We have been hearing a lot about a health care crisis and about the "need" to provide every citizen with insurance. It is a topic about which I have written a lot (see the postscript). However, it is also a topic about which I believe we have made a number of bad assumptions. Allow me to demonstrate.

Let us suppose there is a huge crisis somewhere. Say a hurricane strikes a small tropical island, wiping out all the crops and washing away almost everything. International aid flows in from everywhere, and, as part of the program, you fly down with crates of food and tons of seeds.

A government official meets you at the dock and asks your purpose. You explain you plan to hand out free food for the moment, to stave off starvation, then hope to distribute the seed sot hey can plant crops and provide for themselves, at which time the aid can stop, at least for all but the most needy, or those who cannot farm for themselves.

The official looks at you and shakes his head. "No. They don't need your food. That won't work. What they need are government ration coupons to cash in at food centers."

You shrug. You suggest that maybe the ration coupons could be used to distribute the aid while transitioning back to a stable agricultural economy, but after that, there really would be no need. Still, you offer to let the government distribute the emergency relief, but don't see the point once farming is underway.

Still the official shakes his head. "I don't get this 'farming' thing. How can they have food without ration coupons? You want them to starve? They must have coupons to get food!"

That official represents our current obsession with "insurance".

Our model of health insurance is defective. It is not insurance. ("Redefining Insurance... To Actually BE Insurance", "The Insurance Sham", "Why Health Insurance Isn't Insurance and Related Topics") Nor is it a particularly efficient system. It is nothing but a remnant held over form World War II wage restrictions, which has somehow become so ingrained in our minds as the right way to pay for health insurance that we have turned into that bureaucrat I described above, who can't imagine getting food without a ration coupon.

To make this simple, insurance pays for a risk which materializes. It has to be something which may or may not occur, and which is undesirable. Otherwise the insurance model breaks down. Regular checkups, preventative are and the rest are not insurable, as they are regular, expected expenses. The only reason we fail to see this is because we pay in pre-tax dollars and our employers contribute, otherwise we would notice we are paying $110 for every $100 of care we receive, at least in regular, expected care.

Worse, because we are so used to paying through insurance, there is almost no price competition in most medical fields. While prices have fallen sharply in areas not covered, such as plastic surgery, in those areas covered by insurance, the prices have not. ("Cosmetic Surgery, Lasik, Dentistry and Health Care Reform ") And that is not entirely attributable to torts, as the areas where prices have fallen are just as subject to malpractice claims. The reason, simply put, is a lack of price competition.

But, I have said all this before, so, rather than go through it again, let me just cut to the point. We do not need more insurance. If anything, we need less. What we need is private insurance, designed to cover only catastrophic illness, with the terms negotiable between seller and buyer. If we pay out of pocket, if the government reduces its regulation and we get some minimal tort reform, along with the end of our defective insurance model, prices will drop quickly, putting quality care within reach of most of those now crying about their lack of care.

Yes, they will have to pay for it, but someone will have to pay for it under any system. At least if we enact my reforms, we will be paying a whole lot less.

POSTSCRIPT

To read my earlier writing on this topic see the following:

Lifespan
A Most Dishonest Commercial
Medical Regulations
There ARE NOT 46 Million Uninsured!
Envy Kills
Medical Regulation II
Almost Right
Envy And Analogy
A Thought on Healthcare
Misunderstanding Profits
A Passing Thought on ObamaCare
Government Efficiency
A Useless Measure
High Cost of Medical Care
A Potential Problem With Universal Insurance
Negative and Positive Rights
Private Charity
The Devil is in the Definitions (And Assumptions)
Two Examples of "Inefficiency" in Capitalism
Private Charity Take Two
Cutting "Costs"
Clarification of My Argument for a Free Market in Medicine
Big Government Creates New Problems
ObamaCare on the Ropes?
AARP Proves They Are Partisan Hacks and other Thoughts on Health Care Reform
Red Herring
The Problem With Tort Reform
Shameless Self-Promotion
Who Will Decide
Confirmation, Yet Again
My Health Care Plan
First Kill All the Lawyers, Looking Back at Katrina
The Insurance Sham
One Real Life Example
Public Insurance
Again?
Medical Reform, An Overview
The Absurdity of Mandatory Insurance
Medical Reform, An Overview
The Absurdity of Mandatory Insurance
"Compassion"? Well, For Some
ObamaCare's Achilles Heel
Private and Public Coexisting
Preexisting Conditions
Interetsing Cuts in Budget
Symmetry and Greed
Disgruntled Workers
So, Why No New Medical Posts?
Desperate Media
Redefining Insurance... To Actually BE Insurance
How to Tell They Lost on Health Care Reform
A View From the Inside
2010 and Health Care
Bad Economics Part 2
Why Health Insurance Isn't Insurance and Related Topics
Even More Harm
An Interesting Question Under ObamaCare
Bad Economics Part 5
Public Funding is Government Control
Checking In With the Professionals
Cosmetic Surgery, Lasik, Dentistry and Health Care Reform
Government Funding and the Free Market
Did We Dodge The Bullet?
How to Ration Without Rationing
Shocking Numbers
Why We Lose
Who Is Saving Us From Socialized Medicine? Obama!

I think that covers everything.

By the way, as work has kept me busy and health problems have kept me distracted, I am not up to date on the current state of the debate. I try to catch up as best I can, but the word out there seems as uncertain as ever, so I am still hopeful this whole thing will end in a lot of noise and not much action, but I suppose it remains to be seen. Lieberman seems to be courting both sides, and, whatever he does, I still have my doubts about the blue dogs once they start hearing more from constituents, so I have not yet seen any clear signs that the bill is a fait accompli. There is a lot of media talk about a compromise, but I wonder how much is true news and how much is wishful thinking. Even should the bill get through, there is still the reconciliation with the house bill, which leaves room for yet more changes of heart. As far as I can tell, nothing is yet certain.