 65 bucks, you'd think the US wouldn't have the problem where many people can't afford to pay for medical care.
spikels 14y ago
Wrong analogy - Not a valid argument for government health insurance. There may be other justifications but this is not one. If this were really true we would already have government provided health insurance everywhere because private insurers would have gone bankrupt long ago. Flood insurance is fundamentally different from health insurance because floods cause large losses for large numbers of people at the same time (i.e. highly correlated incidence of losses). This means the insurer or insurers would have to make a huge payout in the event of a flood. If this payout is greater than all their resources, then everyone can't fully rebuild their home. Most people can't afford to rebuild their home if it is destroyed because they do not have the resources. Similarly private insurers simply can't afford to rebuild everyone's home at the same time. And while some insurers might be willing to take the risk any responsible regulator should stop them. Governments are often the only entities with the enormous resources to make these huge payouts. Therefore we have an vaild argument for the government providing flood or earthquake insurance. Health issuance is entirely different because large health expenses do not occur to large numbers of people at the same time. Health insures are not going bankrupt because of flu epidemics. Instead they set their rates to cover these predictable payouts as well as generate a profit. Unlike rebuilding an entire home most health expenses are affordable by most patients. It is only occasionally that the required treatment is so expensive that we need a third party to pay for it. In some countries this is done by private insurers and providers and in some it is done by governments. While this is not a good argument for government health insurance there are many. Unfortunately this is a very complex area requiring expertise in many areas: insurance, economics, regulation, politics... and perhaps even software development.
rjknight 14y ago
The argument appears to be that we should compensate people for bad luck, whether that's living on a flood plain, or suffering from poor health. But why stop there? Why not compensate people for their less-than-optimal genes? It's well established that people of below-average heights earn less over a lifetime than tall people, and one can hardly tell them to just knuckle down and grow a bit taller. They're entirely innocent victims of forces beyond their control. I think it's possible to divide people into three groups: people who accept my above statement and think that we should compensate the unfortunate, people who also accept that above statement and think that we should not, and therefore (perhaps) should not compensate the flooded or the ill, and people who simply don't accept the statement. Right-wing libertarians are pretty much in category two. Socialists (real, actual socialists) are probably in category one. The group that interests me is category three, which seems to consist of most people, and which doesn't seem to have a coherent view on this. Why should we help flood victims or cancer sufferers and not the vertically-challenged? For my part, I'm ethically in category one, but I don't really know if it's possible to compensate people for their misfortune without having to make a vast range of impossible judgements about what constitutes 'misfortune'.
AndrewKemendo 14y ago
I am missing the part where I am morally impelled to subsidize poor decision making. This applies specifically to the flood plain example - though there are some corollaries to health care; eg. people eat bad food and smoke etc... which leads to increased costs. The post states that flood plain knowledge is high - and the data is easily available. So why should I help someone if they are knowingly taking a risk? The point of taking a risk after a risk-benefit assessment is that there is a payoff that would be greater with the risk than without it. If you shift the cost of the risk away from the principal agent, then there is no impetus to optimize your decision. So again, why should I absorb your risk if significant and verifiable information is available?

77 points by llambda 14y ago

An enormous number of words just to say, "Health Insurance is anti-selective." Which reminds me of a Jazz story. Miles Davis was chiding John Coltrane for the length of his solos. John shrugged, "Once I get going, I don't know how to stop." Miles rasped, "Try taking the instrument out of your mouth."

tptacek 14y ago
Did you seriously just preemptively write the thread-leading snarky comment for your own post? Nice try, Reg Braithwaite. But it won't work: how dare you compare your blog post to a Coltrane solo?
- raganwald 14y ago
  I'm sooooooooo busted! Off to listen to "Sahara..."
- srl 14y ago
  And here I almost missed that, and was about to DV him for an unnecessarily high snark/signal ratio.
Mz 14y ago
Hey, I worked for an insurance company for five years or so. Nice try, but sloppy. Flood insurance, which is the main thing you talk about, isn't health insurance. Car insurance, at least in the U.S., is fundamentally different from both health insurance and homeowners insurance. Your remarks prompted me to finally start a stub on the topic, something I have wanted to write about for a long time. Thank you for the inspiration. If I wind up mentioning your piece, and possibly critiquing it, hopefully you can feel flattered rather than attacked.
ChuckMcM 14y ago
Well that particular religious 'homily/joke/parable' is one of my favorites. I'm guessing the Darwinians will jump in here with "Gov't Health Insurance" subverts natural selection. But frankly I find the whole insurance vs market economies question much more nuanced than that. Of course it is the heretical to suggest that health care, itself is the public service (you know the Army kills/wounds people, the Medics save/heal people kind of thing).

lutusp 14y ago

> Up here in Canuckistan, we do have private insurance. You must, for example, privately insure your own dwelling against things like fire or burglary. "You must"? Not really, unless you have a mortgage. If you don't have a mortgage, if you actually own your house, you aren't required to buy insurance, and you may be much better off self-insuring. And now for the best-kept secret in the insurance business -- if an insurer evaluates your true risk and offers a policy, it's not worth it. Why? Because on average, you will have paid out much more in insurance payments than you will get back in the event of a claim. You would be better off putting the insurance payments into an investment that (a) will grow over time and (b) can be used against future loss. Do you doubt this? Ask yourself why an insurer would be willing to issue a policy on which he expected to lose money. Are insurance companies profitable? Yes, they are. Any questions? If you have a mortgage, you are required to buy insurance. If you don't, by all means ask yourself why you are willing to give your money away to an insurance company instead of investing it by yourself, for yourself. More detail here: http://arachnoid.com/wrong/index.html#Insurance http://arachnoid.com/wrong/index.html#Insurance EDIT: If you cannot afford to lose the insured item, then the above doesn't apply. I should have said this at the outset.

raganwald 14y ago
Poorly worded, I meant that if you wish to insure it, you must insure it privately. Thanks for pointing out the balderdash.
- lutusp 14y ago
  It was just an excuse to jump onto one of my favorite soapboxes. But if you can edit the article, by all means do it -- I don't like to see insurance portrayed as mandatory, or the obvious action of a responsible person. That's only true sometimes, and most people can't say when that time is. A classic scene, when a retailer is offering one of those useless electronic service plans: customer says, "Do I benefit from this offer?". Salesman: "Absolutely!". Customer: "Then why are you offering it to me?"
  - raganwald 14y ago

pmonks 14y ago

As an American friend of mine once said: "why would we let facts get in the way of our illogical obsessions with socialism, encroachment by the state on personal liberty, etc. etc.?"

bmmayer1 14y ago
True dat.

randallsquared 14y ago

> This actually makes sense, because the "free market" doesn't work properly when it comes to flood plains. "This item I want isn't cheap" does not mean that markets don't work "properly", except where you define "properly" to mean whatever you want to happen.

jacoblyles 14y ago
I think what he means is that the people living on the flood plain want protection from risk at below the price it costs to provide that protection. The only way to do this is with taxpayer money.
- skylan_q 14y ago
  That's the correct conclusion. Now one has to ask why someone who didn't make the mistake of living in a flood plain has to pay for those who choose to continue to take that risk. This attitude is all about destroying the notion of personal responsibility. Let everyone else bail me out.
  - raganwald 14y ago
    Ayn Rand, is that you?
    - skylan_q 14y ago
      No, I just believe that this is an attack on personal responsibility. No need to demonize.
  - NateDad 14y ago
    This is a straw man. The point of the article is health insurance, and no one chooses to break their leg, get burned in a fire, or develop cancer. But I'll take you up on it anyway, because it's still BS. How about the people in tornado alley? Or hurricane alley? Or everyone in California with all those earthquakes? Or mudslides or forest fires or or or... can you tell me no one in your state/province/whatever has ever had a natural disaster destroy their home?

scottmp10 14y ago

1. Providing government insurance is somewhat equivalent to having private insurances that you buy into right before birth of a new child. The rates would be very low (assuming you agree to pay the monthly fee consistently for the entire life of the person, similar to taxes) despite full coverage for life. Unfortunately, many people would not opt for this coverage and would prefer to wait until they need good insurance to opt in. Then they call insurance companies greedy or unethical for not providing them inexpensive insurance. Somehow paying a little extra in taxes doesn't seem as bad as paying for the insurance. Although for most people, putting the cost to the taxpayer means that people with more money end up paying for them. So in reality, the most significant effect of government-sponsored healthcare, etc, is to have those with more money provide coverage for those with less. 2. The other effect is that buying into insurance makes people less risk-averse. For instance, they would be more likely to live on a flood plain if they know they will be compensated for damage to their house. This is a net negative for society since it is wasteful of resources. Someone who doesn't want to pay the extra taxes and instead live a more risk-averse lifestyle doesn't have that choice when they are required to pay taxes that cover insurance.

philwelch 14y ago
It's even worse when the government subsidizes flood insurance. Then it's not just adverse selection, but the whole premise of insurance--pay a premium to mitigate risk--is gone, since it's not even profitable anymore, leaving us with a needless subsidized incentive to waste public funds in the long run.
NateDad 14y ago
#2 is a fallacy, which is what the original author had said. Look at all the people buying mansions on the coast of Florida that then get wiped out by hurricanes. Humans are very bad at gauging long-term risk.
- philwelch 14y ago
  Those mansions have their insurance subsidized by the federal government. The only foolishness is institutional--to the homeowner, the government just buys you a new mansion every few years for below cost. It's a fantastic deal for them.

andrewljohnson 14y ago

Did you get the joke from the West Wing, or from the place the West Wing got it from, which I don't know?

raganwald 14y ago
I strongly suspect that this joke predates not only the TV show, but also the construction of the West Wing.

jacoblyles 14y ago

I don't buy it. I get health insurance between jobs because I know American health care is very expensive. I know if I tear a knee ligament playing ultimate frisbee it could force me into bankruptcy. So I pay someone slightly more than the expected cost of sports injuries in a man my age to insure against that risk. The regulators force me to insure against a bunch of other risks too that I don't need. But other than that meddling, it's a pretty classical insurance market. The real problem with American health care is just that it is very expensive compared to the rest of the world. We get better health outcomes on the high-end stuff in exchange (our cancer survival is tops), but overall health outcomes aren't great.

kevingadd 14y ago
There's a lot more wrong with American health care than prices. I know a lot of people who simply can't get insurance in the US at any price because of how the market works - and some of them are in great health and have been forever. It's actually quite close to raganwald's 'flood plain' example, where the insurers will outright refuse or quote impossible rates. And, as it happens, I can't buy insurance on the free market anymore either. I've never been hospitalized or needed surgery or been injured, so I used to get pretty affordable insurance and have no problem paying out of pocket. Then I saw a therapist and that was enough for every insurer I've contacted since to blanket refuse to insure me at any rate. According to the state agencies that regulate this stuff, that's how the system is supposed to work. Now, you could say that this is how an insurance market should work - maybe the reason people like me can't buy insurance at any price on the free market is because it's not possible to turn a profit by insuring us, statistically, even if individually we are incredibly healthy and pay a ton. I can buy that explanation. But do you think it's morally right for people to be unable to access basic preventative care at reasonable cost, and be unable to afford emergency care, just because statistically 5-10% of the people in their group are expensive? I think it's also worth considering the counter-example: group health in the US is comparatively quite sane. If your employer has a reasonable group health plan, you can count on having basic coverage, even if a pre-existing condition gets excluded for a bit when you first enter the plan. The employer's overall cost for the group might go up, but that's about it. A friend of mine found out that his company's rate for group health was nearly $2000/mo - apparently they had lots of high risk employees - but my past employer's group health rate, in comparison, was around $400/mo for good coverage.

jdreaver 14y ago

> They're such high risk, that no actuary will quote them a reasonable price. That makes sense. There is such a high chance of the insurer losing out on flood insurance money, that no one would want to buy flood insurance. > Private insurers are unapologetic about this: The prevailing thought is, when nature strikes, the government must bail people out. > ...the "free market" doesn't work properly when it comes to flood plains... Let me get this straight. The author states that the free market fails when it comes to flood insurance, but in the next breath states why government is the problem. Private insurers can't possibly compete with a free service provided by taxation. If the government wasn't guaranteed to bail people out, then they would probably buy flood insurance in droves (or leave because, like the author said, it's expensive to live in a high-risk area like a flood plain), therefore driving the cost down. All of this could happen without government intervention. Furthermore, so many people have moved there because government intervention prevented the price system could not reflect the high risk of floods. I really don't see how to author can blame the free market for the lack of flood insurance when it is the government mucking up the price system.

wisty 14y ago
No, the point is - flood insurance (on a floodplain) is so expensive people simply don't get it. You can say people should leave if they can't afford it, or they should suck it up and buy it, but it's not going to happen. The USA has the same problem - you couldn't get people to move from New Orleans (until they were actually washed away), San Francisco (an earthquake zone) or Seattle (there's a massive tsunami waiting to go off there any time in the next millennia). People are stupid. They settle in dangerous areas, then the government will be forced to bail them out. It's not 100% efficient, but the alternatives (letting people suffer, or draconian regulations like compulsory flood insurance or strict zoning laws) aren't politically acceptable. And the costs of the government insuring people just isn't so high that it's completely unacceptable - especially when you consider the economic cost of them not covering people (e.g. homeless people clogging up emergency rooms because they couldn't get their cough looked at when it was simply a mild case of pneumonia).
- jdreaver 14y ago

bmmayer1 14y ago

One question that no one asks: why do we insist on paying for healthcare with insurance in the first place? Imagine a world where everyone paid for health expenses out of pocket, where there was competition and price transparency for all procedures which means much lower prices (instead of prices being driven up by government-subsidized plans), and most importantly, doctors had to answer to us as consumers instead of insurance companies?

raganwald 14y ago
I think you need to first state what you're trying to accomplish. Is lower prices an end unto itself? if so, I doubt that you will get it from the "free market." It's too inefficient. When you slip and break your leg, you can't take your time shopping around for the lowest price care. You can't buy a lung transplant when it's cheap, save it, and use it when you need it. Some people simply want people to pay their own way for ideological reasons. I can understand that without agreeing with it.
- bmmayer1 14y ago
  Insurance is a really terrible way to pay for any commodity. If I paid a fixed price to go to the grocery store every month and get everything I needed off the shelves, the grocery store would go bankrupt. Obviously, insurance works for event that are unlikely, as a way to mitigate risk. But everyone dies eventually. Everyone will need healthcare. Because of the nature of insurance, it drives up prices, it misaligns incentives, and our particular mode of insurance--subsidized employer-provided insurance--has the added injury of forcing people to stay in their jobs for the sake of their health and limiting mobility. Yet, not only do we accept insurance as the best way to pay for healthcare today, we just doubled down on it with Obamacare, requiring people who previously weren't in the insurance market to participate. My solution is to let healthcare be another commodity, like food, where there is widespread competition and choice, and thus lower prices and more transparency. With your example, it's not like someone makes a choice in emergency care right now either. But at least you could establish a relationship with a hospital ahead of time. How about an app that lets you join a hospital network for emergencies? What about an annuity plan that lets you save up for a lung transplant ahead of time if/when you need it? I don't know what health entrepreneurs would come up with. But there are solutions out there that will never be tried as long as insurance companies have a stranglehold on the health industry.

zacharyvoase 14y ago

The points I got from this were: 1) People enjoy living in flood plains; 2) People who live in flood plains can't afford flood insurance; 3) Therefore, it's everyone else's job to compensate them for the cost of flood damage. Finally, this is used (somehow) as an argument for universal healthcare. This logic seems faulty.

raganwald 14y ago
You seem to have an ideological objection to the argument. Maybe you should simply state that you are perfectly okay with a city of people being left in dire straits (heh) when the river overruns its banks or the levees break. I can understand that, even if I don't agree with it, and that makes a lot more sense than saying my argument is faulty when what you really believe is that a society that takes care of its own is faulty ;-)
- SlackerATX 14y ago
  People are naturally risk adverse. Government subsidized flood insurance incentivises people into living in locations they wouldn't otherwise live. The free market is telling people not to live there because it's prohibitively costly. Government puts people's life in danger by manipulating the cost of living in dangerous places. It forces society to fit the bill for the endless cycle of destruction then reconstruction. Besides the fact government interference in the insurance market does more harm than good to those it intends to protect, the wealthy are the ones that most benefit from government flood insurance. The vast majority of people that live in places where insurance is unavailable or too expensive are those wealthy enough to build a house on a hurricane prone beach. (Think too of the fire/earthquake prone hills of glorious sunny California) What you're really asking for is those of average means to subsidies second beach houses for the rich. Not only is your argument faulty it's immoral. We're all better off taking care of ourselves than being taken care of by morons. The government solution to a problem is inevitably worse that the problem itself.
  - astalwick 14y ago
    The cities are already there. That's a done deal. And of the people that live there, not everyone lives there because they CHOSE it. Not everyone has the ability to up and move to a newer, safer city simply because they're worried about floods. It's just not that easy. So, given that cities ARE built on flood plains, and that flood insurance IS refused for those people that live there, what are we going to do? Abandon them entirely when a flood happens? Good luck with that. What do you think will happen to the government that says "too damn bad, you should've moved?" By the way, if you think Winnipeg is 'beach houses for the rich,' dude.. yeah..

chris_mahan 14y ago

Except of course that if person A chooses to be very health-conscious, exercises, eats healthy, and doesn't abuse coffee, sugar, salt, tobacco, and alcohol, and pays more for better food and gym membership that person B who eats fast food, drinks, smokes, and eats kit-kats all day long, then person A gets taxed to pay for person B's surgeries and other treatments. This doesn't seem fair at all. It makes it look like all the people living in the hillside because they didn't want to move to the floodplain have to pay for the guy's house in the flood plain even though they warned him not to build there. Seems to me that everyone would then say: "well, let's not be healthy, let's not eat well, since the government will pay for all our surgeries and medicine..." What happened to personal responsibility?

waterlesscloud 14y ago
And obviously we should include risky sexual behavior and unplanned pregnancies on the list of things people should be personally responsible for as well. And all sorts of sports and outdoors activities that raise risk. It's only fair.
Falling3 14y ago
And what about the (very common) scenario where person A actually contracts an expensive disease based on environmental factors that are largely out of their control and person B lucks out with great genes and has no significant health issues. I don't think most people have a problem with personal responsibility in this context (theoretically). But the healthcare debate is SO much more complicated than that.
NateDad 14y ago
Yeah, 'cause gastric bypass and daily insulin injections are gobs of fun. Humans are really bad at long term risk assessment. No one says "I'm going to eat 2000 extra calories every day because the government will pay for my daily insulin injections when I get diabetes". They say "bah, it won't happen to me".
wisty 14y ago
> Seems to me that everyone would then say: "well, let's not be healthy, let's not eat well, since the government will pay for all our surgeries and medicine..." The government might pay for your health care, but they can't reincarnate you if you die. So there's still a reasonable incentive to stay fit. There's some UK TV show where the government (I think) is paying for fat people to get stomach staples. Preventative medicine can save money in the long run, and public health systems are often more willing to do it (since the guys in charge care about the next election, and not just the next quarter).

tmoertel 14y ago

What worthwhile benefit does society receive for underwriting the cost of rebuilding property in flood plains? I mean, if you build a house where it's likely to be destroyed, it obviously benefits you to make your inland neighbors pay for your house, should it be destroyed. But how does it benefit your inland neighbors? What do they get that is worth the cost of underwriting your risky behavior?

raganwald 14y ago
As I noted above, after the 1957 Hurricane in Toronto, the city appropriated the floodplains. There was no benefit to rebuilding when people could easily be relocated. The trouble with Winnipeg is that it's an entire city. It's an economic engine that was built on a river at the time when river commerce was vital. Moving the entire city is infeasible at this point in time, so the givernment assumes some of the flood risk and mitigates some of it with civic projects.

untog 14y ago

The only criticism I have of this comparison is that, well, maybe people shouldn't be living in flood plains. Yes, I understand why people want to live near Winnipeg and that there's limited space, but we may reach a certain point where we say "tough, the government won't bail you out for living in an at-risk area". Certainly, in New York State the Governor has announced plans to buy up waterfront land from people wrecked by Sandy to make sure that others don't make the same mistake. Health isn't the same. We can't say "well, maybe you shouldn't have gotten cancer" to someone who develops it through no fault of their own. We can choose where to live, but we can't (often) choose our health.

raganwald 14y ago
There is a certain amount of that going on. After Hurricane Hazel in Toronto, the government did buy up a lot of land on the Humber and Don rivers where houses were swept away, they are now parkland. the trouble is, moving people out of a flood plain within a city is easier than moving an entire city that is a substantial economic entity in its own right. So I think you're right that where practical, people shouldn't live in flood plains, and perhaps they shouldn't even have a choice in the matter.
bmmayer1 14y ago
You can certainly choose not to smoke, and to exercise, and to take care of yourself in general. We do introduce a principal agent problem into the mix when we start letting people get their healthcare paid for by other people.
- untog 14y ago
  Yes, and that's why I added "often" to my last sentence. But while you can certainly avoid some illnesses by making good life choices, it's still out of your control. You can have never touched a cigarette and still get lung cancer. In fact, that opens up another reason for public healthcare- many illnesses are caused by society as a whole. That second hand smoke from the man sat next to you at the bus stop is an individual thing, but the pollution coming out of the power station on the edge of town is a far broader issue. You could say "fine the power company!", but that's short sighted- everyone benefits from the power they provide. As a society we have decided that x level of pollution is acceptable in order for us to have y level of comfort. The side variable is the number of illnesses caused by that pollution, and I think there's a strong argument that the costs of that should be borne by society.

spenrose 14y ago

Really nice piece. Thank you.

deleted 14y ago

[deleted]

ctdonath 14y ago

This actually makes sense, because the "free market" doesn't work properly when it comes to flood plains. In theory, people would never put their homes on a flood plain if they couldn't get flood insurance. But the market for dwellings is highly irrational. Dunno about Winnipeg's historical geography, but take a look at old New Orleans maps: people didn't build in the floodplain, for obvious reasons. Once government stepped in with grand assurances of levees ("we'll stop the flooding") and welfare ("if that doesn't work, we'll take care of you"), buyers were blinded to the natural realities. For decades, I'd see annual magazine articles opining "ya know, New Orleans is gonna flood again" - then it did. It's not that "the free market doesn't work properly when it comes to flood plains", it's that government interference with its promise of what amounts to (and the article advocates) "free insurance" doesn't work properly. People build there because they're lied to: "yeah, sure, if something bad happens we'll confiscate the money you need from others and give it to you". We're now in a time where a whole lot of promises by a whole lot of governments - promises of "free insurance" included - are coming to hit the reality that "socialism fails when you run out of other people's money." People take risks of natural disasters (floods, tornados, ice, whatever) everywhere. Hurricanes in Florida, blizzards in Canada, tsunami in Indonesia, tornados in Kansas, flooding in Winnipeg... It's up to them to decide what risks they'll take, what potential losses they're willing to accept as tradeoff for what probable benefits, and how they're going to prepare for disaster. Free market takes the very real facts of availability & limitation and disperses it in a fair manner; government intervention all too often distorts these facts, overpromises, underdelivers, and on the whole operates by garnering the support of many by promising to take from few by force.

praptak 14y ago

You can move away from flood risk, you cannot move away from an unlucky mutation. So covering the former from public money feels less justified than the latter, at least from the veil of ignorance point of view.

DannyBee 14y ago
I'm okay with this, with the proviso that it may not have been a flood risk when you built there. I mean, there are plenty of houses that have been around 50-70 years, and with water levels rising, are now in flood plains that they weren't. This of course, could be taken care of by subsidizing it based on when you bought the place vs when it became part of a flood plain (FEMA issues flood maps, so you don't have to deal with local politics at least)

deleted 14y ago

[deleted]

snowwrestler 14y ago

Private health insurance works fine for a large percentage of the U.S. population. It's worked well for 3 generations of my family, for example, and there is plenty of data that shows similar successes for many millions of other people. There are situations where it does not work well, and it is appropriate that the government steps into those situations. The U.S. government already does this, with Medicare, Medicaid, and Social Security. Just like they provide flood insurance to the few people who need it. But neither the U.S., nor Canada, have stepped in to take over the entire homeowner insurance market. Why not? Because it works well enough the way it is. There's no need. Likewise, replacing the entire private U.S. health insurance industry with government-run single payer is not needed. It would be hugely risky, but with little marginal benefit for those who would be most affected.

kevingadd 14y ago
I don't think you can claim that it's not needed just because a 'large percentage' of the population is well-served. The United States' population is over 313 million people according to the last census. Would you be okay with 3 million people dying or living in perpetual poverty because they don't have access to preventative/emergency care? Politicians in the US regularly make a fuss about things that affect less than 3 million people. Now, you can argue that any government-run single payer system would have 'marginal benefit', but you'd have to work pretty hard to do worse than what we have now for those people.
- snowwrestler 14y ago
  > Would you be okay with 3 million people dying or living in perpetual poverty because they don't have access to preventative/emergency care? Obviously not, which is why I said that it is right that the government should step into those kinds of situations. But now let's picture 3 million people for which private insurance works fine. Why should the government take over their insurance?
mimiflynn 14y ago
Medicare doesn't pay if the patient doesn't show improvement. If the person is dying, medicare will not pay for their care, leaving dying people and their families to choose between pain and debt. We will all die. Why, in this world of medical advancements, can't we all help each other die as painlessly as possible?

nagrom 14y ago

Whenever I read about natural disasters affecting some large urban dwelling, e.g. Winnipeg, New Orleans, I always wonder why we still have that problem. Not that people are building on that land, but that we haven't yet figured out how to live safely and conveniently on flood plains, etc. The health care analogy is rather than spending public money on fixing broken people, spend money on making fewer people broken in the first place. Better preventative measures, better safety rules, healthy eating campaigns, more anti-ageing research, etc. Surely when looking for 'stimulus' plans, this kind of thing that will work out net-positive financially for the government and result in a better quality of life for people in the affected area should be amongst the first thing getting funded? In short: why on Earth are we still subject to the whims of God?

__hudson__ 14y ago
I think you are right as there are ways to mitigate natural disasters. The question is whether or not there is political will to pay for the mitigation measures until the disaster happens. Winnipeg had been flooded severely several times in the last hundred years until the 1970s when a giant floodway was created which could divert a river's worth of water around the city. Since then the floodway has saved the city from numerous large floods and has just recently been expanded to provide protection for a 1 in 700 year flood. It seems unfortunate the city was catastrophically flooded several times before that monetary expenditure was politically acceptable.

pdeuchler 14y ago

A well written article but it seems mostly like a re-hash of the basic argument for government provided healthcare, not something addressing large, pressing problems facing implementations of public healthcare. I'll be the first to advocate the right to be treated, but this needs to be done extremely carefully. For example: - Government is notoriously inefficient. How can we fix government bureaucracy in a sector that requires speed ("Can we operate now?") and offers lean margins? - Modern insurance companies pay top dollar for mathematical modeling and financial services. Will/Can the government do this? - Does a morbidly obese person qualify for a life-saving liposuction on the tax-payers dime? - Do you perform life saving abortions on the tax-payers dime? - Do you tax progressively based upon risk and past history? If yes, does that mean that the poor are unfairly taxed vs. the rich since the rich have better quality care? If not, should someone who is a health nut be taxed the same as those who dismiss their body? Private companies can throw away people's morals, prejudices, philosophies. If you don't like it, don't buy it. But once you introduce government (and something mandatory) you encounter issues that were never even remotely related before. A lot more needs to be discussed on this topic than just "it's like flood insurance". Edit: Formatting

raganwald 14y ago
Now that you explain it like that, I see it's impossible to provide cost-effective health care for a nation of people with anything except staggering inefficiencies. I don't know why this isn't obvious to me, sitting here in Toronto. I clearly haven't thought this through. ;-)
- pdeuchler 14y ago
  I can't tell if you are being sarcastic or not, but I'm just going to respond as if you are. Could it be impossible to provide cost effective insurance against "Acts of God" aka "Nature" to a nation of people without staggering efficiencies? I think it's a very real possibility that this could be a pipe dream right now for a country the size of the United States. Why is it so hard to believe that we may not ever be able to mitigate Nature? If you would like to draw comparisons between the US and Canada, the U.S. has 315 million people with a 34% obesity rate. Canada has 33 million people with a 24% obesity rate. That's a difference of ~99,231,174 obese people. If you notice, that difference is actually three times larger than Canada's entire population. I highly doubt we can apply very much of the implementation from Canada to the United States. The wheel very well may need to be re-thought. This is the equivalent of scaling any startup. Anyone can write a twitter clone in a couple hours, it's really not that hard. However, it takes some serious thinking, engineering, thought and complexity to scale that simple CRUD app to millions of users. Your comment seems rather like the owner of a small business complaining that the CEO of a Fortune 500 company can't control his employees as well as he can.

dougk16 14y ago

Insurance doesn't work, period...for anything. It's gambling in reverse, and the house always wins, especially in the last few decades when they can crunch so much data and know the price points with great precision. What's worse is that insurance companies are becoming even more monolithically inefficient than government agencies while still racking in obscene amounts of cash, without having to do anything more than bombard you with horrible advertisements featuring talking geckos. The fact that some insurances are required by law (in the US at least) disturbs me deeply.

jacoblyles 14y ago

There's not a lot of meat here. If you really want to dive into the details of the regulations, costs, and incentives of the US health market you can do so elsewhere. But this is just an eloquent expansion upon a particular political talking point. You won't learn much besides raganwald's political leanings. I buy arguments that health insurance breaks down for the very old and the very sick. But otherwise there is no theoretical reason for believing you can't insure health risk. However, there are seven decades of bad regulation which complicates the matter in the US.

deleted 14y ago

[deleted]

jeffdavis 14y ago

"They're such high risk, that no actuary will quote them a reasonable price." That is just plain wrong. The reason it's hard to insure people on a flood plain is not that they are high risk. It's because the risk of flood is too statistically dependent: if you get flooded, your closest 1000 neighbors probably also got flooded. Unless you are a very large insurer (to the point bailing out ten thousand homes is just another day at the office), it's just really hard to hedge that risk. Same thing for earthquakes. Insurance works best on independent risks: car accidents, major medical events, lawsuits, even fires. "The prevailing thought is, when nature strikes, the government must bail people out." So the author's claim is essentially that the people of Canada want to subsidize the risky lifestyle of people on flood plains? I guess it's probably true to a degree; people prefer to have costs hidden from them by indirection. But that doesn't mean that it makes sense economically. What might be a better analogy is flood insurance and insuring the health of people with unhealthy lifestyles. Do we want to subsidize people who eat junk food all the time and never exercise? For the most part, we are (in US and Canada, at least), but I don't think that's a good idea, either.

geoka9 14y ago

I wonder if the insurance payments (~$65 per month) is enough to cover the ongoing healthcare costs even when everybody has to pay up. I mean, if it was as simple as charging everybody 65 bucks, you'd think the US wouldn't have the problem where many people can't afford to pay for medical care.

spikels 14y ago

Wrong analogy - Not a valid argument for government health insurance. There may be other justifications but this is not one. If this were really true we would already have government provided health insurance everywhere because private insurers would have gone bankrupt long ago. Flood insurance is fundamentally different from health insurance because floods cause large losses for large numbers of people at the same time (i.e. highly correlated incidence of losses). This means the insurer or insurers would have to make a huge payout in the event of a flood. If this payout is greater than all their resources, then everyone can't fully rebuild their home. Most people can't afford to rebuild their home if it is destroyed because they do not have the resources. Similarly private insurers simply can't afford to rebuild everyone's home at the same time. And while some insurers might be willing to take the risk any responsible regulator should stop them. Governments are often the only entities with the enormous resources to make these huge payouts. Therefore we have an vaild argument for the government providing flood or earthquake insurance. Health issuance is entirely different because large health expenses do not occur to large numbers of people at the same time. Health insures are not going bankrupt because of flu epidemics. Instead they set their rates to cover these predictable payouts as well as generate a profit. Unlike rebuilding an entire home most health expenses are affordable by most patients. It is only occasionally that the required treatment is so expensive that we need a third party to pay for it. In some countries this is done by private insurers and providers and in some it is done by governments. While this is not a good argument for government health insurance there are many. Unfortunately this is a very complex area requiring expertise in many areas: insurance, economics, regulation, politics... and perhaps even software development.

rjknight 14y ago

The argument appears to be that we should compensate people for bad luck, whether that's living on a flood plain, or suffering from poor health. But why stop there? Why not compensate people for their less-than-optimal genes? It's well established that people of below-average heights earn less over a lifetime than tall people, and one can hardly tell them to just knuckle down and grow a bit taller. They're entirely innocent victims of forces beyond their control. I think it's possible to divide people into three groups: people who accept my above statement and think that we should compensate the unfortunate, people who also accept that above statement and think that we should not, and therefore (perhaps) should not compensate the flooded or the ill, and people who simply don't accept the statement. Right-wing libertarians are pretty much in category two. Socialists (real, actual socialists) are probably in category one. The group that interests me is category three, which seems to consist of most people, and which doesn't seem to have a coherent view on this. Why should we help flood victims or cancer sufferers and not the vertically-challenged? For my part, I'm ethically in category one, but I don't really know if it's possible to compensate people for their misfortune without having to make a vast range of impossible judgements about what constitutes 'misfortune'.

AndrewKemendo 14y ago

I am missing the part where I am morally impelled to subsidize poor decision making. This applies specifically to the flood plain example - though there are some corollaries to health care; eg. people eat bad food and smoke etc... which leads to increased costs. The post states that flood plain knowledge is high - and the data is easily available. So why should I help someone if they are knowingly taking a risk? The point of taking a risk after a risk-benefit assessment is that there is a payoff that would be greater with the risk than without it. If you shift the cost of the risk away from the principal agent, then there is no impetus to optimize your decision. So again, why should I absorb your risk if significant and verifiable information is available?