Why Can't Health Insurance Be More Like Automobile Insurance?
If insurance paid for every oil change and engine failure, we'd have an autocare crisis, too.
~Zach Krajacic, writing in today's Christian Science Monitor
Originally posted at Carpe Diem.
~Zach Krajacic, writing in today's Christian Science Monitor
Originally posted at Carpe Diem.
6 Comments:
Because auto insurance is not health insurance.
Mandatory auto insurance doesn't pay for routine maintenenace, only damage from accidents. If the damage is high enough, the car is "totalled".
"Sorry Mr. Smith, but you've been totalled."
Automobile owners have the option to take the repair check and junk the car. People do not have the same choices with health care.
Car repairs have a smaller variance in payouts and a higher deductible as a percentage of maximum loss. Liability coverage has no analogy in health insurance.
The market does wonderful things for both health and auto insurance, but resist making false comparisons. The markets for health and auto insurance also have serious problems or fraud, pre-existing conditions, moral hazard, adverse selection, and market power so there needs to be some offsetting mechanism or regulation. I've seen insurance from both sides of the transaction - both can be ugly and unfair.
The differences you cite seem minimal. What would be the ramifications of those differences in the health insurance market that would be so significant that they could not be overcome?
Yes, health insurance should be more like auto insurance. Insure the truly catastrophic circumstances. Most of the rest is simply a benefit. Let me explain...
In my family of seven, each of us goes to the dentist twice a year. Most of the time this is simply a cleaning and checkup. Well, we go, every year, and it's scheduled. That's $1400 a year. But why should that be covered with insurance? It's simply a cost. Why would anyone insure something that they know they are going to use anyway? Isn't it less costly to simply pay the bill in the first place? The only situations you should insure are situations that you hope you won't be in.
No, the differences I cite are huge. They are the difference between health care and health insurance with the conflation of the two being the main problem in this debate.
As Cliff suggests, you insure against things which might happen and are too costly to pay for if you had to. For small potential losses you self-insure and save. You pay for things you are sure to need like annual exams. Employers might choose to subsidize some "costs" to maintain a healthy and productive workforce, but that's a free choice and a mutual benefit.
By pooling all the people who think something might happen, you can effectively price premiums based on the probability of it happening.
Insuring people with pre-existing conditions is nothing less than a transfer, gift, welfare, charity, whatever you want to call it.
Greg Mankiw posted a link to an article by Dr. Jeffrey Flier, the head of the Harvard Medical School.
Very insightful piece of writing which puts into perspective many of the arguments that have been raised in the health care debate and offers insights into the historical reasons for rising costs.
oil changes are just routine maintenance... it's impossible to cover routine maintenance for your body (that would require exercise, eating healthy, getting enough sleep, etc)
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