Comments on: Health care oxen

By: Chuck Betley

Chuck Betley — Thu, 19 Nov 2009 22:24:03 +0000

Private insurance became a mechanism for paying for health care because of a superficial resemblance to financing catastrophe losses in the property/casualty area, we all know that other countries chose different paths. But, I think the closer analogy is education; all members of a society need to some minimum level of literacy, but that minimum has risen over time as society and technology have become more complex. You can question whether people will make better use of resources if they face out of pocket costs (premiums & cost-sharing, or tuition & student loans) or whether society would be better off with no price barriers to consumption of services (universal free public education, or universal insurance). But such choices are orthogonal to how we allocate, finance, and subsidize the flow of resources to the system as a whole, via broad-based progressive taxation, quasi-regressive property and sales taxes, or user fees.

By: paul

paul — Thu, 19 Nov 2009 20:35:19 +0000

It seems to me that the analogy between fire/etc insurance and health insurance is a lot closer than we think, but with many of the similarities obscured by accounting differences. The fire insurance people (in a business setting, at least) will work with the insured on loss prevention. Health insurance companies will cover routine care that (in theory at least) reduces the likelihood of extreme payouts, or of excessive payouts for things that could have been handled at lower costs. The loss-prevention costs aren’t listed as payouts for fire/theft/etc insurance, but they are for health insurance, even though to a first approximation they’re similar sorts of things.

By: Thomas

Thomas — Thu, 19 Nov 2009 13:50:41 +0000

Yes, if you hold profits steady, then the industry is the size of the business. And yet when people present business plans with that kind of assumption, investors don’t take them seriously.

By: Joel

Joel — Thu, 19 Nov 2009 08:40:12 +0000

“Profits of the health insurance industry” must also take into account federal income taxes and state premium taxes, as well as underwriting and administrative costs and expenses. Moreover, I am not sure what useful comparison can be drawn from the property (fire) insurance industry. Fire policies are normally purchased by owners of property, not the owner’s employers and the policies themselves are “true insurance” in the sense that they compensate for unplanned and unexpected losses. In contrast, health insurance policies are more often than not purchased by the insured’s employers and normally cover the routine and expected such as doctor visits and medicine. While employers may have an interest in reducing health insurance costs, I do not think they are adequate substitutes for the self-interested buyer in a competitive market interested in purchasing the best product for the lowest price. Competition is further limited because insurance policies and premiums are subject to the review and approval of state departments of insurance, which have the power to limit a company’s ability to sell lines of insurance within the state.

By: elizilla

elizilla — Wed, 18 Nov 2009 20:27:59 +0000

Ben M, Yes, there were once private toll road owners, private fire departments, and private libraries.

The private fire departments are an interesting case. Once upon a time there were no public fire departments, and people contracted with private fire departments. When a building caught fire, the private fire departments that had NOT been contracted by the building owner, would get in the way of the fire department that did have the contract. Brawling was a valuable part of every fireman’s skill set because rival fire departments had to fight over the fire before anyone could start putting it out.

By: Michael O'Hare

Michael O'Hare — Wed, 18 Nov 2009 18:58:20 +0000

Stockbrokers and negotiated commissions? Airline and trucking deregulation? Lawyers and advertising? Interesting that these are cases where industries were forced into a competitive environment where they couldn’t protect themselves by regulation and actually grew instead of shrank. I think publishers and booksellers were originally opposed to public libraries…interesting question.

By: Ben M

Ben M — Wed, 18 Nov 2009 17:57:55 +0000

Michael, can you think of any policy success stories in this vein–large industries that were successfully downsized through regulation, rather than through obsolesence or competition or something? Were there once private toll road owners, private fire departments, private libraries, etc., lobbying against the provision of these public goods?

By: Fred

Fred — Wed, 18 Nov 2009 10:03:51 +0000

As long as the cost of care for any serious medical condition is high enough to force the average family into bankrupcy the health insurance industry will be in business.
As to profits: the insurance parasites have shown that they will tack on as much markup as they can get away with. The only limit in sight is regulation and a real public option available to anyone who wants it. Obviously the public option part is not going to be there so we must hope and pray that the regulation part will be of some use. I am not optimistic for the near future. Once again the Democrats are poised to snatch defeat from the jaws of victory.