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  • Health care vs. health insurance

    This gets to the point from a thread about a year ago that postulates that American health insurance is insurance, but really a cost insulation plan, designed to insulate you against bearing any medical costs, even routine doctors visits in some plans.

    Health care vs. health insurance

    In this post, I asked you to respond to this question I received from a reader, Tom:

    Imagine we had entirely private health insurance market – no Medicare or Medicaid. If I live to be sixty-five, I will probably have a personal and/or family history that indicates a strong probability of developing an expensive chronic condition. I would wager that is true of almost all sixty-five year olds.

    So here is my question: which insurer in their right mind would take on my risk?

    I suspect none. Once philanthropy and savings were exhausted, I would surely risk a painful life and preventable death.

    Do I want this? Does anyone? Isn’t “socialized” medicine for older people an unpleasant moral necessity for our wealthy society? Please note I am deeply suspicious of most arguments cast in moral terms in discussions of politics and economics. I ask these questions guardedly.
    Your answers were wonderful. Thoughtful, interesting, and perceptive. But no one really got to what I think is the key to the matter. (Though AdamGurri hinted at it at one point and I stopped reading after about 150 comments so I may have missed someone else’s insight.)

    Tom’s question is interesting. But it’s the wrong question. And that Tom asks it and that everyone answered it is fascinating in and of itself.

    It’s the wrong question because when you’re 65 the problem isn’t getting insurance. It’s paying for health care. But the public debate has become so obsessed with health care insurance we’ve forgotten what the real issues are.

    When you turn 65, the high cost of insurance isn’t the problem. The problem is that you’re old. A lot more things are going to go wrong. Yes insurance is going to be costly. But that’s because so many things are more likely to break in your body. The high cost of insurance at that point is just a result of the problem. It’s not the problem itself.

    It’s like saying that if you drive your car in a demolition derby, it’s hard to get coverage for collision damage. No kidding.

    What’s funny (well not funny, really) is that we’ve totally forgotten the point of insurance and why it’s economically sensible. Insurance is designed for the unpredicatable. There’s nothing unpredictable about bad health when you get old.

    By the way, most of you in the early comments did make this point clearly and talked wisely about why it’s important to save when you’re young. But most of those comments if I read them correctly, were trying to explain why you’d still be able to afford insurance rather than health care per se.

    Our current world of health “insurance” is absurd. It should not cover pregnancy which is a largely predictable and planned event. It should not cover an annual checkup. This is not insurance. This is just a subsidy.

    What we have come to mean by health insurance is “cheap medical care.” They are not the same thing.

    This confusion is most obvious when people talk about the uninsured as if the uninsured don’t get health care. Of course they do. They just pay more for it (or they get it for free under certain circumstances.)

    Most importantly, the cost of health care, whether you are uninsured or over 65 has been increased and distorted by the public subsidies to insurance that artificially lower the out of pocket costs for those who are insured either via employer-based coverage or Medicare and Medicaid. This is what makes being uninsured in modern America, no matter your age, so unpleasant. It’s that what you pay when you do need health care is artificially high.

    Let me ask Tom’s question in a different context.

    Once I get married and have kids, how am I going to be able to get insurance coverage that pays for my kids’ college tuition? Who’s going to insure me against that?
    The answer is no one. But people still manage to send their kids to college even though it’s really expensive. Hard to believe, but it would be a lot more expensive if people had subsidized insurance to cover the cost of college. And it would be a lot less expensive if there the current subsidies to education were eliminated.

    This is not to say there aren’t challenging issues about how to allocate your income when you’re 80 years old and trying to decide on medical treatment. But the health insurance issue is a red herring.
    "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

  • #2
    Interesting. Hadn't thought of it that way before.
    I enjoy being wrong too much to change my mind.

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    • #3
      I've read something like that a while ago. Our insurance isn't insurance. It's one big subsidy plan for people who don't want to pay.

      What's infuriating is people complain about how expensive current health insurance is (roughly $500 a month for a family of 4 on medium deductible plan, and this is without employer subsidy), but they have no problem paying 2 car payments that could easily double that. I know. I paid $460 a month for my 2002 Lexus IS300 that had a sticker price of $31k. Imagine what the payment on a car that costs $50k would be. That could easily pay for health care. But no. We have to have 3 cars for a 2 driver family because 1 is a status symbol, 1 is for every day driving, and the 3rd car is for utility.
      "Only Nixon can go to China." -- Old Vulcan proverb.

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      • #4
        Imagine we had absolutely clandestine bloom allowance market. no Medicare or Medicaid. how is it?


        __________________
        Individual health insurance

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        • #5
          Originally posted by spikemedic View Post
          Imagine we had absolutely clandestine bloom allowance market. no Medicare or Medicaid. how is it?
          I'm not sure what you mean by bloom allowance market.
          "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

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          • #6
            The problem in my humble opinion is the US trying to reform healthcare today with the type of economy the world has when the British NHS was built during the post war rebuild and gained it's foundations early on.
            One problem in the UK is that due to our colonial past we have to fund health care for millions of economic migrants who come for medical care.
            This may sound harsh but it is like that.
            Plus the UK has a smaller population and the NHS is desperately under funded still despite billions of Gordon Browns money during the last ten years of boom.
            It is a very tricky debate for the US population to have today under the current economy and healthcare for all can no doubt be abused extremely well by those who want to.

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            • #7
              "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

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              • #8
                That agrees with what I've found with my research. Insurance is for catastrophic events and health insurance was originally for medical issues coming out of nowhere.

                With anything routine you're paying the average that's paid out, plus handling fees, to get at most the average that's paid out... So why use an insurance model for it?

                Considering how little medical professionals really make after insurance against lawyers and otherwise is factored in, and that people are now advocating a "right" to their labor I heard an interesting analogy recently. The last time people were talking in these terms they were talking about slavery... The fact Obama has shown no interest in increasing the supply of medical professionals, and his relevant Secretary has a history of advocating "some lives aren't worth living" doesn't inspire exactly confidence.

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                • #9
                  FOG3,

                  fact Obama has shown no interest in increasing the supply of medical professionals,
                  how does one propose to "increase the supply of medical professionals"?
                  There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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                  • #10
                    Originally posted by astralis View Post
                    FOG3,
                    how does one propose to "increase the supply of medical professionals"?
                    Increase visas, subsidize medical education, tort reform - these are some of the basic ways.
                    "So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

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                    • #11
                      Seems as how I was addressed directly, I hope you don't mind Shek if I take my own less informed swipe at the question, Shek.
                      Originally posted by astralis View Post
                      FOG3, how does one propose to "increase the supply of medical professionals"
                      FDR worked on this that did he not? Did not he expand the number of hospital beds, improve medical services, etc.?

                      Worst comes to worse you can always negotiate with the AMA/Universities and get them to open more slots and skim deeper for doctors, funding as is required to meet their needs with that.

                      Personally? I'd change things around so incentives are where they should be and put out a commission directed towards the Lean Engineering specialists at Toyota and otherwise to look at the entire medical system from education to deployment. Have them compile a thorough report, and encourage the health industry to implement it and further refine things based on experience. Toyota Talent even uses a hospital as an example to show how things can be refined, so it's not exactly an alien concept.
                      Last edited by FOG3; 05 Sep 09,, 05:01.

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                      • #12
                        Ive just been watching a program where a load of Americans were going mad over the British NHS. They called it 'evil' and talked a load of scary stuff about 'death panels' and other nonsense. They were incredibably insulting about it. It got me wondering how much do Americans pay for medical insurance? - i.e for the same coverage that the average Brit would get from the NHS?


                        I worked in England last year - I earned pretty much the national average.
                        Britian spends 8.3% of its GDP on the NHS. I was paying about a fifth of my salary on tax. This works out that my healthcare was costing me about £33 a month.

                        I was wondering how much the average american would pay in insurance costs?

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                        • #13
                          Originally posted by zara View Post
                          Ive just been watching a program where a load of Americans were going mad over the British NHS. They called it 'evil' and talked a load of scary stuff about 'death panels' and other nonsense. They were incredibably insulting about it. It got me wondering how much do Americans pay for medical insurance? - i.e for the same coverage that the average Brit would get from the NHS?
                          For the same coverage? Not sure. We have some of the world's best medical equipment and staff here. I have never waited for any treatment or examination, nor do I know of anyone who did.

                          I broke my hand in a hockey game. I didn't know it was broken until the next day. Went to my chiropractor (he has x-ray) to confirm. He gave me the film and told me to call a hand specialist he knew. I called the hand specialist, told his staff what had happened, and scheduled to see him within 4 hours. He told me the break was at 37 degree angle and just below the 40 degree mandatory surgery recommendation. He told me to think about it and call him back later. I called the next day saying that I want to avoid surgery (rehab is long and difficult). He would have to set my bone. That was normally a day he didn't come into his practice (surgery day at the hospital). But he came in anyways to set my bone. My hand was out of the cast 4 weeks and 3 follow-up visits later.

                          I didn't have to deal with an emergency room. I went to a hand specialist on a 4 hour notice. I thought that was pretty good.

                          Originally posted by zara View Post
                          I worked in England last year - I earned pretty much the national average.
                          Britian spends 8.3% of its GDP on the NHS. I was paying about a fifth of my salary on tax. This works out that my healthcare was costing me about £33 a month.

                          I was wondering how much the average american would pay in insurance costs?
                          Out of pocket (paycheck) I pay something like $120 a month. My employer picks up a tab of roughly $240 a month. Of course there's also co-pay and deductible I need to meet.
                          "Only Nixon can go to China." -- Old Vulcan proverb.

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                          • #14
                            Cost for me and mine is running a hair under 380 a month, that's for two adults and one child. In February, it's going up to a hair under 1100 a month for the same plan.
                            And no, going without insurance of any kind is not an option.

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                            • #15
                              Originally posted by zara View Post
                              Ive just been watching a program where a load of Americans were going mad over the British NHS. They called it 'evil' and talked a load of scary stuff about 'death panels' and other nonsense. They were incredibably insulting about it.
                              This is a British news service talking about that "nonsense." As is this.

                              Sorry, but I don't see how you can blame Americans about that concern. The second article I link is from JAN 2008. You could try to sell me on how this is some Great American Conspiracy, but at the start of the last year of George W. Bush's term? Would the people the Great American Conspiracy would be trying to manipulate even have the attention span to look back that far to find evidence for as you put it "nonsense"?

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