Posted by
Andrews on Thursday, October 01, 2009 10:16:17 AM
I was reading comments today on
Michael Barone's post and I saw a comment that read in part:
Then,
pass reforms that #1 Permit Insurance companies to compete ACROSS state
lines. #2 Pass Tort Reform and #3 Make sure Insurance companies can't
turn down “Citizens” and/or “Legal Immigrants” for preexisting
conditions OR cancel coverage AFTER customers get sick.
Now, don't think I am picking on this poster. In fact, I selected it as this post is pretty characteristic of many posts on the health care debate. However, because of that, it also contains many of the characteristic errors. I discussed the problems of tort reform in "
The Problem With Tort Reform", "
Red Herring" and "
Medical Reform, An Overview", so I will not go into that here. And as far as competing across state lines is concerned, yes, that is beneficial, but so long as insurance regulation in each state creates an effective cartel, opening it up to a larger national cartel will have only limited benefits.But that is a topic for another day.
What I want to address today is the concept of "preexisting conditions". Now many people think that insurers are evil for excluding preexisting conditions, but let me give you an example that may help you comprehend this.
You have a weekly poker game. One day, a fellow shows up and on the first hand starts betting heavily, he bets all his chips and then some, and then calls. When you ask to see his hand he says "I drew a royal flush at home before the game, so I win." Should he get the pot?
That is what "preexisting conditions" are. Insurers are not a charity. They basically are taking bets. They bet you will not develop health problems sufficient to spend more than your premiums, while you are betting you will. If you have a preexisting condition, that is stacking the deck in your favor, as we know you will have a statistically higher cost to them, due to your preexisting condition.
Well, let me amend that, there is one way to allow preexisting conditions, the insurers could charge everyone the cost they would charge people with heart conditions, asthma, cancer, leukemia, epilepsy, dementia, alzhiemer's, and so on. Since they could not discriminate base don preexisting conditions, they would have to bill everyone as if they had every possible medical condition in order to make insurance a profitable business.
Does anyone think that is a good idea?
The answer is not to reform insurance, either to allow national cartels instead of state ones, or to "mandate" they cover preexisting conditions. Those solutions will either result in expensive insurance or the collapse of insurance the left needs to nationalize health care. What we need is what I said in "
High Cost of Medical Care", "
The Absurdity of Mandatory Insurance" and "
Medical Reform, An Overview", cost competition, which means we need to stop thinking in terms of insurance.
Imagine if back in 1930 FDR had created a "national gas company" and we each paid a monthly fee and could then gas up for free at any station. Now, suppose on average that worked out to $6 per gallon. Suppose someone came along and said competing gas companies with pay per gallon would be better and cheaper. Everyone would call him mad, ask if only the rich should have gas and so on. But he would be right. And the same is true of health care (and
education and host of others, but lets stick with health care). If we paid per service, or deregulated and allowed the free market to come up with limited insurance plans, or other creative payment arrangements, we would find that cost competition would drive prices down considerably. And if we got the government out of it, stopped letting themr egulate the number of hospitals, the number and types of equipment and so on (or even regulating anything at all, see "
Medical Regulations" and "
Medical Regulation II"), we would find we would be much richer at the end of the day.
I know it sounds odd, but when you pay for something yourself, sometimes it costs less than letting someone else pay it for you.