When Insurance Isn’t Insurance

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Jeff Jacoby has it right on our health care system: “The purpose of insurance is to protect policyholders from unforeseen or catastrophic expenses.”  What’s more:

When Americans rely on a third party — private insurance, Medicare, or Medicaid — to pay most of their medical bills, they forfeit their power as consumers. Our ill-conceived system of subsidized health plans provided by employers and taxpayer-funded “free” treatment through the government ends up stripping patients of their economic clout. Doctors and hospitals have little incentive to compete by lowering prices, because patients rarely bother to ask about prices. By and large, health care providers in the United States do most of their negotiating with insurers or the government. After all, they’re the ones paying the piper.

Money is just a measure of value, and prices are just the balancing point between the seller’s requirements and the consumer’s willingness.  The only reason to hide any of these numbers is to pull something over on somebody.  Prices should be high for things that people greatly value and that aren’t particularly easy to supply.  The decision between, say, a life-saving operation and an indulgent vacation should be clear.  An effort hide the prices is apt to wind up costing somebody less powerful than the vacationer something more important than the vacation.

This principle obtains even with the legitimate concern that the price that our society as a whole sets for medical procedures will be beyond the means of some people even if they sacrifice everything they have.  But hiding the prices — whether in the name of the “dignity” of the poor or because politicians are using the transaction to buy votes — only disguises the real problems:  that people wrongly value a great many things over each other’s health and that the economy isn’t allowing people to increase their own resources.

Filtering everything through government does great damage on both counts.



  • Rhett Hardwick

    ” because patients rarely bother to ask about prices.”

    I have had reason to inquire about various “tests” and found that no one knew. Not the doctor recommending it, nor the people operating the testing equipment. The best the hospital people could offer was to call the accounting department. Even the accounting dept. couldn’t answer the question. I was left with the opinion that prices must vary according to circumstances, or the identity of the insurer. Whenever I asked the question, people seemed to be startled, as though no one had ever asked before.

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