Wednesday, March 16, 2005

Slithery D on Health Care

Dylan writes:

A couple of weeks ago I read a comment on some other blog bitching about how health insurers won't pay for preexisting conditions. I'd mentally written a scathing rejoinder before I realized the next three comments already explained that, duh, it's insurance against risk, not a discount program to make other people pay for your problems. If it's not a suprise, it's not the insurers' responsibility.

Two problems I have here, and as I have to get ready for my interview, I'll be brief.

First, we should view health insurance as a discount program (unlike other types of insurance). That's because we principally bargain for health insurance coverage in large groups. We do this because it benefits all the parties. For the employees, some will get seriously ill or injured, but we don't usually know who when we initiate the insurance. All the employees get a better price by spreading the risk. The insurance company benefits because it too doesn't know which individuals will get sick, but it gets to spread an essentially unpredictable risk. It also gains access to a larger pool of insured than it would otherwise. The employer benefits because no matter which employee gets sick, she can get care and return to work with minimum disruption.

Second, assuming we accept the premise that insurers shouldn't cover preexisting conditions, they often refuse to provide insurance to people that have preexisting conditions altogether. This is a problem because when these people get sick or injured, from their preexisting condition or otherwise, we all end up subsidizing the risk anyway. When hospitals have to write off a bunch of charity care, you don't think they raise the prices for everyone else to recoup their loss?

A diabetic gets a new job, and his insurance won't cover his diabetic care for the first 6 months. With all the accoutrements of treating diabetes, a person could have substantial difficulties paying to maintain his health for six months. Instead of us discounting his care over a large group and paying the modest (to the group) cost, we end up paying the much higher costs if he gets hospitalized because he ran out of insulin and went into shock.

I may revisit this later, but if I don't go shower right now, I'll be late.


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