Map of life expectancy at birth from Global Education Project.

Wednesday, January 09, 2019

Health Insurance 101

Over the course of the years, decades and centuries I have found I need to spell out some elementary facts for the newbies who come here unenlightened.

Health care is not like most commodities, say for example cheese or oven mitts. People who make remarks to the effect that it's a violation of their liberty to make them buy health insurance or tell them what the minimal contents of their insurance must be and how would you feel if the government forced you to buy cheese and it had to be cheddar only think they're being clever.

If you want to drive a car, the government requires you to buy insurance and tells you what that insurance must at a minimum cover. Think about that for a moment and also notice that just about nobody objects to it. True, you don't have to buy a car, but the difference is that you do have to live.

So what happens when somebody who doesn't have health insurance falls off a ladder or has a heart attack? The ambulance takes said person to a hospital where they receive services which, if they don't really cost $75,000 probably cost more than you can afford to pay. Which means the rest of us get stuck with the bill, one way or another. Furthermore, if you'd had insurance and been getting primary care you might not have had the heart attack in the first place.

As with motorcycle helmets, it is not merely and exclusively your own safety and well being that are at issue, in which case many people would agree that the nanny state should leave you alone. You likely have dependents, and you need to be able to work and make a living at the very least to take care of yourself. If you can no longer do that, you become a dependent of the state. And even if you think that people in that condition should just be turned out on the street to die, the people who live on the street on which you die will not like that. Society just won't accept that situation.

But health care is not like cheese and oven mitts in many other ways. You know what kind of cheese you like and whether or not you bake and therefore need oven mitts. However, you don't know what health care you need because you are not a doctor. The doctor has to make the diagnosis and tell you what the treatments are. Also, you cannot anticipate our need for health care, just as you don't know when or if you will crash your car or your house will burn down and you will therefore need a new car or a new house. That's why you have insurance. But again, if you're out of luck and don't have a car or a house, society can tolerate that, but again, they can't tolerate a lot of sick and dying people wandering around the neighborhood and they also don't want to have to take care of your kids.

Another thing about insurance is that some people have a lot of medical expenses and some people don't. Again, we can't entirely predict. So the way we get the money to pay for the expensive people is to have everybody pay into the premium pool. That way the money is there for people who need it, because of the premiums paid by the people who don't need it. If you have employer-provided insurance, you are in fact paying for it, whether or not you know it, because it's part of your overall compensation package and if the employer didn't provide it, you paycheck would be bigger.

All of this is to say that it is socially desirable for everybody to have health insurance. Also, everybody needs to buy into at least a minimal package that includes essential benefits because otherwise the risk pool for those essential benefits won't be big enough.

A single payer system is the simplest, most efficient way to organize this. And yes, people have to pay for it. You can do it through taxes, obviously. If you don't like to call it taxes you can call it premiums and have a sliding scale based on income. But it would be cheaper than it is for you now, unless you already get Medicaid or an ACA subsidy, because Medicare has much lower administrative overhead costs than private insurance and doctors and hospitals also wouldn't have to spend so much money on complicated billing systems to multiple different payers.

And yes, people who are now over 65 and receiving Medicare paid into it during their working lives, so what? If we provided Medicare to people under 65, they would obviously have to pay for it, again either through premiums or taxes, with a subsidy for low income people. That seems pretty simple.

Is this socialism? You can call it whatever you like but the people of Canada, Norway, France and the rest of Western Europe don't think they live in a totalitarian dungeon and in fact are very happy with their systems, which differ considerably but still provide everybody with basic coverage for a lot cheaper than what we spend here. That is an empirical fact. Yes, you can't opt out and not have insurance and yes, people have to pay for it. That is the inexorable logic of the problem.

If you don't like it, move to a different universe.

Update: Let's make a couple of concepts absolutely clear, although it's probably a waste of time because some people don't actually want to understand.

Insurance shifts risk to the risk pool --  the money accumulated by premiums, or if you prefer in a government run system, taxes. That's just a name, it comes to the same thing. You could isolate the premium on the tax return and withholding just as they do now with Social Security if you want to be transparent. People called actuaries calculate the likely future cost to the risk pool and adjust the premiums accordingly. Of course there might be an unexpected even such as a pandemic or an epidemic of idiocy -- oh sorry, that's already happening -- which might require an adjustment in next year's premium. Or we could have a good year and it would go down. But that's the idea of insurance, to spread risk. Its not your individual risk that's at issue, it's the population aggregate risk.

Second, right now Medicare beneficiaries have to pay a premium for what's called Medicare Part B, and if they don't pay it they lose coverage for a period. I don't know whether that's a good idea or not, it probably isn't, but it's intended to make people who have the means put a little skin in the game. People who are too poor to afford the premium become what's called "dual eligible," which means they also get Medicaid and they don't have to pay the premium. The design of a Medicare for all system could or could not include that feature, it would be up to Congress.

And yes, if you were affluent and wanted to buy supplemental insurance you could do so, as is the case right now. Medicare beneficiaries can buy whatever additional insurance they want.

1 comment:

Don Quixote said...

Even when faced with sound logic and facts to support that logic--which you've provided today on your blog in "Health Insurance 101" as you have numerous times in the past--people who are "non-believers" in the logic of universal health care turn to a highly irrational tool of rhetoric: the talking point.

These days, Republicans have lots of asinine talking points: "Trump at least tells it like it is" (he does nothing but lie); "We can't just let immigrants in so that they get welfare" (the Pilgrims/Puritans were "alien" immigrants; corporations receive welfare; etc.) that they use.

One of these convenient and totally untrue lies is, "People in Canada and Europe have to wait months for medical care."


Try getting in to see a rheumatologist in the good ol' "We are No. 1" U. S. of A. It'll take months.

Try getting health care without any insurance.

The fact is that complex medical procedures can take a while in Europe, Canada, the U.S.A. and elsewhere. But hey folks, I've LIVED abroad in Europe and Canada and Guess What? I loved the health care. And I know Canadians who are thrilled with their health care system (INCLUDING CARE FOR AGING PARENTS, which is often paid for entirely by the government).

So next time you want to argue--or hear someone else argue--that health care is inferior in Canada and Europe compared to the U.S.A., well, sorry, but that's bullshit, an utter lie.

Think about it logically: remove the middleman, and billions (or trillions) will be saved. Who do ya think pays for all those big-ass insurance buildings in U.S. cities, and who pays for all the insurance company executives' bonuses, and who pays for EVERYTHING the insurance companies' employees have and get?

We do.

Universal, single payer, comprehensive health care. A day without it is like a day without sunshine.