The Perils of the Yangtze River

The concept of insurance, as a college professor once told us, originated in ancient China. Each year the farmers and craftsmen who lived inland had to load their goods onto boats and take them to markets on the coast via the Yangtze River. Each year some boats were lost, and a few lost everything. They decided among themselves to spread their goods over many boats, so that if one or two were lost, each would lose a little, but none would be devastated.

We had an interesting discussion yesterday over at Gregg’s Electric City Weblog, and I learned quite a bit from a guy calling himself Wolfpack. I observed that the concept of for-profit insurance did not seem to work in health care, and should be run on a non-profit basis. He asked me

Mark T. said, that one thing that other countries have done is to outlaw for-profit insurance, which is colossally counterproductive. Mark- Are you opposed to “for-profit” car and home insurance also?

It’s a good question. Why does for-profit insurance work in some areas but not others? For example, in many rural areas private fire fighters respond when a house catches on fire. But the homeowner has to pay a premium for this service, and if he has not, the fire department will simply watch the house burn. A better solution is to make fire fighting a government service funded by tax dollars. That way everyone has coverage and no one has to watch a house burn while fire fighters sip coffee.

The private protection model does not work well in that mode, but does for fire “insurance” – reimbursement for loss after-the-fact. It also works well for personal liability and for automobiles. There are many companies who provide that kind of insurance, and they compete for our business. They respond to that competition by providing adequate protection and prompt claim settlement (There are exceptions, of course, and insurance companies have to protect us from abusers. They are diligent about claim service when there is suspicious activity surrounding a loss.)

I have driven cars for 43 years, and have never caused an auto accident. Most of us will pass through life without an incident. Only a few of us are so unfortunate. But with health care, sickness is a virtual certainty. As we age, it becomes more so (which is why for-profit insurers refuse to cover old people). It is here that the Chinese boat example works. Among ourselves we can agree to share our risks, each of us absorbing some the cost to protect those who are currently suffering. When our turn comes, others will take care of us.

Because suffering and sickness are universal, we don’t need an insurance company in the middle of the process trying to extract profit by avoiding the sick. We need government to collect taxes and provide the insurance. It’s broad insurance with universal risk and huge costs which will affect all of us in our lifetimes. We don’t need the money people mucking it up. We simply need to manage the system for ourselves, using our government to do so.

It is our right as citizens to boot the for-profit insurers out of the system. By its very nature, for-profit insurance has to avoid sick people and avoid paying claims. It’s not a match.

The problems with our health care system are caused by right wingers and conservatives who are convinced that some people taking more out of the system than they put in is a moral hazard. Not so. Health care should be a right. We can help each other in our mutual suffering by any means we choose, including our government. Screw capitalism.