The problem with health insurance

Don’t worry. This is not another piece about Obamacare. Instead, we’ll go back to basics, and see if health insurance can ever satisfy the demands of the payers, the providers, and the patients. It’s not as if people haven’t been working on this for awhile. The notion of health insurance stems from the so-called “friendly societies,” and dates back to the very dawn of the Industrial Revolution.

Arguably, those associations can trace their own origins back to the burial societies of ancient Greek and Roman artisans. In the Middle Ages, they morphed into the trade guilds of Europe, and expanded their mutual assistance programs to cover the financial burdens of illness.

But the founder of modern health insurance is Otto von Bismarck, chancellor of Germany, who in 1883 passed the Reichsversicherungsverordnung (Reich Insurance Act). As such, it became mandatory for certain segments of the workforce to pay premiums in support of sickness funds. This effort, and the rest of its early social welfare programs, was a means for the government to counteract the appeal of Communism, especially to those on the lower economic strata.

However, it would take another German chancellor—better known than von Bismarck—to inflate this concept into universal government-controlled health care. His name was Adolf Hitler. It must be noted that Hitler was quick to see the potential in such control, and it is a sad fact that the mass extermination methods of the Nazis were first perfected in government hospitals.

A few years earlier, in Dallas, what would eventually be known as the Blue Cross and Blue Shield Association began in the wake of the October, 1929 stock market crash. Justin Ford Kimball, who had set up a sick benefit system for Dallas teachers, was recruited to deal with Baylor University Hospital’s falling admissions and problems in getting paid by its patients.

Kimball’s non-profit low cost prepaid plan concept was an immediate success, and for-profit insurance carriers would enter the fray during World War II. Given the wartime labor shortage, health plans were a valuable incentive that beleaguered employers could offer. Medicare, introduced in 1965, put the Feds into health care in a big way, and it was only a matter of time before its rubrics would spill over into private insurance.

Meanwhile, the Baby Boomers entered the job market, and competition in the private health insurance space exploded. For sure, that is what led to the amazing transition of health insurance covering catastrophic needs to its covering nearly everything—at a price, of course. In fact, there is no other form of insurance that remotely fits this paradigm. Today’s health insurance is much more like a platinum-level extended warranty program, even if it is called “insurance.”

In a pathetically ironic twist, the one similarity that health insurance does have with other forms of insurance is that claims processing must be based on easy to understand cookbook formulations. This massively favors procedural medicine and acute care over cognitive medicine, and drug dispensing over lifestyle modification. In other words, there is a lot more money in disease than in health.

While longevity might increase under such a structure, health and wellness will probably not. Thus, the current system is bound to create an ever-increasing population of older, sicker individuals. This is not exactly an actuarial model for success. Given limited resources, choices must be made on both the distribution of health care and the reimbursement to the providers, whether it is a fully socialized system or a fully private one.

In a socialized system, such choices will be based on the “welfare of society.” In a commercial system, such choices will be based on marketability and return on investment. Either way, the rights of the individual disappear, along with the long diminished doctor-patient relationship. Moreover, since the entire enterprise is based on third-party payers, the true value of the covered products and services is grotesquely distorted.

So, let’s summarize what we have here: A system based on the shakiest of actuarial foundations, in which hard choices will have to be made that can only destroy individual rights, operating in a platform whereby the core component values are unknown. What could possibly go wrong?

47 responses to “The problem with health insurance

  1. Shaw, you’re disccussion was excellent. The whole idea of insurance starts the ball rolling.

    Yesterday, probably as you were writing this essay, i was thinking about how we are chasing an illusion.

    I read yesterday in a Forbes piece by Avik Roy that the calculations show that 93 million people will be taken out of their current insurance programs by Bamstercare. Could be, and the promise that people wouldn’t have to change their insurance was the repeated chant–supposedely enough that it will bring down the left.

    No it won’t, because people that worry that much about insurance that it’s a priority are always waiting, wishing, hoping that central planners will find a way for them to be secure and safe int their pathetic little heads.

    The manipulations and “redistributions” and trade offs are all part of the shell game of a free lunch.

    Lot’s of people pick on the basis of what looks like a safe way to get the free lunch–then they criticize the trade offs that create the delusion or they complain the benefits were too expensive or not lavish enough.

    I ran an HMO in the 80s under the Nixon HMO act–i met a few free lunch folks in Louisiana. They were offered a community rate for a lavish plan and they used it. Now i work in an Army hospital and see another set of people who are living the dream of health care consumers in the modern age–except they wait too long or the think they should get more or they want better access.

    Nice essay Shaw, why am i not surprised?

  2. There are elements here that I accept and some that I’d challenge.
    The key insurance-related concept is one I accept. When insurance covers important losses rather than routine expenses, it becomes a way of sharing and managing risks. This is provident and valuable for most people. In healthcare specifically, risk management is crucial because we can intervene now in ways that were only dreams in 1930 or 1960. Instead of watching a child die, we can pour resources into the child’s recovery and we do so.
    Many insurance plans did evolve into something closer to a pre-pay model. That’s okay too for those who choose the model and its premiums. The author above seems to scorn such programs but that’s one I challenge. For some people, this may seem the provident route. It’s hard to know what is chicken and what is egg, but it’s true that routine visits are more costly than before and procedures that were once pretty affordable are now much more expensive — so people do look for coverage of things like treatment for lacerations or even routine well-child care. At $125 to say “hello”, I’m not surprised.
    The author doesn’t mention, at least not in the excerpt, the role of state mandates to insurance policies that they cover what most of us would consider routine events. Such coverage of course makes health insurance more expensive and distorts markets for insurance and for the health care itself.
    I’m sorry but I’m going to essentially discount the Hitler reference. It’s true that single-payer does give government extraordinary control over both patients and providers. In a system like UK’s NHS, theoretically the voters can control the system by controlling Parliament but in practice that fails badly. More to the point, why should voters control a system at all? In that, the author and I agree.
    Now let’s talk about procedural versus cognitive medicine, intervention versus lifestyle changes. Lifestyle changes may change the point at which people seek major healthcare and may have some small affect on the reasons that they seek major healthcare, but there’s only weak evidence for this concept. There’s a lot of talk, and the article seems to go along, about paying for outcome based healthcare instead of procedures.
    I pay taxes to cover “public goods” and some that are less so. I pay stewardship to support my church.
    Every other part of my life is based on paying for what I use. I don’t pay the grocery store to manage my diet, I don’t pay the electric company to manage my lights and I don’t pay the oil companies to manage my mileage. It is well and good that a provider advise me on how I can improve my health and be paid for that service. But I go to see a provider mostly when I have acute needs and I expect to pay (actually I expect my insurance mostly to pay) for services related to that acute need. I don’t want my healthcare provider to be “Big Brother” to my lifestyle and I don’t know how in heck you’d work out an incentive system for providers that rewards “outcomes” in any meaningful way.

    • @MT–

      A bit to cover here…

      Left out of this piece, mostly because I’ve said this many times: There is not enough money in the world to pay for a disease care model. There is no “health care” in the current system.

      I have nothing against a pre-pay model, but in nearly all cases, the choices are limited. That’s why HMOs are cheaper than PPOs.

      Again, there is nothing wrong with procedural medicine, it’s just that the current system drastically favors it, and that’s why health care is so expensive. A procedural model would favor waiting for a quadruple bypass, rather than managing the case earlier.

      Discount the Hitler reference all you want. It is historical fact.

      Actually, easy to incentivize outcomes. Start off with something simple, such as net weight loss, key blood titer improvements, etc.

    • The other side of the coin of an “outcomes” driven centrally controlled system is that neither the central controller nor the controlled will get to choose the outcome. The problem is the expectation of centralized control being able to control anything without ultimately destroying the thing controlled. It cannot.

      All information is local. Combine that with centralized control, the system is guaranteed to fail catastrophically strictly from the fact that sufficient, fine grained, and timely access to that information is impossible to achieve. The central control response to external impacts on the system will always be too little, too much, too late, or simply the wrong thing at the wrong time. If it is the right thing at the right time it will be by accident and rare. This is guaranteed by The Law of Requisite Variety:

      Since all information is local, rapidly changing, and extremely fine grained, ALL control, action, and responsibility must be local. That is unless your goal is catastrophic destruction. See the history of the 20th century for instructive detail. The 21st century is a work in progress but appears to be on target for more of the same for exactly the same reason.

      • @Lionell–

        No argument. In the end, nothing good can come out of central control of health care. That’s why the Hitler origin of this thing is so important—and so denied!

        • This is why I conclude their goal is catastrophic destruction.

          The parties in the crime hate the certain knowledge that they must use their minds and stay in contact with reality to continue to exist (i.e. to be human). They want to survive on whim, wish, magical thinking, and brute force without consequence and know they can’t. Hence, if they can’t have things their way, they work to destroy everything all while pretending they are doing it “for the children”. Their words don’t rise to the level of being lies. There is no such thing as innocent ignorance in such matters. It is malignant to the core!

        • Reducto ad Hitlerem is a falacy for a reason. Or “Hitler ate Sugar” if you prefer the English.

    • I’ll agree, removing the reference to the third Reich would greatly improve the piece. It gives nothing of significance except poisoning the well, and it can very easily turn off readers. After that line, I almost didn’t finish the essay. Heaven help you if I was actually against your thesis. I seriously doubt that anyone on the left would be able to swallow their pride and rage long enough to read your more thought-out points.

      • @Ben–

        “Nothing of significance”? Not significant to mention that Hitler is the founder of universal health care? Sorry, but I cannot soften this to conform to PC sensibilities.

        As to anyone on the Left swallowing their pride—don’t worry. That will never happen.

        • That’s a fallacy and you know it. He also founded Volkswagon, However, I don’t see anything wrong with the Beetle. Just because Hitler did something doesn’t make it evil. Lucifer questioned authority does that mean that we must be blindly obedient to everyone? That’s called poisoning the well. “You don’t want to agree with Hitler don’t you”. If you want to make a point, then make it.

          Universal Healthcare doesn’t work is a valid thesis. Support it. “Hitler founded Universal Healthcare” is a historical fact, but it does not support the first thesis.

          • @Ben–

            Please! It was not just *because* Hitler did it… It was that ONCE he did it, he saw it for what it is—A terrific method to exert control over people. Indeed, von Bismarck set up the charitable aspect of it. It was Hitler–grand socialist that he was–who made it mandatory for everyone. You will recall that the Ruskies also controlled health care, and could use it to declare their internal opponents “insane” at the drop of a hat.

            The totalitarian aspect of universal health care cannot be soft-pedaled. For heaven’s sake, the British NHS is pleased with the success of their trial program where they pay bonuses to doctors who can convince their patients to accept an early death rather than expensive hospital care.

            Private insurance can’t do that…yet.

            The other point is that few people known the origin of universal health care, and pointing this out to them couldn’t hurt.

            I’m sorry, but I reject the notion that I cannot mention his name because he was too evil. What is this? Harry Potter and Valdemar?

          • It’s not a fallacy if it’s true!

        • Friend of John Galt

          Yes, the parallels with Nazi healthcare are frightening. The paper (which is the philosophic underpinning of the Obamacare law) written by Ezekiel Emmanuel (brother of Rahm, former Obama chief of staff) is dissected in a blog at Junkfood Science (which,sadly, has been dormant for several years). see

          Then draw your own conclusions.

    • Good post, Geoff.

      “When insurance covers important losses rather than routine expenses, it becomes a way of sharing and managing risks.”

      This is one good thing about Obamacare. Insurance companies are per force raising deductibles to cover the expense of new Obamacare required coverages.
      I consider large deductibles to be one of the core actions to reduce the overall cost of health care. Large deductibles will make insurance actual insurance.

  3. Westchester Bill

    An excellent Post. Heath Insurance is driven by the economics of longevity and the principal that health care can not be withheld from anybody showing up at a hospital. Social security can not be privatized because its reserves would equal or exceed the total value of everything in the United States. Everything wouldm be owned by the Social Security Administration. Similarly for medicare where rough $150,000 has to be accumulated by age 65. Private insurance doesn’t work for individuals. It is too expensive for those who need it and a bad deal for those who don’t need it. ObamaCare puts back old fashioned community rating. Once people stop pounding the web site, the system will save the costs of marketing and underwriting. Those expenditures can be shifted to actual care. Unfortunately Republicans opted to destroy the bill and forced the inclusion of a bunch of preventative features favored by Democratic nit wits.

    • Ummm, I don’t know where to start except for the fact that everything you said in your post is wrong.

      Medicare and Social Security are pay-as-you-go systems, where inputs equal the outputs. You don’t store a horde of cash that is then dispensed. Private insurance works by balancing risk. This is why young men pay cheaper rates than old me. Yes, there are issues with balancing risk and care, but that is simply a matter of paying. The Obamacare mandate is a mass system that does nothing of benefit that cannot be done (and has been done at various times) by private insurance companies.

      It was sold on lies, and your claims that they cannot work are ridiculous because they do, have, and can work.

      • Your claim that Medicare and Social Security “do, have, and can work” depends upon what you mean by “work”. It’s rather like the person who wanted to jump off a hundred story skyscraper and was warned that nothing good could come of it. Yet, in spite of the warning, he jumped anyway. As he was passing the 50th floor, he was heard saying, “See nothing bad has happened yet. Everything is going to be OK.”. He clearly thought it was working.

        Then shortly afterward, he impacted the cement sidewalk below with a very loud and very messy SPLAT! For some reason, apparently unknown by you, he was no longer able to do or say anything after that event except leak various vital body fluids. I have a great difficulty calling that “working” even as he was falling. The “long run” is much closer than you think.

        As has been said, socialism appears to work as long as the socialists don’t run out of other people’s money. That takes an unlimited number of willing victims who posses an unlimited pile or wealth to steal. What happens when there are no more victims to sacrifice and no more wealth to steal? It is an immediate SPLAT! “They will think of something – they always do” won’t work when you have made it impossible for them to do anything.

        “But…but…but I didn’t mean for THAT to happen.” Yes you did but you were unwilling to admit it even to yourself.

        • So because a specific implementation that can be easily fixed by adjusting taxes and benefits doesn’t work, the entire idea is invalid?

          And, by the way, how does Obamacare fix that?

          • The whole idea is invalid because it represents the initiation of force by the government against individual citizens. If you think it is not force, try not paying the required taxes.

            The only “fix” is to abolish all such programs along with the abomination called Obama care. Then reduce our government to its only valid function: the protection of individual rights. As it is, its primary function is to steal wealth produced by some and give it to those who did not produce it. This is no different from any common thug except the government does it under a pretense of legal authority. That a majority of voters agree with it is irrelevant. There is no right to violate rights!

  4. I found out there is an exemption in Obamacare for health ministries. Now they tend to be for religious folks so if you can’t abide by some of the strictures – it is probably not for you (They don’t pay for abortion, birth control suicide, and want you to lead a clean Christian life)

    There are several but this is the biggest

    It works like this. Any expenses under $300 you cover yourself. They don’t have a doctor network, but you can get info on doctors who give cash discounts and such.

    If the expense for an event is over $300 and is acceptable to the organization then other members will pay for the expenses up to $250,000. If the full amount can not be covered for various reasons, say your cancer goes over the limit. Your name gets put on a list and other members can donate to your cause – so usually you get what you need. It is not insurance under the law, it is an association of people who willingly will pay to others in the group.

    For more information, and info about other Healthcare Ministries you can look here.

    Anyway – what is the point – The point is that this is the way insurance is suppose to be. You take care of small things yourself, and if you have a major issue, you ask your community for help. It wasn’t supposed to be a bumper to bumper all service warantee.

  5. I also take issue with the Insurance forces medicine on us rather than lifestyle change.

    First off many of our problems are caused by government meddling.

    It turns out that the high starch diet the government is trying to foist on us, is killing us by inflaming all our arteries. The government also replaced relatively begign animal fats with hydrogonated vegatable oils – from plants never meant to produce oil (eg corn). This was all done for political reasons (anti meat advocates, farming advocates, senators who liked a diet and tried to foist it on the rest of us) – So foo on the lifestyle changes, what damaging change would the government like me to do?

    Secondly a big part of Obamacare is dedicated to this trope. If we force people to go to annual checkups so the doctors can badger you about your lifestyle, and give you tons of tests we will save money because we will all be healthier. Problem is studies do not support this. Annual physicals are a waste.

    Third, it seems that people are causing their own problems. We know we should excercise – but parents are afraid of letting their kids outdoors, even though crimes against kids are at all time lows – parents are both working, so they can’t have one parent stay home and say get off the Nintendo, and go out and play. In fact they are encouraged to stay inside until the parents come home to be “safe” or they are put in after school day care where they aren’t let out of a small classroom for an additional 3 hours every day – where I got to play during that time as a kid. Having a doctor nag at the family to do more excercise isn’t going to change any of this.

    • @marque2–

      The preventive portions of Obamacare are basically eyewash. Annual physicals are nothing more than gateways to more procedures. Indeed, “prevention” under the guise of procedures such as mammograms and colonoscopies shows you just how much the language has been distorted.

      • I have to agree about that. I haven’t seen anything that suggests an annual physical has any actual health benefit to a healthy young adult. Unlike dental visits, or children’s visits, there really isn’t much to be done on these. For the extremes, (the eldery, children, and the sick), there are good reasons for routine visits, but the annual physical requirement is not supported by data for a large fraction of society.

  6. Who in red-glowing hell is this guy Shaw? Talking of Hitler here is just gross. The purpose of healthcare is one of very simply statistical mathematics: If there are 50 people out of which one will get a rotten hip that has to be replaced and it costs him 15 000 USD while the others don’t, is it not fair that they all contribute 300 dollars over, say, 25 years, meaning 12 bucks a year, for the purpose of having the one getting ill fixed at a nominal cost of 200 dollars? You cannot predict which one of these is going to get ill, but you know that with a pretty well known probability someone is going to! Mr. Shaw: Hitler was a monster, but you have examples closer in both space and time: the news right today are full of stories about how American doctors and nurses have been helpful in developing methods for torturing political prisoners. So don’t play innocent here! marque2: If you feel Insurance is forcing medicine on you instead of lifestyle it is totally your own fault! Nobody prevents you from eating tomatoes instead of Clubburgers or drinking water instead of Coke!
    Do not misread me. I drive the 3rd Cadillac in a row and probably will never switch brand.

    • Please don’t conflate health insurance with govt-forced universal health care. I’m supposed to be scared into not mentioning that Hitler founded universal health care?

      • Shaw, case in point. Your rhetoric has turned off someone to the point that while he might agree with your argument for the use of catastrophic insurance versus prepaid healthcare, he is too angry to see it.

        • You are apparently offended. So what? Why do you think your or anybody else’s tender feelings have anything to do with the argument. That is rather like someone is offended by the mention that today is Monday. Therefor we should not identify that today is Monday?

          My response is “get over it”. The use of government force to violate individual rights is always wrong! Government enforced and mandated universal health care is wrong no matter if Hitler, Obama, or the Pope himself institutes it. It is a violation of individual rights at their most fundamental level: the individual’s life and right to choose as he and only he sees fit.

          • I’m not offended. I’m discussing. Shaw stated how important it was to point out that Hitler was the first to suggest universal healthcare, and I’m pointing out how this is a bad tactic. Not only does this say NOTHING WHATSOEVER about the quality of the idea, but it undermines his case. The falacy isn’t important to the coldly logical (correction: it does offend me as a sin against logic, but no further), but to many, it’s just angering. Extreme rhetoric inflames people who agree with you and incenses those who disagree. Shaw’s little section on Hitler INVALIDATES HIS WHOLE PIECE as a useful topic for discussion. Half of the comments on this discussion have been about a two-sentence paragraph that could be removed without changing a darn thing about the essay. The rest of his piece, which includes some well thought out ideas about what insurance should be, has been almost entirely ignored.

            • @ben–

              I’m still unclear as to why mentioning Hitler as the founder of universal health care is a logical fallacy. Would it be OK in a discussion of WWII to mention his name?

              If someone is offended by Hitler’s name to the point that they won’t read the rest of the piece, there’s not a whole lot I can do about it—nor should I care.

            • The falacy is in the heavy implication “Hitler did it, therefore it’s evil”. It’s a snide quip that does not contribute anything to the piece.

              If it was relevant or tied into the rest of the work in an integral fashion that would be different (for example, one cannot discuss Social Darwinism without mentioning the 3rd Reich). However, it doesn’t. If you extracted that paragraph, then the rest of the piece would be unaffected. That paragraph exists solely to compare Obama to Hitler. It’s a “by the way, have I mentioned they’re evil” reference worthy of Greenpeace.

            • I see. You can “discuss” Hitler but no one else can?

              The comment that started your rant about using “Hitler”:

              “However, it would take another German chancellor—better known than von Bismarck—to inflate this concept into universal government-controlled health care. His name was Adolf Hitler. It must be noted that Hitler was quick to see the potential in such control, and it is a sad fact that the mass extermination methods of the Nazis were first perfected in government hospitals.”

              The reference is not so much that Hitler was involved, it was that Hitler saw the potential of controlled health care and what the Nazis did with it. That potential exists today with our version of a “leader”. The point is that no central authority should have such life or death power over the population.

              That abuse of such power is possible with our government is demonstrated by the IRS targeting the Tea Party, the NSA snooping on the US Population without possibility of examination or redress, and drones being used to assassinate US citizens without trial. ALL of these things are precursors for the death panels, selectively withholding life saving treatments of disfavored persons. This even happened by the actual and repeated denial of a lung transplant for a young child.

              All of this makes the reference to Hitler quite appropriate and almost urgent to make. We, in the US, are but a few small steps away from such abuse of power. This is especially so with the almost total disregard by all branches of our government for our Constitution and the limitations it places on government power.

              The parallels between 1938 Germany and the US today are beyond ominous: intellectually, philosophically, morally, socially, and economically.

            • @Lionell–

              Thanks. The parallels are ominous indeed. Amazing that many cannot see that we are creeping–and not so slowly–into a fascist dictatorship.

        • Being conditioned to be so PC sensitive that you cannot think clearly because of rage at the mention of Hitler demonstrates exactly how Tyrants like Hitler control thought. It is absolutely relevant to the discussion to point out Hitler started Iniversal Healthcare.

    • That is not what medical INSURANCE is today. [It IS what it SHOULD be.] Medical insurance is a 3rd-party payer system.

      “Who in red-glowing hell is this guy Shaw? ”

      Sir, Mr. Shaw is a good guy.

  7. I’ve made this argument before. When you start pouring in lots of money into a system, the incentive to reduce costs goes away. Like with Pell grants, easy government loans, and higher education. Since money for college became easier in the 1970’s, the costs have soared, far surpassing inflation. Why? Because there’s no pressure to keep costs down. As the costs go up, the government pours more money into the system.

    The same with health insurance. You get charged $180.00 for an office visit. You pay $30.00 (or less) copay, the insurance pays $150.00. Next year, the doctor raises his fee to $200.00, you might still pay $30.00 copay, but your premium goes up $10.00 per month. Or your deductible goes up $250.00. Or your copay goes up $5.00.

    If there were no insurance, you’d probably start balking at a $50.00 doctor visit. So much so that you’d have to be pretty sick to go. The doctors would have to lower their fees to something that people would be willing to pay. He would definitely be looking at ways to lower his cost of doing business, instead of automatically passing his costs on to the patient. Your doctor’s standard of living might even go down and it might not be as lucrative a profession as it is now. Of course, as with the legal profession, if you did need a doctor, you’d pony up what ever it cost. The difference being that you’d probably stop seeing the doctor for a cold, or mild flu, or a skin rash, or sprained ankle, etc. And some people that should seen a doctor, but didn’t because of the price tag, might pay a heavy penalty healthwise.

    I’m not advocating getting rid of insurance by any means. I’m just pointing out that it’s a two-edged sword. We benefit from access to preventative care, but in turn we participate in the spiraling rise in the costs of healthcare.

    • This is the best argument for CDHPs and catastrophic insurance. I know my costs have gone down since I (or more accurately, my wife) have seen the actual costs of medications and visits. Even though it is paid with an HSA, you still see the actual costs and have to sign that receipt.

  8. I find Shaw’s post offensive in the extreme, and it has nothing to do with the environmental lies that we are trying to fight with this website. With friends like Shaw, we don’t need enemies. To the extent that environmental skepticism is associated with right wing crackpot ideologies, it will lose credibility with the public at large.

    • “it has nothing to do with the environmental lies that we are trying to fight with this website.”

      This is a privately owned website. It is about what the owner wants it to be about.

    • @Ronald–

      And here I thought that most of the environmental lies were about health. Silly me. You must think that people really do care about polar bears.

      • I must assume that Shaw is a closet warmest since he is setting about to trash this website. If the main purpose here is to flog right wing ideologies a la the tea party, then its credibility drops to zero. Let’s stay on message.

        • @ronhave–

          Curses! You’ve found me out! Please Oh wise one—tell me what the purpose of this website is.

          • Tricky, but no, but I will tell you who can.
            I speak of none, but the computer that is to come after me.
            A computer, whose merest operational parameters I am not worthy to calculate, and yet I will design it for you. A computer of such infinite and subtle complexity that organic life itself will form part of its operational matrix. And it shall be called… the Earth!

  9. Friend of John Galt

    The chief problems with the current health care system is that it has been so thoroughly distorted by Government interference. That interference started during WWII, when the need to attract workers caused wages to rise — but such increases were blocked by a wage freeze. To accommodate extra renumeration, the government allowed employers to provide health care or health care insurance tax free as a “benefit outside of the restricted wage rates.” I note that the Kaiser HMO has its roots in this same period. In part, due to the huge numbers of workers attracted to Kaiser’s shipyards during WWII, local facilities were overwhelmed. Kaiser created a healthcare system to care for the workers and their families.

    Well prior to times of government interference with health care delivery, some larger companies also had “company doctors” that cared for their employees. Indeed, my first employer (a railroad) had company doctors (generally employees of the company, but some contracted located in smaller towns) in all the principle rail centers — and had two large hospitals. We had a “clinic” in the headquarters building where an employee could drop in and see a doctor (at no cost, other than medicine provided) for whatever ailments they wished to attend to. This particular system attempted to transition into an HMO during the 1970s, but that failed in bankruptcy. (They were competing geographically with the Kaiser HMO and simply didn’t have the resources to be an attractive alternative.)

    During the Lyndon Johnson administration, Medicare and Medicaid were created, further disrupting the health care delivery system.

    Once government interceded in the market, the whole system became seriously distorted. Today, and uninsured (but otherwise affluent) individual is faced with outrageous “retail prices” for medical care. Nobody covered with insurance pays these rates, as the insurance carriers have negotiated more favorable terms. This forces those who can afford insurance to buy it simply to get the advantage of reasonable rates. (Example, I had a minor injury that required a couple of stitches — and a trip to the emergency room. While I had to hang around for several hours, the total time of my interaction with all staff was less than 15 minutes. The bill was more than $1000. The insurance paid it’s agreed rate of $125. Had I not had the insurance, I’d have been screwed.)

    The reason for this distortion is that the government chooses to pay charges that do not always completely cover delivery costs. So, there are massive cross subsidies and cheating going on. Often a specialized treatment or exam results in “multiple boxes” being billed– that is, the treatment is broken down into numerous parts and procedures so that as much recovery from the government or insurance carrier can be obtained.

    The actual consumer is rarely particularly aware of either the actual cost of a service nor what is being billed and paid for that service. The consumer of health care services is unable to exercise any reasonable effort to get the most efficient service.

    Personally, I’d be very happy to pay the first $25,000 (in a year) of medical expenses (for my family), with insurance to pick up the excess. I hardly expect that my family’s _reasonable_ (non distorted) charges would exceed more than $2000 or $3000 in a year’s time. The cost of such catastrophic coverage is likely to be reasonably low.

    Since part of the distortion is caused by employers being ‘third party’ payers, all company-supplied insurance should be phased out with policies converted to individual/family coverage — paid for out of pocket by the person covered.

    If there are citizens in need of “help” in obtaining access to health care, then those in need should be provided ‘vouchers’ to purchase a commercial policy.

    The shell game of cross subsidies and hidden rates needs to end. Providers should be required to post their prices (just like a gas station). While there are complexities (more significant than gasoline pricing) representative price lists could be prepared … only then can the consumer actually be making economic choices.

    And government should stay out of this entirely.

  10. Shouldn’t remuneration be a private matter between the patient and his/her doctor?

    • I had a deal with my daughter’s broken arm. When I was a kid, you just went to your family doctor and he fixed it up for you. This arm was only cracked it didn’t even need to be reset. Family doctor would have been great.

      But we took her to the pediatrician who refused to put on a cast. She sent us to the ER and called in a bone specialist to do the cast. Total cost including the pediatrician charging 150 was $3500.

      I am guessing the reason the pediatrician refused was due to liability and insurance costs. Tort reform would have saved me at least $2500

  11. @marque2
    Bingo! That is precisely the point missed: the Affordable Care Act does exactly nothing to manage healthcare costs. All that is accomplished is to shuffle the costs of current care onto our children and grandchildren.
    I don’t expect my auto insurance to cover the cost of my oil changes, so I don’t expect health insurance to cover my own wellness costs. But the public at large has been taught that it is someone else’s responsibility to pay for their care, more specifically, Government responsibility.
    We give them food stamps to buy filet mignon, lobster tails, pork bellies, candy, and mountain dew, so we might as well pay for the health problems incurred, right?

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