A commenter at 4&20 (Ingemar Johansson, about 4/5 down the page) remarked that the standard right wing solution to our health care cost problem, crossing state lines to buy health insurance, would work because we all buy our property and casualty insurance from companies that cross state borders.
That does work. It’s a common thought, but misguided. It starts with a perceptual mistake – to name property and casualty and health care both “insurance.” It may be a useful name in terms of catastrophic events, like auto accidents and building fires where people and property are harmed.
But property insurance is based on the premise that events that require claim payments are rare. People who buy homeowners’ insurance do so because coverage is cheap and prudent, and not because they know they are going to have a fire someday. Auto accidents seem common, but in terms of the number of drivers and miles driven, are rare.
Companies who sell that insurance compete less on price and more on quality of service. It’s a good deal for everyone, and the market does a good job for us.
Health “insurance” is different. It is a virtual certainty that we will all make claims on the insurers, and also that we will avoid seeking out needed services that are not covered. Young people are so healthy that they don’t want to buy into the system and pay for other people’s costs. But these are the very clients the insurers want. Older people are a certainty to file claims, and so insurers avoid them. They even dumped those 65 and older on government.
So health insurers write elaborate contracts that sound good but disappoint when a claim is filed. States stepped in and required that they cover certain events, like maternity or the first day or two of a baby’s life. Insurers avoid those states that do that, and flock to states like Arizona, that don’t regulate them.
Because they are paying fewer claims in Arizona (medical costs are not lower there – only the percentage that insurance companies pay), if we allowed cross-state insurance, people would flock there for coverage, and we would all be under-insured. That is bad public policy.
The simple answer, the bonehead answer that every other industrial country already knows about, is to quit calling health care an “insurance” product, and simply build its cost into the national budget and spread it over the whole population. After that, we are no longer playing the hide-and-seek insurance game, which itself is a large driver behind our skyrocketing costs.
Instead we would play a game called “retail/wholesale.”
That is the essential difference between us and other countries – we pay retail. Other countries cover their entire populations, and even the worst performers, like Canada, pay only two-thirds as much per capita as us. Most countries pay around one-half of our per capita cost, and everyone is covered. Life is better in those places than it is here.
All we need to do is expand the covered pool of clients to “us” and change the enrollment period to “anytime.” We can allow insurers to practice their trade, but instead of profit-seekers, they become utility plant managers. They can’t refuse service to anyone, are guaranteed a reasonable rate of return, and are heavily regulated.
The downside? There aren’t many.
Some claim that profit-seeking drives innovation. That is a valid point in the sense that private companies innovate. That would not change, as they would be selling their products to us via government instead of private companies.
Some say there is a moral hazard as people would use medical services unnecessarily. That’s not been the case elsewhere, as evidenced by per capital costs.
Some say, in the face of all evidence, that it will cause costs to spiral. But we are the spiral. Our cost increases far outpace inflation. Costs are going up everywhere, but the U.S. leads the pack by several lengths.
And finally, some say that our system is lawsuit-driven, and that we must have tort reform before anything else can happen. False. Lawsuit settlements and malpractice insurance are a very small part of our cost spiral. Maybe we should address that matter, but it is being used as a lever – corporations simply don’t like being sued, and are using medical malpractice as a device by which they can avoid lawsuits in all areas. That is nothing more than clever PR.



















