John Cochrane’s early stuff must have been genius by mattsteinglass
April 1, 2009, 11:20 pm
Filed under: Economics

…because everything I’ve ever encountered from the guy, knowing him only through his mass-audience writings as a public intellectual over the past few months, seems ridiculous. Yet Brad DeLong thinks he’s a very smart guy who’s lost his way, so it must be true.

On this latest concept: if, as Cochrane suggests, you had people buying “health status insurance” which would pay the increase in their health insurance premiums in case of an adverse health event, then the primary insurer would obviously start upping the premiums immediately every time anyone submitted a claim for anything; a bump on the knee would give the primary health insurer an excuse to immediately raise premiums to whatever maximum premium was covered by the re-insurer. This, in turn, would enable doctors to start raising the cost of treatment still further, since primary insurers would stop negotiating for lower prices, as they could now fob the costs off through higher premiums covered by re-insurers; which would mean yet-faster inflation in health care costs. Re-insurers could try to fight insurers’ exorbitant premium hikes, but what exactly would be their threat? To refuse payment of the premiums, causing the client’s insurance to lapse? If the re-insurer can refuse payment of a premium it considers exorbitant, then the re-insurance is worth nothing to the client; it’s not really insurance at all.

In other words this seems like a form of insurance in which buying the insurance pretty much guarantees that the adverse event will happen to you, because the third party that gets paid off in the case of the adverse event (a premium hike) will make it happen. The whole idea is just a way to add yet another layer of parasitical money-sucking to the private health insurance bureaucracy. But John Cochrane is a professor of this stuff so he must be seeing things I, as a mere purchaser of health insurance, can’t see.


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