The Economics of Insurance

[rowyn]

One of the things that’s been kind of driving me nuts about the whole “mandatory insurance coverage for contraception” thing is that, of dozens of tweets and articles I’ve seen complaining about it or complaining about people complaining about it, only one actually addressed what I don’t like about it.  Here, have a link: http://online.wsj.com/article/SB10001424052970204136404577210730406555906.html

 

Allow me to pull out the key point:

Insurance is supposed to mean a contract, by which a company pays for large, unanticipated expenses in return for a premium: expenses like your house burning down, your car getting stolen or a big medical bill.

 

There are certainly good arguments for subsidizing contraception.  If the federal government wanted to up food stamp allowances and let people use them to buy condoms/birth control pills/etc., I could see that as reasonable.  In fact, the federal government already does subsidize birth control, in the form of grants to Planned Parenthood, which provides inexpensive birth control pills and annual check-ups to women across the country. They may even still be handing out free condoms.  I don’t know if this is the highest and best use for taxpayer dollars, but it is at least (a) pretty cheap on the scale of the federal budget and (b) reasonably efficient.

 

Insurance is not efficient. 

 

No doubt we could come up with a less efficient way to subsidize birth control than to:

 

(a)   Create a government  mandate that every company offer employees insurance that covers contraception from private insurers, necessitating that:
(b)   Private companies purchase insurance from those private insurers
(c)   Private companies report their insurance to the government
(d)   Private insurers report who’s bought insurance to the government
(e)   Individuals report whether they have insurance or not to the government
(f)     The government track what companies aren’t providing insurance
(g)   The government offer subsidies for those who aren’t getting insurance through an employer
(h)   The government penalize individuals who don’t get insurance and companies who refuse to provide it
(i)     Individuals who did get insurance get a prescription for birth control pills from a doctor
(j)      The doctor files a claim with the insurance company for $100 for the office visit
(k)   The insurance company spends $15 processing the $100 claim
(l)      Individuals get their birth control pills from a pharmacy
(m) The pharmacy files a $30 claim for the pills
(n)   The insurance company spends $15 processing the $30 claim
(o)   Insurance company reports all this back to the government to show they’re complying with the law.

 

I mean, I could think of a worse way of doing it. Perhaps we could get the TSA into the act?  They already do full-body scans, why not add prescription drugs?  Oh wait, I was trying for LESS efficiency.  I’m sorry, my imagination is failing me at the moment.

 

My point is that insurance is a HORRIBLE, NO GOOD, VERY BAD way of covering routine expenses.  It adds a whole extra layer of bureaucracy to every transaction, for no reason at all.  If you add $200 worth of annual routine expenses to what insurers are required to cover, then insurers are going to charge an extra $300-$400 of annual premium to your bill.  You don’t get “free” or even “cheaper” services this way.  You get more expensive services because now you have to pay for all the extra bureaucracy and paperwork and insurance company profit.  If you can afford insurance for a routine expense, you can afford the expense.  If you need a subsidy in order to get insurance for a routine expense, you could just get a subsidy for the expense itself and it’d be cheaper. 

 

But NO.  This is freaking America, and we have to do everything in the most insane and ridiculous way, and then call it 'compromise'.  Where 'compromise' means 'worse than what anyone on any side actually wanted'.  x.x

Comments

[terrycloth.livejournal.com]

The problem is, sort of by accident, this is how a lot of people are getting their birth control paid for right now. And there's also confusion/conflation/deliberate bait-and-switch going on between 'government does not require insurance to cover' and 'government is prohibited from subsidizing', meaning it's very easy to see this option going away if it's left out of the list of essential services.

And the chances of having the government pay for it in some other way are basically zero, considering the arguments being used against it. v.v

While, technically, it'd be more efficient to just have people pay for it out of pocket (the people who can't are probably already using one of the other ways of getting birth control like PP) that's a very dangerous way to go because of a stupidity of human psychology where people try to conserve anything that costs money even when it doesn't make sense and ends up costing them more in the long run. If people aren't using enough of the simple health care services (like birth control or regular checkups) -- and they aren't! -- then adding a fee that they have to pay is just going to make things worse. You're better off making them pay twice as much whether or not they use it. x.x

But yeah, the whole health insurance industry is a ridiculous mess. Tying health care to employment is just... mind-bogglingly stupid, for one thing. Let's punish the unemployed *and* hurt business! Something for everyone!

[terrycloth.livejournal.com]

I was going to compare the situation to a really badly written section of code, but then I remembered I didn't have to have the whole team vote on each individual edit I make to the source basing their decision mostly on whether or not I followed their individually preferred coding style.

I only have to have one person do that. Yay code reviews. q:3

[tuftears.livejournal.com]

Well, compare/contrast against dental insurance. You just skip the step about going by a pharmacy, but you still have the rest of it, your company gets dental insurance, your dentist bills your insurance company, yadda yadda.

Mind you, I signed on with a health equity contribution thing so maybe that's a cleaner way to handle this sort of junk.

I would say 'maybe we should just drop the whole idea of insurance and people should be inoculated with the idea of saving money for medical issues' but honestly, I have little faith that some people will save appropriately, and people who are sick will spread (contagious) diseases to those who aren't. So it makes sense to ensure baseline medical support for people, to keep society as a whole healthier and more productive.

Maybe hospitals should be free for basic and emergency care and compensated by the government directly? (wailings about the healthy paying for the chronically sick or infirm aside)

[zeeth_kyrah]

I'd love single-payer health care with free basic and emergency care for all. Sadly, we live in a world where an industry that has lost its relevance and turned into a vast shadow of its former efficient self can pay a few million dollars a year to get a couple of dozen Congressmen elected and re-elected, and then reap the benefits of government subsidies and support for generations to come.

That's what lots of money but little function will get you: life support until the machines break.

[alltoseek.livejournal.com]

1. Capitalism is a notoriously inefficient system. There's tons of waste and redundancy in the failed/less successful enterprises, just to allow consumers to pick their favorite places to spend their money.

So everyone pays private out-of-pocket is not a big improvement on insurance efficiency. The financial waste would look different but it would still be there.

2. By your argument that health insurance should cover only major problems the way car insurance does, then all the following also need to be eliminated:
* regular check-ups for infants and children
* vaccinations
* anyone's routine physical - including the recommended annual gynecological exam and pap smear
* also including prostate checks, mammograms, etc.
* regular dental cleaning/exams
Basically all well-person exams should be budgeted by the individuals and paid out-of-pocket. Except no one does this.
* also medical care for minor injuries and illnesses should be out-of-pocket. Only major events covered.

Except this is exactly what health insurance did (and still does for many) look like. And what happens is that there is a HUGE amount of inefficiency and waste in treating major ailments that could have been caught and treated much earlier. So waste in terms of both money and health and suffering for the individuals affected.

The public health cost - both financial and in terms of overall public health - is much greater when people are required to pay out of pocket for 'optional' health costs (optional meaning they're not going to die if they don't pay for it right now).

3. Contraception only affects fertile people engaging in penile-vaginal intercourse. That's not actually the entire population all the time, just as not everyone all the time needs vaccinations, mammograms, and prostate exams. There's no reason not to cover contraception the way other routine medical expenses are covered.

There is plenty of room for improvement in the US health insurance system, but eliminating routine medical costs from it is not part of that.

[velvetpage.livejournal.com]

The best way to eliminate routine stuff from medical insurance is to move to a single-payer system where routine preventative, diagnostic, and pharmaceutical care are covered by the government as insurer, directly billed to the government by the provider. Countries that have that kind of program have about one tenth the administrative costs experienced in the U.S., and with fewer (I won't say no) financial barriers to access, uptake for basic preventative care is much higher. (There is still a financial cost associated with care if people have to take time off work to see the doctor, but that's pretty much unavoidable.)