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January 23, 2007

Comments

details are fun.

my prediction: this will be fought, as is everything else, for many months in the future by talking heads ignorantly repeating misleading misinformation while a handful of people here on the blogs pick at the details and conclude WTF?. three months from now, there will be a big push by bloggers to get their reps to Please, For The Love Of Jeebus, Vote This Thing Down!!!

mmmm..mmmm... cynicism is yummy.

This is fundamentally nothing more than a plan to tax employer-provided health insurance. Forget the "gold-plated" issue (yes, I was taken in). It will probably reduce the number of people with health coverage rather than increase it. The key is that despite its name the deduction is simply a flat amount, and has zero to do with how much one spends on health insurance.

Sayeth Ezra:If you're 23 and your health care costs $2,000 a year, you still deduct $7,500, pocketing the difference. It would, in that situation, be economically foolish of you to purchase high quality, comprehensive coverage.

Well, sure, if you know your health care costs will total $2,000 a year, it would be economically foolish to purchase insurance, assuming you're willing to take that risk.

And does/will "high qualify comprehensive coverage" for the young and healthy cost more or less than $2,000 per year? And I'm not sure he's got the deduction incentive quite right -- if you're entitled to the deduction no matter what you do, it won't have any impact on your behavior (i.e., his "pocket the difference" comment seems misplaced; and note at a marginal rate of less than 26% or so that doesn't even cover the $2,000).

All that said, since my operating assumption these days is that anything conceived by the Bush administration is sure to be a disaster unless proven otherwise by years of successful implementation, I oppose this plan.

Extra weird is this from TPMuckraker, which purports to be White House spin for tonight's speech: "The President is proposing to reshape the health care system so it's responsive to individuals' needs and preferences. Many companies only allow their employees to choose their health care plan once a year during open enrollment. Meanwhile, if consumers want to buy a cell phone, they get options every day. The President believes our health care system should be as responsive to individual needs as our other consumer marketplaces."

How's THAT gonna happen?

Besides, it seems to me that one of the problems in the current system is that health insurance companies and their enrollees have such short-term relationships. If the insurer has a customer for 30 years, there's an incentive for the company to keep the insured health in the long term through smoking cessation programs, benefits for weight loss, etc. If the relationship is short, the insurer's best interests are to cover only care necessary right away, and dump the long-term issues on the next insurer.

The whole point of insurance is to pool risk. Making insurance more responsive to consumers' needs is a way of getting lower-risk people out of the same risk pool as higher-risk people. And smaller, more tailored pools is a way of making health insurance less, well, like insurance.

(Note: I wouldn't really be against this if what was being insured against were either non-catastrophic or largely controllable by the person purchasing the insurance.)

If you're 23 and your health care costs $2,000 a year, you still deduct $7,500, pocketing the difference. It would, in that situation, be economically foolish of you to purchase high quality, comprehensive coverage.

It has always been economically foolish for a 23-year-old to purchase high quality, comprehensive coverage. At best, you need catastrophic coverage only.

Oops, hit post before finishing.

Young people will be in the pool for catastrophic coverage, which will prevent the "death spiral" on that end. The idea that young people should be forced into the pool to reduce everyones costs is ridiculous, and a pernicious new notion: that people are somehow entitled to lower risk pools in insurance. I've been hearing that for years about seat-belt & helmet laws, and it's completely absurd.

Just tax me to help people who can't afford coverage. Don't forceme buy ridiculous, decadent coverage I don't need.

And I'm not sure he's got the deduction incentive quite right -- if you're entitled to the deduction no matter what you do, it won't have any impact on your behavior (i.e., his "pocket the difference" comment seems misplaced; and note at a marginal rate of less than 26% or so that doesn't even cover the $2,000).

This plan really has no impact on those who already buy individual policies, except that it gives us a $7500 tax deduction. There should be no significant change in behavior there at all. It affects the people with employer paid insurance by making it taxable income. Hence, employers are less likely to offer plans, and employees with options will lean towards the less expensive plans. So insurance coverage will drop.

Young people will be in the pool for catastrophic coverage, which will prevent the "death spiral" on that end. The idea that young people should be forced into the pool to reduce everyones costs is ridiculous,

Would you force them into the pool for catastrophic coverage if they don't want to participate?

Bernard,

Would you force them into the pool for catastrophic coverage if they don't want to participate?

Sure, maybe. Given that both the Government & Hospitals seem to be on the hook for the costs presently if people can't pay, that could go a long way towards making this whole system make more sense.

POSTED BY Jonas Cord, Jt.:Just tax me to help people who can't afford coverage. Don't force me buy ridiculous, decadent coverage I don't need.

Or, in the case of Bush's plan, pay you not to buy coverage you don't need.

That is the killer,the mind-blowing idiocy, of Bush's "plan". He is going to pay people who don't need comprehensive insurance not to buy comprehensive insurance.

Just when you think they can't get any more ridiculous....

Sure, maybe. Given that both the Government & Hospitals seem to be on the hook for the costs presently if people can't pay, that could go a long way towards making this whole system make more sense.

But doesn't what constitutes a catastrophe vary depending on one's income? A sudden two or three thousand dollar bill from an accident, say, would be pretty disastrous for lots of people. If you think mandatory catastrophic coverage is a decent idea, how would you set the threshhold?

But doesn't what constitutes a catastrophe vary depending on one's income? A sudden two or three thousand dollar bill from an accident, say, would be pretty disastrous for lots of people. If you think mandatory catastrophic coverage is a decent idea, how would you set the threshhold?

I agree completely. I haven't been wonky enough to precisely determine the threshold, but I'm sure something reasonable could be worked out.

So insurance coverage will drop.

exactly. let us not forget, many conservatives believe many people have too much insurance. Bush has been saying this since at least 2004

exactly. let us not forget, many conservatives believe many people have too much insurance.

Many people do. When you are insured against paying for checkups that you know are going to happen at regular intervals of time, insurance is no longer the right word to describe what you are buying.

Health Care Leninism ..Matthew and Ezra are starting to think the whole sytem must collapse. Then we can get decent single payer.

I think their discouragement comes from the insane complicatedness of all the interim and incremental proposals. Ezra was fooled by the Bush plan; here hilzoy sees things she could like.

Really really bad stuff could slip thru, and the retired person dying alone in their apartment will not get headlines.

Lots and lots of people dying for the Bush tax cuts, huh. My Marxism says hate not the rich, they know not what they do. But I think they do.

"For some reason best known to himself, Bush has been trying to break our current system of health care for some time."

Do I really have to explain a variant on conservatism or libertarianism here?

1) In order to justify their own success, they have to believe that almost anyone can achieve, and the difference is mostly effort and character. They worked hard, and are good people.

2) Since everyone can become multi-millionaires, why are there so few? Because of disincentivizing effects of government intervention and bad cultural indoctrination.
Eliminate a great portion of the "safety net" and the terror will motivate the slothful to self-respect, productivity, wealth and security.

On the other hand, there are plenty of people willing to sell adulterated penicillin to get rich. Darn, what a quandry.

This plan is going to get the same degree of serious attention as last year's proposal to ban human-animal hybrids, and with less chance of passing.

Jonas,

You'll want some guarantee of long-term coverage, I suppose, as well as access to more comprehensive coverage, without pre-existing condition limitations, when you get older.

Bob: I said there was something I could like IF a bunch of things are true. And so there are. Do I have any confidence that in a plan put forward by this President, they will be true? No.

I am flatly opposed to health care Leninism. Health care is absolutely the wrong place to go playing games like that. If I knew or cared enough, I could probably get into soccer league Leninism, or movie studio Leninism, or something. Not health care Leninism.

...insurance is no longer the right word to describe what you are buying.

regardless, "insurance" is the name of the product.

This plan really has no impact on those who already buy individual policies, except that it gives us a $7500 tax deduction.

If you are middle aged, and you buy your own insurance (as I am and do) you already have a deduction about that big. It's not a 'standard' deduction, but...health care is damned expensive if you pay for it yourself.

I agree with Hilzoy: it's very easy for people like Matt Y to blithely be in favor of 'health care Leninism', but it's just wrong. If that's the only way to get to single payer (AKA the largest possible risk-pool) we are really screwed.

"I am flatly opposed to health care Leninism"

Matt is catching hell, and of course, I am being ignored, but in case anyone misunderstands at least what I mean by "Leninism", and what MY might have meant, I will explain.

The classic story is about Lenin refusing to work on private relief efforts during a famine, because he wanted to "heighten the contradictions." This was before the War and Revolution, in the 1880s, I think. Lenin did not starve anyone, or make things worse. He simply refused quick palliatives for a systemic and structural problem.

This is what MY said:

"And if it doesn't, it'll be easier to build a rational universal system on the ashes of a wrecked employer-based system than it'll be to cobble one together using employer-based health care as a foundation. On most topics, I think there's very good reason to be skeptical of "things have to get worse before they get better" kind of thinking, but there are, I think, good reasons to make an exception on the health care front."

Matthew is not saying he would make things worse. He (might be) saying he would just stand out of the way while the system collapses by itself.

Umm, there is a more general theoretical Leninism that involves an anti-parliamentarianism, a refusal to work with the system at all, but the above should do for shorts.

Rinally, and sorry for 3 in a row, but there are very important differences between:

Making things worse;
Letting things get worse on their own;
Making things just a little bit better;
and
Changing the world.

you already have a deduction about that big.

Not quite. It goes into medical expenses, which are only deductible to the extent they exceed 7.5% of Adjusted Gross Income. If AGI is $75K, for example, and you pay $7500 for insurance and have another $2000 in medical expenses your deduction is $3875 (That's $9500 - (.075 X $75000)).

One interesting thing not much noted: The deduction Bush is proposing will apply to payroll taxes as well as income taxes. That means a big hit to Social Security.

If they can't destroy it one way they'll try another.

Many people do. When you are insured against paying for checkups that you know are going to happen at regular intervals of time, insurance is no longer the right word to describe what you are buying.

I'm going to take two chances here. First, I'm going to take the chance that I'm not just feeding a troll. Second, I'm taking a chance that I'm not violating ObWi posting policy with what I'm about to say.

Jonas, this is a really dumb comment.

I'm sure you're aware of why insurance companies pay for regular checkups. But, I'm happy to play along for a bit. Just for a bit.

Insurance companies fund regular checkups because, net/net, they increase the likelihood that more serious (read: expensive) conditions will be nipped in the bud.

It's the same reason that you get a break on automotive insurance if you buy an anti-theft device. Likewise, you get a break on motorcycle insurance if you take the safe rider's course. Likewise, you get a break on homeowner's insurance if you install an alarm system. Etc, etc, etc. It's a financial incentive to do something that, statistically, reduces the overall cost of providing you with coverage.

You get this, right?

Thanks -

Though Jonas has not been around much lately, he's not a troll. Though the appending of jr. makes me wonder if we have another parent-child duo here.

I'm still trying to get my head around health care leninism (does that mean that there is health care trotskyism, where one nothing but demands revolutionary medical interventions all the time?) so I haven't been following this closely, but I took the point to be that there is a problem with focussing on 'insurance' which tends to exclude by default preventative routes. That's not a dumb point, and the battle over national health care has to deal with the sort of bizarre twists and turns that the words come to mean (like hurricane insurance that doesn't protect against flooding caused by the hurricane)

Anyway, please take it down a notch. Thanks.

I'm still trying to get my head around health care leninism

By analogy with the famine example it must mean not treating sick people is OK, because it will make some unspecified future better in some way, maybe.

I don't think it's a good idea.

Russell: Jonas is not a troll, though I agree with the substance of your point. I also think that if every American got an annual checkup, that would be a wonderful thing.

lj: I took "health care Leninism" to be basically: let the system collapse; it will only hasten the day when we can replace it entirely. To Bob: I don't think it would count as Leninism (would it?) if one neither too steps to hasten the collapse nor failed to take steps one could have taken to prevent the collapse, but just watched powerlessly, with a secret smile. At any rate, I took Leninism to involve doing things that would heighten the contradictions, or not doing things that would lessen them; to exercising some influence over the course of events. And exercising one's influence to hasten the collapse of our system of health insurance is something I oppose.

I took the point to be that there is a problem with focussing on 'insurance' which tends to exclude by default preventative routes.

I took the point to be that insurance that covers annual checkups falls under the heading of "too much insurance". In context, it's not an unreasonable reading. If that was in fact the point, I find it willfully obtuse. If not, my apologies.

Russell: Jonas is not a troll

Noted. If Jonas has your vote of confidence, that's more than good enough for me.

Thanks -

"At any rate, I took Leninism to involve doing things that would heighten the contradictions, or not doing things that would lessen them; to exercising some influence over the course of events."

I must go read What is to Be Done :)

Note: the "not doing things" is a significant step, especially when Socialists and labor movements were being accepted into the Parliaments of European nations.

I am just a beginner, but as I remember pre-revolutionary Lenin in exile in Europe, he was anti-parliamentarian (don't join the gov't) and fiercely vanguardist while not being Bakunist or Blanquist (bomb-throwing, etc.) He was focused on the vanguard remaining fiercely revolutionary not reformist, waiting for the opportunity and having the maximalist agenda ready to go. So Stalin was shocked by the program handed to him at the Finland Station.

Remember this is mostly between the failed 1905 attempt and before and during WWI. Europe was in consistent upheaval and Lenin had grounds for believing the natural Revolution imminent and inevitable.

I must go do more research.

(In this context it might mean demanding nothing less than national single-payer from the Feds and blocking anything less, but ameliorating deficiencies on a local level with community assistance. I would have voted against Medicare-D. Bad bill)

Wiki on Leninism ain't too bad. I am pretty close above. As opposed to say Rosa Luxemburg's council communism, Lenin didn't think the workers could achieve the correct consciousness under capitalism.

So can Americans imagine Health Care without private insurance, or a much smaller role? Even tho it exists around the world? Even tho so much American Health Care is public and gov't? How do we get past the private insurance industry? Is such a discourse really possible? Is change of the unknown so scarey that change is impossible?

So Leninism would involve letting the private system collapse, while Matt & Ezra are constantly working out the details of a single-payer. The people will just know the old system doesn't work, the Democrats simply nationalize health care in a coup, and then explain to the people why it is a good plan.

FDR did similar things in his first term. He closed the banks, not waiting for a consensus on closing the banks.

Not speaking for Matt, of course.

there are very important differences between:

Making things worse;
Letting things get worse on their own;
Making things just a little bit better;
and
Changing the world.

This is a good point.

My general observation is that, as a strategy, "changing the world" has a pretty poor track record. FWIW, I'll take "Making things just a little bit better" every time.

With that as background, I see Yglesias' "health care Leninism" to be a position of insane irresponsibility. The "ashes" he talks about means the needless death and ill health of many thousands of people.

The "brave new world" that comes after is less likely to be a nirvana of universal coverage, and more likely to be a generation of picking up the broken pieces of the systems and infrastructure that are currently in place.

"First, do no harm". Wise words.

Thanks -

I'm now offering $1 annual catastrophic coverage for the healthy and the good-looking.

No qualifying physicals. You get $7499 in deductions.

I get the dollar. Then you try to find me when your number is up.

Am I mistaken, or did we just get ourselves an expensive troop surge AND another big tax cut?

Diabolical, those Bush Republicans. They just keep coming at you. It applies to the payroll tax, too?

It's a nightmare. Tell me it is a nightmare.

The people will just know the old system doesn't work, the Democrats simply nationalize health care in a coup, and then explain to the people why it is a good plan.

Correct me if I'm wrong, but from the polls I'd seen (such as http://abcnews.go.com/images/pdf/935a3HealthCare.pdf), the people already think the current system doesn't work. Compared to some of the stuff the Republicans have shoved through in the past few years, single-payer health insurance doesn't look that unpopular.

My general observation is that, as a strategy, "changing the world" has a pretty poor track record. FWIW, I'll take "Making things just a little bit better" every time.

the current system is built on a base of towering, immovable objects: the insurance co's. like mountains, you won't move them by nudging them "a little bit" in the direction you want to go, every four years. all you're going to get from that approach is frustration and a bad back.

It's a nightmare. Tell me it is a nightmare.

Ummm...closest I can come is that you're as awake as I am.

Russell,

Insurance companies fund regular checkups because, net/net, they increase the likelihood that more serious (read: expensive) conditions will be nipped in the bud.

Fair enough, check ups are a bad example. I'm more concerned about the "comprehensive" coverage, where for instance you can visit the doctor for free to get unnecessary cheap antibiotics for tiny, passing ailments.

I don't have any problem with the existence of such policies; I'm sure people feel safer having it and like it a lot. That said, when we're grappling with the fact that people lack health care coverage, I don't think that the humanitarian problem is that people lack this sort of comprehensive coverage; rather it's that they lack the catastrophic coverage.

And as an aside, I'd like to take this opportunity to thank everyone for vouching for my non-trolliness.

I'm not exactly sure how this all relates, but the notion of rising health-care costs bugs me a bit. Sure it costs more, because there's so much more of it. Now maybe it costs more than it needs to, but one should expect it to cost more than it used to (adjusted for inflation). How many drugs have been developed in the last 20-30 years? How many devices, procedures, treatments and materials? A good bit of what we're paying more for didn't exist in the good old days. And how much longer can we keep people, with no hope of recovery from whatever ails them, alive so we can spend more money on their health care in their dying days? How many preemies who wouldn't have had a shot a few years ago make it now, and cost quite a bit in making it? How many effing arthritis drugs can you buy now? I guess my point is that some portion of our higher health-care costs are good, and we should be happy about them. And of course those costs directly relate to the costs of coverage. (Not that the system doesn't need fixing. Just something to consider.)

One other thing: Why would the cost of employer-provided health insurance become taxable once the deduction for individually purchased insurance was enacted? It seems to me that providing a deduction (if hamhandedly) for individual coverage corrects whatever inequity exists, and that taxing employer coverage then creates a new inequity. Rather than eliminating an inequity, such a policy would simply turn it on its head.

Jonas: "I'm more concerned about the "comprehensive" coverage, where for instance you can visit the doctor for free to get unnecessary cheap antibiotics for tiny, passing ailments."

Since I have worked for an insurance company, I feel I have some knowledge about this. First of all, more and more insurance companies are eliminating the totally free visits. And those that have had co-pays are increasing them. The general reason is that they feel (with merit) that if people have to pay something out of their pockets they will be a little more aware of their care and need for it.

Secondly, the problem to some degree is the willingness of many doctors to prescribe meds, even when they know that the meds are either unnecessary or will have limited effect. It is easier to write the script than to deal with the patient complaining about what they need.

This is partially fueled by the drug compaies advertising in a way that patients think they know as much as the doctors about what they need.

Also, it should be noted that in the 2004 campaign Kerry proposed a modified catastrophic coverage system whereby claims for treatment that exceeded $50,000 per year would be covered by the government and not by the insurance companies. Many insurance people I know where thrilled with this idea. If accepted it would have reduced the cost of insurance significantly to both employers and individuals, resulted in a de facto pay raise for many people.

Obviously it would not have solved the problem for the uninsured.

I do think it is naive for the young and healthy to avoid comprehensive coverage. although people with chronic illnesses do have expensive care, there is nothing that prevents a 25 year old from suddenly requiring expensive treatment. That is what insurance is all about. This is specially relevant since the Republicans made sure that even a medical catastrophy does not count when it comes to bankruptcy protection.

John Miller,

First of all, more and more insurance companies are eliminating the totally free visits.

Ah, it's been so long since I've had comprehensive coverage that I'm out of touch, it seems. That being said, I'm only bringing this up because I worry when those proposing government health care plans aim to recreate that golden age of free & easy coverage for everyone. That would appear to be the foundation of the complaint Ezra Klein had that we were discussing - but I could be wrong.

Also, it should be noted that in the 2004 campaign Kerry proposed a modified catastrophic coverage system whereby claims for treatment that exceeded $50,000 per year would be covered by the government and not by the insurance companies. Many insurance people I know where thrilled with this idea. If accepted it would have reduced the cost of insurance significantly to both employers and individuals, resulted in a de facto pay raise for many people.

I remember this proposal, but I didn't give it much thought at the time. Were there any independent evaluations of what such a program would cost? I ask because my only concern about such a program is that the tax increases necessary to pay for it would make it a wash for middle-class taxpayers (i.e. health care costs go down the same amount taxes go up.) This seems possible given it's these major, expensive treatments that make up the bulk of the cost of health care presently, correct?

I do think it is naive for the young and healthy to avoid comprehensive coverage.

It's naive to avoid catastrophic coverage, but the idea that young and healthy people should be sinking tons of cash into gold-plated policies seems rather paranoid.

"Lenin did not starve anyone, or make things worse. He simply refused quick palliatives for a systemic and structural problem."

Appropriating crops from the peasants certainly contributed to the Russian famine 1919-1923. If not for Herbert Hoover, more would have died.

http://en.wikipedia.org/wiki/Russian_famine_of_1921

I'm more concerned about the "comprehensive" coverage, where for instance you can visit the doctor for free to get unnecessary cheap antibiotics for tiny, passing ailments.

That's more culture and attitude than what kind of insurance you have I'm afraid. This is a comparison between France and Germany. Both have good national health systems, but in France much more antibiotics are prescribed - and thus th eprevalence of dangerous resistent bacils is much higher.

It's not that you can have the antibiotics for free, it's that the patient expectations often are wrong. Many people don't realize that viral diseases are not cured by antibiotics, and that antibiotics attack healty cells too. Using antibiotics is really bad for you guts, makes you much more susceptible to fungoids - and diminishes the working of the anticonception pill. It's no 'cure all'.

but the idea that young and healthy people should be sinking tons of cash into gold-plated policies seems rather paranoid.

most employers (at least all i've seen in the past decade or so) offer multiple plans. you can get the bronze plan, if you prefer low premiums, high co-pays and high deductibles.

I worry when those proposing government health care plans aim to recreate that golden age of free & easy coverage for everyone

why worry ?

insurance companies are very happy to sell gold-plated coverage to people who statistically don't need it. but that doesn't mean the govt would necessarily allocate the same amount for people in the 'young and healthy' group as it would in the 'smokers 65 and over' group. why not assume the govt would be smart about it ?

Oh, and we have insurance for everybody (including free doctor visits and free medication), a higher percentage of elderly people, and our government still pays less than yours - and most countries score better on various criteria.

It's naive to avoid catastrophic coverage, but the idea that young and healthy people should be sinking tons of cash into gold-plated policies seems rather paranoid.
You misspelled "prudent", John. Sure, if you know with absolute, 100% certainty that you're not going to contract a chronic, life-threatening illness, or get hit by a car, or have some sort of accidental grievous wounding happen to you, then sure, go with the barebones insurance plan.

I think the best description of the insurance agency came from a comedian I heard however many years ago: The company tells you "I bet that nothing bad happens to you", and you say "I bet it does!"

I worry when those proposing government health care plans aim to recreate that golden age of free & easy coverage for everyone
why worry
?

insurance companies are very happy to sell gold-plated coverage to people who statistically don't need it. but that doesn't mean the govt would necessarily allocate the same amount for people in the 'young and healthy' group as it would in the 'smokers 65 and over' group. why not assume the govt would be smart about it ?

You don't assume that government would be smart about it because voters are operating out of unrealistic expectations. You can't get unlimited MRI use without paying a heap of money. You can't get 'costless' doctor visits without the government paying a high cost.

In general you can't generally raise benefits and cut taxes either, but a troubling number of people act and vote as if you can. Government intervention often makes it easier to divorce expectations from the reality of costs. That doesn't lead to smarter and smarter decision making.

"You misspelled "prudent", John. Sure, if you know with absolute, 100% certainty that you're not going to contract a chronic, life-threatening illness, or get hit by a car, or have some sort of accidental grievous wounding happen to you, then sure, go with the barebones insurance plan."

No, that is still price sensitive. At an extreme level, would you pay $100 to insure against a 5% risk of something that will cost you $50 to fix? Clearly no. You really shouldn't pay more than $2.50. But some people are very risk averse and are willing to spread out payments to avoid risk more than you might think they should. Those people might pay $3. But even very risk averse people won't typically be willing to pay $49 to insure against a $50 5% risk.

The problem with risk analysis is that people are already irrational about risk. People already worry about walking near high-tension lines because of cancer risk, but don't realize that the chance of the cables snapping and killing them that way are much higher. Adding governmental interference to make the risk analysis even harder isn't a generally thrilling idea to me.

You don't assume that government would be smart about it because voters are operating out of unrealistic expectations.

no, i assume govt. would be smart about it because there's no profit involved. the insurance companies have an obvious interest (some would even say a duty) in selling the most-expensive and least-used policies they can come up with. aside from the fact that they aren't selling anything for-profit, why would the govt have any interest in over-insuring anyone ?

In general you can't generally raise benefits and cut taxes either, but a troubling number of people act and vote as if you can.

sure. we call those people the Republican Congress and the Bush Administration. that doesn't mean the rest of the country is comically irresponsible.

Quoth Sebastian:

At an extreme level, would you pay $100 to insure against a 5% risk of something that will cost you $50 to fix? Clearly no.
Given that I'm still waiting on my lawsuit against the driver that tried to make a right turn across three lanes of traffic and through my girlfriend's Jeep last year to settle so that I can pay the $350 bill for the time I spent in the emergency room afterward, I have to take issue with the "$50 to fix" part of your question.

I would argue (and, to an extent, already did) that you're understating the risk here. To restate what I said to John, if you knew there was no chance whatsoever that your total health care costs would be $50, then sure, you'd be crazy to pay the $100 in insurance. But if you take the fact that you don't know how much you'llhave to spend, and also that you could wind up with something that cost $1,000 or more? That $100 doesn't seem like such a bad idea after all.

but the idea that young and healthy people should be sinking tons of cash into gold-plated policies seems rather paranoid.

Depends on the price of course.

I think we may be missing part of the advantage of increasing the risk pool. Even if you don't charge one group unfairly high rates to subsidize another you reduce the overall risk of the pool, I think. That is, you make the total payouts more predictable. How much effect this has on rates I don't know.

Is there an actuary in the house?

Bernard, I am not an actuary, but it is interesting the way isnurance companies determine costs to a company.

Generally speaking, the larger the company, the smaller the cost. However, most insurnace companies do a very thourough analysis of three things:

1> Gender composition (Due to pregnancy issues).

2> Age composition.

3> Past claims history.

Other things taken into account are the actual risks of the jobs that the employees do, etc.

I can tell you that a compay that has a generally younger, higher male composition gets insurance at a much lower rate (although I can't give you a specific percentage.)

There is definitely a gain in predictability that goes along with a larger pool. Taking the analogy of flipping and ideal coin - 50% chance head/50% chance tails - if you flip the coin twice, you very easily could end up with 100% heads and 0% tails. If you flip the same coin 10,000 times, you are, in practical terms, guaranteed to be extremely close to 50/50. That's why casinos know how much money they'll make on roulette. You get a few spins, so you might defy the odds. They get lots of spins, so their odds are guaranteed.

John and hsh,

Thanks. What I was wondering was whether the gain in predictability from larger pools translates into lower rates at all, quite apart from expected payouts due to risk, etc.

"no, i assume govt. would be smart about it because there's no profit involved."

I'm not sure that a nonprofit=efficiency equation is a good assumption at all. If anything it is amazing how often the pursuit of profit creates efficiency. I don't buy the administrative efficiency concept either. I've never seen manuals and regulations more complex than when the government is running things. I've rarely seen things work more slowly than with government involvement.

"But if you take the fact that you don't know how much you'llhave to spend, and also that you could wind up with something that cost $1,000 or more? That $100 doesn't seem like such a bad idea after all."

Only at a 10% or worse chance of occurrence. The chance of all catastrophic health concerns combined probably isn't even that large in the 20-30 set.

Only at a 10% or worse chance of occurrence. The chance of all catastrophic health concerns combined probably isn't even that large in the 20-30 set.

This is not a bridge hand, Sebastian. Risk aversion matters. Would you pay $1200 to insure against a 1% chance of a $100,000 loss?

I'm pretty sure I'm underinsured now Bernard, so the answer is probably no.

But even if the answer were yes, I don't think that is a close analogy to the question at hand. Would I pay $5,000 to insure against a 1% chance of $100,000 loss, would I pay $10,000? No and definitely no.

I'm pretty sure I'm underinsured now Bernard, so the answer is probably no.

But even if the answer were yes, I don't think that is a close analogy to the question at hand. Would I pay $5,000 to insure against a 1% chance of $100,000 loss, would I pay $10,000? No and definitely no.

It's a matter of individual preferences, of course. Some people are just more risk-averse than others.

But here is something to think about. The less money you have the more an extra dollar is worth to you. Now suppose you have some kind of big medical problem, serious disease or injury. You are then quite likely to have financial problems not related to your direct medical costs. You may not be able to work for a time. You may need to pay for things - help at home for example - not covered by insurance. In other words, catastrophic medical expense will be correlated with other financial pressures.

This argues strongly that you should be significantly risk-averse in this area. A dollar you get from insurance will be very valuable, precisely because you will have to draw on savings to meet many non-medical expenses. A dollar you pay for insurance will, if you stay healthy, be worth much less.

So go get some more insurance.

I'm not sure that a nonprofit=efficiency equation is a good assumption at all. If anything it is amazing how often the pursuit of profit creates efficiency.

so are you saying the govt will have some kind of interest in over-insuring people, similar to the interest insurance companies have ?

what is this interest, how will it manifest, etc ?

Here's a question I still can't figure out: Who benefits?
If young healthy people don't buy insurance or spend as little as possible, and if their employers don't buy it for them, I can't see how it will benefit the insurers. Wouldn't a policy that makes it easy and affordable to sign up for insurance when you're healthy make more sense?
What am I missing? Or is it even stupider than I think it is?

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