Filed under: Health
I wrote this post on the health insurance/fire department analogy on Democracy in America, and in comments, someone who calls himself Navarchos wrote what may be the most pithy and concise explanation I’ve ever seen of why a free market in private health insurance doesn’t work. I can’t link directly to his comment, but it’s at 17:39 on August 3. An excerpt:
No sane insurer will sell a policy to a sick person, just as no life insurer will sell a policy to someone who’s already falling off a bridge. Forcing insurers to cover everyone with preexisting conditions without enacting myriad other reforms creates perverse incentives to reduce coverage and raise rates across the board (to avoid looking attractive to unattractive subscribers).
Finally, since a health insurance policy can be called upon by choice, rather than catastrophe, moral hazard is rampant. To limit this, where life and auto insurance have simple deductibles and limitations, health insurance has ridiculously complex deductibles and limitations as well as co-insurance and co-payment structures that are more or less incomprehensible to individual subscribers. This prevents any meaningful measure of informed choice by subscribers, particularly as it’s impossible to gauge how cynically litigious an insurer will prove to be until after you’re sick. The asymmetry always favors the insurer, since the insurer can cancel a policy if the subscriber withholds information, whereas a subscriber just gets to die while his claim is held up in arbitration if the insurer reneges on its obligation. Oh, and most people don’t buy their health insurance; they get what their employers are pleased to give them in lieu of wages.
In short, y’all should quit pretending there’s a free market in health insurance, or that it’s possible to have one without deleterious effects on public health.
Read his whole comment. It’s great. Oh, and read my blog post while you’re at it.
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