Monday, March 01, 2010
Health Insurance
I'll lay it right out there - I haven't put a huge amount of thought or background research into this topic, so I'm not the most knowledgeable person in this area. While thinking about it the other day though, it was apparent to me that the only way to really reduce the cost of health care is to push more of the burden off of insurance and onto the individual. I used an example of car insurance. Car insurance covers unexpected breakdowns, but not routine maintenance like oil changes, gas, and new tires. Why then does health insurance cover routine things such as physicals, pregnancy, etc? Shouldn't that be covered by the individual?
Interestingly I just came across this article from the Cato Institute with a similar view (although he used home insurance).
No one is suggesting that people shouldn't have [health] insurance. But insurance is ultimately meant to spread the risk of catastrophic events, not to simply prepay your health care. Your homeowners insurance covers you if your house burns down. It doesn't pay to mow your lawn or paint the fence.
You can also envision a scenario of product differentiation if you moved away from insurance and towards individual responsibility. For example, maybe doctor's office "X" maintains a large staff so that you don't have to wait, and they have the latest and greatest in technology. If you want that kind of platinum service, you pay more for it. Or, if you don't, you go to no frills doctor "Y."
The bottom line is I don't see an obvious way to seriously reduce costs unless individuals have a greater responsibility to cover them. Am I missing something? Is there really a silver bullet answer?
Interestingly I just came across this article from the Cato Institute with a similar view (although he used home insurance).
No one is suggesting that people shouldn't have [health] insurance. But insurance is ultimately meant to spread the risk of catastrophic events, not to simply prepay your health care. Your homeowners insurance covers you if your house burns down. It doesn't pay to mow your lawn or paint the fence.
You can also envision a scenario of product differentiation if you moved away from insurance and towards individual responsibility. For example, maybe doctor's office "X" maintains a large staff so that you don't have to wait, and they have the latest and greatest in technology. If you want that kind of platinum service, you pay more for it. Or, if you don't, you go to no frills doctor "Y."
The bottom line is I don't see an obvious way to seriously reduce costs unless individuals have a greater responsibility to cover them. Am I missing something? Is there really a silver bullet answer?
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2 comments:
And I just came across this piece from Mitch Daniels in WSJ, discussing Indiana's health savings accounts.
It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: "Is there a generic version of that drug?" "Didn't I take that same test just recently?" "Where can I get the colonoscopy at the best price?"
By contrast, the prevalent model of health plans in this country in effect signals individuals they can buy health care on someone else's credit card.
The Indiana experience confirms what common sense already tells us: A system built on "cost-plus" reimbursement (i.e., the more a physician does, the more he or she gets paid) coupled with "free" to the purchaser consumption, is a machine perfectly designed to overconsume and overspend. It will never be controlled by top-down balloon-squeezing by insurance companies or the government. There will be no meaningful cost control until we are all cost controllers in our own right.
Americans can make sound, thrifty decisions about their own health. If national policy trusted and encouraged them to do so, our skyrocketing health-care costs would decelerate.
^^^^^^^
+1,000,000
This is why those in the GOP with their arms around the issue have been pushing HSA's and HDHP's for years now.