Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Friday, December 17, 2010

Of Health Care and Insurance

Earlier this week, Thom Hartman had somebody named Joseph from World Nut Daily on his radio program. I think it might have been Joseph Farah, who seems to run the whole show there.

One of Joseph's points was that what he calls "ObamaCare," if it included a public option, would put health insurance companies out of business.  To this, I say, "Hooray!"

He also attempted to make a point about competition, suggesting that a "free market" approach to health care coverage would yield optimum results for everyone.  While I do no doubt Joseph's sincerity,* his argument is pure bull shit.

Consider the business model of health insurance; it's really pretty simple.  Income is from insurance premiums.   Expenses are payment for the health care services used by customers of the insurance company.  In this scenario, there are two ways to effect profitability.  On the income side, you raise rates.  On the expense side, you refuse to pay for services, and/or eliminate high-cost clients from your cost structure by terminating their coverage.

That's it.  There are no other possibilities. Opportunities for competitive advantage by improving efficiencies are severely limited, and would not be proprietary.  Opportunities for competitive advantage by taking better care of your customers would result in increased outlays and thus reduce the bottom line.  The clear, simple, and obvious message is that for-profit health insurance does not fit a rational business model.  The profit opportunities and the customer-care needs are in an absolute and irreconcilable conflict.

So, what's the answer?   It seems obvious.  A single-payer system run on a not-for-profit model suits the needs of customers.  Since there is no profit, there is no need to try to maximize it by cutting off high-cost users - those in greatest need of coverage - nor to raise premiums above whatever the total cost of the population risk pool drives.

Update 12/18:  I forgot to mention that with the Federal Government as the single-payer, premiums would then be in the form of taxes.  Thus, Joseph's objection that people would be (unconstitutionally) forced by law to buy a service from a commercial entity simply evaporates.  Congress has the power to levy taxes on all citizens.   In addition, for health insurance to make any kind of economic sense, even as not-for-profit endeavor, and for premiums to be affordable for all, you have to have the healthy members in the population as subscribers and in the risk pool.  Hence, UNIVERSAL single-payer coverage.

As an additional advantage, the lack of a profit element eliminates the need for premium mark-ups to guarantee profitability.   The only losers in this scenario are the multi-millionaire CEO's, who add no value to the system while skimming lots of value in the form of huge salaries and bonuses.  What we currently have is a system run by leeches, for leeches, to the detriment of society.  But, since they control a bought and paid-for congress, there is no hope that it will improve, unless there is a revolution.

Once again, we're doomed.
*A later caller accused him of being a shill for the insurance industry.  Hartman didn't think so, and I don't either.  He's just a smart, but naive guy who's drunk on free market kool-aid.


BadTux said...

Ah yes, Crazy Joe of World Nut Daily! Yes, Crazy Joe really does believe a lot of the stuff he spews. For example, he has *always* believed that Muslims are evil and that Islam must be destroyed in order to save civilization -- he's a Lebanese Christian whose family was involved in the Lebanese Civil War, and he hates, hates, hates him some Muslims with the kind of furor that only a true believer can muster. Same deal with his love of Israel, he loves Israel because Israel hates Muslims too, and besides, they helped his fellow Lebanese Christians during the Lebanese Civil War.

But when it comes to economic policy, he's not a true believer. I've been following his career since he started WND, and what I've noticed is that in the field of policy if it's a Republican policy, he's a staunch defender, if it's a Democratic policy, he's a staunch detractor -- sometimes for the exact same policy, just different person proposing it. He spent the entire Bush administration blasting Democrats for opposing Bush's dictatorial power grabs... and now is accusing Obama of dictatorial power grabs? Sistah, puh-LEEZE...

- Badtux the Observant Penguin

Jazzbumpa said...

Tux -

Thanks for the insights. I don't have a nut-cracker with enough endurance to travel in those circles.

I will suggest that one can be a true believer in free marker nonsense and still be an IOKIYAR shill. The opportunities for cognitive dissonance arising from conflict there are virtually nonexistent.