Health Insurance 101

The latest hot right wing think tank meme is that the reason health care costs so much in the United States is that it's mostly paid for by insurance. Since our insurance is paying for it, we consumers aren't cost conscious, and therefore we spend too much. If we could just reduce or eliminate insurance coverage, and make people pay more out of pocket, the wondrous free market would constrain health care costs.

Like everything else that comes out of right wing think tanks, this is of course complete bullshit. The easiest way to prove that is just to take a look around at the real world. Every wealthy country except for the U.S., and even some that aren't so wealthy, has universal health insurance. Furthermore, it's good insurance, better than what most Americans have, with very little out of pocket spending required and very comprehensive benefits. So, all those countries ought to be spending even more on health care than we are, right? Your theory proves it. But of course, the precise opposite is true. They all spend much less, in most cases half as much. And yet their people live longer, healthier lives than we do.

Hmmm. Well, we already know that at right wing think tanks, facts are stupid things. Reality is irrelevant, it's our theories that matter. But here, we're reality based, so we can ask why the theory is wrong.

It's wrong for several reasons but the most important is that consumers do not generally decide what health care to buy; and to the extent they do decide, they don't make decisions in a way that reduces costs in the long run. Except for a very few people with a specific mental disorder called Munchausen Syndrome, we don't obtain health care because we enjoy it, and we don't want as much of it as we can get. In fact, most of what constitutes health care is unpleasant, and we prefer to consume as little of it as we can get away with, even if somebody else is paying for it.

I'm not going to go out and get a kidney transplant, take pills, or even consume minor services like having my doctor thrust a popsicle stick down my throat or stick his finger up my ass just because Blue Cross is paying for it. I'm only going to consume those services because I know I really need them, or more likely, because my doctor tells me I do. Furthermore, the vast preponderance of medical expenses are for goods and services provided to people who are truly, seriously ill. Having to pay a $5,000 annual deductible isn't going to stop me from having cancer surgery or taking antiretroviral drugs; I'll pay the $5,000 and then I'll let my insurance pay the $100,000 balance. If I don't have insurance, I'll spend everything I have and then Medicaid will pay. The third alternative is that I'll die.

Now, this is so obvious and so susceptible to common sense understanding that you would think it would be impossible for any adult to seriously argue otherwise. And yet everyone from John Stoessel to Jeff Jacoby to the White House Occupant is going around saying that insurance is the cause of runaway health care costs and the solution is to make sure people have really crappy insurance that doesn't pay for routine services. Of course, they also claim that C02 emissions aren't causing global warming; that Saddam Hussein was behind the 9/11 attack; and that it's a violation of our fundamental rights to take arsenic out of our drinking water.

Next: The real reasons why health care spending is so much lower in countries with sane political leadership.