Don Jones

Tech | Career | Musings

For anyone outside the US who has assiduously avoided US media and news stories, the big national conversation right now is still health insurance. For anyone in the US, of course, it is physically impossible to avoid the fact that a bunch of ideologue lawyers and politicians are deciding how we will pay for essential health care products and services. “Let’s just get something done” is an actual phrase that has been used with regard to how we care for our minds and bodies, and it’s more than a little depressing.

However, it’s all utterly beside the point.

Insurance, as any of you who have some for your house or car might know, is something that, by its very definition, you hope to never use. You and a crapload of other people pay a monthly premium, and the sharp-pencil boys at the insurance company invest that, and try to earn more from it than they spend on your claims. You, in turn, doubtless hope you never have to use it, as doing so usually means an Unpleasant Life Event like a car crash or a home fire.

Even whole life insurance is an actual gamble, with the insurance company hoping you live long enough for them to earn back what they’ll pay out. That’s why whole life is so much more expensive than term life: with term life, the company is, again, gambling that you’ll never get a chance to cash in, because you outlived the policy term.

Healthcare is nothing like any of these things. You wil definitely use it. If you’re doing it right, you’ll use it annually for a physical exam, vaccinations, and whatnot. Healthcare is not a gamble, it is a surety. That makes it really hard for “insurance” to actually function. Instead of insuring 1,000 people and hoping only one of them gets in a car wreck, insurance companies are insuring 1,000 people and hoping that only a small number of them need a heart bypass. The numbers simply don’t add up, especially when there are essentially zero controls on the hard costs for health care. If costs go up – hello, EpiPen – the insurance companies essentially have no choice but to raise rates. There simply isn’t a pool of people who don’t need healthcare, who can be forced to pay premiums anyway.

(As an aside, it amuses me greatly to see people complain about being forced to buy health insurance, but not complain about being forced to buy car insurance, something that has been going on for decades.)

So all of this talk about health insurance is, from a purely mathematical perspective, dumb. There is no fix to a product which should not exist, and whose very base premises are basically false. Even the idea of, “let’s get a lot of young, healthy people into the pool to offset the old, unhealthy people” doesn’t play out. That’s in part because young people can’t afford to pay enough in premiums to offset the old people’s expenses, and in part because young people do, in fact, still need health care. They’re young, not invulnerable.

The only mathematical solution – and this is not one that the US government is going to put on the table, ever – is to regulate pricing. This can be done through several political mechanisms, such as just outright regulating pricing (which we do for electricity but not for health care, something that should offend any human’s sensibilities). You could also have a single-payer system, giving one payer unlimited negotiating power. You could do lots of things.

What would work, mathematically, is to regulate the price of health care that all people need. Basic office visits should be affordable, something any middle-class family could afford. And I don’t mean a co-pay, because those imply that you are also paying insurance; I’m talking affordable, with no insurance. You then offer “major medical” insurance – actual insurance that covers medical situations you might not ever have. This, again, is like car insurance, which you have, but hope to never use.

Such a model would likely crush much of the current medical business establishment. If a doctor could just charge $50 for a visit, he wouldn’t need complex billing systems, independent billing companies, and whatnot. He’d need a Square card reader. If insurance was no longer a daily thing for most people, then it would stop being such a major monstrosity. If you could afford an EpiPen, you’d just buy it – you wouldn’t need to file a claim or whatever.

But the whole reason the current conversation is focused on health insurance is because neither of our major political parties is willing to go after price controls. The Democrats didn’t even discuss it when passing the ACA, and the Republicans certainly aren’t discussing it now. So rather than getting riled up against whatever “side” isn’t yours, maybe wonder what the hell we, as a People, are thinking in letting politicians run this particular side show. None of them are doing us any favors. None of them are attacking the problem. None of them are allowed to even see the problem.

One thought on “[POLITICS] Why Health Insurance is Stupid, Especially When Lawyers Discuss It

  1. Scott says:

    Not only are you may favorite PowerShell guru (sorry Jeffrey!), I am always impressed by your non-technical ideas. I’ve been saying for years price control is the only way to make healthcare reasonable, but who is going to be willing to give up their slice of the pie? I’d much rather have the full cost of my premium (employer’s share and mine) in an HSA that I could decide how to spend. I’ve done the math and I’d have upwards of $300k. Sure their are incidents where I might spend it all, but like you said, we could have insurance for just those kinds of risks. Thanks for sharing your insight with us!

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