Originally Posted By ecdc A friend shared this with me from a book he'd read: >>Health insurance companies make their money by denying health care: either refusing to insure people with preconditions, turning down recommended procedures, or limiting the amount to be paid out for some condition--say, paying a maximum of $20,000 for cancer treatments, after which you have to sell your house to get them. This is the opposite of the way most markets work. In a typical market, companies that provide more of their product tend to make more money. In health insurance, the product is health care. But the more care an insurance company provides, the less profit it makes. In a normal market, greater competition helps consumers. But with health insurance, competition is competition for profits, not for delivering care. Greater competition for profits thus means competition to deliver less care, which harms consumers. Health insurance is thus an anti-market phenomenon. Second, health insurance greatly adds to the cost of care. While medicare has administrative costs of 3 percent, HMOs have administrative costs of about 25 percent. Most of that money is spent on determining ways to deny care. On top of that, HMOs make a considerable profit, so that administrtive costs plus profit amount to more than it would take to insure everyone under a Medicare-for-all or single-payer plan.<< (from George Lakoff, the Political Mind) I thought it was a great point - health care in the U.S. really is an anti-market force. You only make money by avoiding providing care. Thoughts?
Originally Posted By Mr X ***In health insurance, the product is health care.*** Good post, but here I would tend to disagree. For any insurance, the "product" is financial protection, or should be. I think many/most insurance companies try to market "peace of mind", but essentially their business model is to sell the concept and then, when push comes to shove, pay out the least amount possible (the payouts are a "liability" on their balance sheet, ie the cost of doing business) while keeping their "peace of mind" product intact. The gap between payout and promise is their profit margin. So I think that "product is healthcare" idea is a little fishy. If you buy hurricane insurance, you're not paying for a homebuilder right? I'm having trouble explaining this the way I'd like to for some reason, but what I'm essentially saying is that ANY insurance scheme is basically a financial "hedge". You are paying some money for protection that you hope won't be needed. Like in the markets, if your position is "high risk" (bad health, living in an earthquake zone, etc...), the premium you pay on your hedge increases. As for the "writer" (the insurer), they are EXTREMELY market-like in that they are taking all the risk. They accept your premium with the understanding that in most cases they won't be stuck holding the check (reason why Katrina screwed so many insurance companies into near-bankruptcy...they didn't factor in the true risks involved when setting their premiums). Anyway, the thing is, they are also very market-oriented in the sense that they can charge ONLY what the market will bear. If premiums are too high, it's because other people are willing to pay for them. If not, the insurance company would be out of business. And at SOME point, the "hedge" becomes not worth the risk (if your cost of health care were roughly comparable to the premiums, you wouldn't buy any right?)... So, I agree that the health care system is broken but I wouldn't pin ALL the blame on the insurance companies. Health care, in general, is ridiculously expensive in America. Some might say impossibly expensive. Someone mentioned a while back that a premature birth (relatively rare, but it happens sometimes) can rack up hospital fees in excess of a million dollars. There's something wrong with that. No average person can pay such a debt. No insurance company can cover such a proceedure without charging comparably insane premiums for the high risk involved. In short, the system is totally out of whack.
Originally Posted By ecdc >>I'm having trouble explaining this the way I'd like to for some reason, but what I'm essentially saying is that ANY insurance scheme is basically a financial "hedge".<< No, you explained it well, and I don't entirely disagree. You're right about the entire insurance industry being a hedge bet. Personally, it strikes me as a scam, but not much you can do. We all need it. Where I do disagree somewhat, however, is that healthcare isn't all about not wanting to make a claim. I want to see my doctor regularly, and I want my kids to get regular check-ups for immunization, etc. My insurance does pay for that. But if my car is at its 50,000 mile check-up, insurance doesn't pay for that. In other words, healthcare is a product that we want to market in some ways. We do want people to get checked regularly and stay in good shape and eat right, that way we minimize as best we can the little things. So I do think there's a market that could move towards wellness, both mental and physical. But that isn't happening. Instead of realizing that a little now is better than a lot tomorrow, insurance companies are under pressure to report profits THIS QUARTER, not "we positioned ourselves to be the market leader 5 years from now by approving all of our claims."
Originally Posted By Mr X ***Where I do disagree somewhat, however, is that healthcare isn't all about not wanting to make a claim. I want to see my doctor regularly, and I want my kids to get regular check-ups for immunization, etc. My insurance does pay for that.*** Okay, sure. But that also goes to my point that the system is out of whack. In other words, if basic health care services such as check-ups were much cheaper, perhaps you wouldn't even need to rely on insurance to cover it (or at least not as much). Also, if there were some government provided insurance programs in place, you could use those for the regular stuff (in Japan I pay somewhere between $5 to $20 per visit, the feds pick up the rest and I pay premiums to them in negligible amounts), thus freeing up your options to find an excellent insurance plan for only the bigger stuff. I'm not saying I have all the answers, but I think the fact that health care costs are out of proportion (and granted, that relates to excellent care as well...it's a real catch 22) is largely the reason that insurance seems like such a scam. ***But that isn't happening. Instead of realizing that a little now is better than a lot tomorrow, insurance companies are under pressure to report profits THIS QUARTER, not "we positioned ourselves to be the market leader 5 years from now by approving all of our claims."*** Sure. But again, that is very much in line with the way wall street works these days (it hasn't always...steady growth and a decent quarterly dividend used to be the way to go, but not so any more).
