Health Insurance

Stethescope by LadyheartThat’s right folks, you know where to come when you need only the finest steaming fresh folly! Just minutes ago, I saw a new post on the infamous Slashdot. Rather than comment on the site itself and have my comments lost in the masses, I figured I’d comment here and let them get them lost in this corner of the Internet.

So the idea of the article is that cheap and easy genetic testing is here now. This sort of testing can provide massive insight into potential health risks. There’s a lot of info that can be mined out of this that can help determine statistical likelihood for certain diseases, genetic defects, etc.

So it makes sense that health insurance companies would be interested in this.

But the line (posted in the Slashdot summary which is why it caught my eye particularly) that gets me is this: “Piecemeal insurance is not viable in a world in which insurers can cherry-pick the most risk-free customers“. I find this statement to be fascinating. Not because it’s so amazing and revealing of the future but because it’s so stupid.

Insurance is a way to manage risk. In all things in life, there’s risk. Even the sure things in life (that’s right: death and taxes) have spawned insurance products. The idea is that you pay a known amount of money now in order to prevent you from paying an unknown amount later. It’s considered equitable (at least when we’re talking about regular, private insurance). That is, both the insured (the entity mitigating risk) and the insurer (the entity shouldering the risk) are happy to be involved.

And this makes sense… If I have a large amount of cash, I can charge more than the statistical likelihood of the sum output of cash expected. Statistics can be wrong, but if I leave a large enough gap, I can make money as an insurer.

If I wanted to insure against the possibility that I would die on my next plane ride (I just wrote this out as “my next plane crash”… har!) , I could probably get some sort of policy that would insure me for this. I would pay some amount — let’s say $50 and if, in fact, I died in a plane crash, the insurer would pay out $500,000 to my next-of-kin. This makes sense — there’s an extremely small chance of me dying in a plane crash. Statistics are fairly readily available that show the likelihood of such a crash (they’re small — really Mom — it’s not dangerous to fly!)

This premium charge would be quite a bit higher if you were an experimental test pilot. (By the way, shouldn’t they call them “test pilots for experimental aircraft” to avoid adjective confusion? As in, “Hey man, I’m just experimenting with this ‘test pilot’ thing!”).

Hutt, Jabba theSo now the fun begins: people want health insurance. Health insurance has been getting more and more expensive and people in the U.S. are having more and more trouble even being qualified to receive it. This makes sense.

Most of us are fat and unhealthy (see picture). Our idea of a nutritious meal is one that has fried meat AND fried vegetables.

So of course costs are rising. Of course some people are deemed “uninsurable”. Who wants to cover someone who has an estimated 90% chance of developing a disease or condition that will cost on average $750,000 to treat? The answer is: someone willing to pay premiums that even at those estimated probabilities will still yield a profit (which is no one).

So insurance always has to be equitable — it always has to make sense for both parties or else it will not be “viable”.

I think the reason the statement was made is this: People don’t want insurance, they want to avoid problems. They don’t want health insurance, they want health. Insurance therefore is viewed not as a tool of the free market that helps manage and mitigate risk, but a social institution that promotes the general well-being of people.

Yummy! (but expensive)!One could say that the statistical ties between tobacco usage and cancer/death, resulting in increased premiums for folks using tobacco, has put pressure on healthy behavior. Previously, an individual could choose to simply ignore this but would have to suffer the consequences of their actions (in expensive treatment or in simply shuffling off this mortal coil earlier rather than later). Now, when applying for life insurance, you see a dramatic difference between the two rates based on that sole attribute: Do You Smoke? The result (at least might be) a decrease in smoking rates since people drive down the price they pay by changing their lifestyle. This is great! At least as long the statistical likelihood is actually accurate.

OK — people don’t seem to  have a problem with this. But with genetics they do… The reason is that someone genetically predisposed to some potentially expensive condition has no ability to alter their circumstances. Essentially, there is no socially reforming affect upon this person. They simply must pay more to mitigate their risk.

From the market’s standpoint, this seems to make good sense: With increased ability to predict risk (at least in theory), there’s less waste as premiums be can fine-tuned to more accurate levels. Competing insurance companies can make tiny profit margins on policies with a highly predictable amount of risk (which saves consumers money).

But it doesn’t “provide for the general well-being”. So, oddly, government provided health care is essentially the same as a private insurance company that knows only statistic: Some people die, some don’t. And the government will also up the premiums a little bit more for everyone who can afford to pay them because there are some who can’t afford to pay anything at all — even a low premium.

This is the concept. I suppose it’s better than forced sterilization or elimination of Lebensunwertes Leben. That’s another way to care for society.

CommunismSo, after all this, it comes down to the purpose of government. Can we provide a system where we can all be happy, from each according to his ability, to each according to his need? How well has that worked…? Should we try the other way to create a perfect, genetically pure society where equality becomes irrelevant?

I think the answer is neither. Life is tough. People die. Babies are born with horrible conditions. Some people are more likely than others to get fat, get cancer, get drunk. Can we ever really change that? Are disabled people the same as non-disabled people because we have a telephone-book-sized stack of laws that give them in equality in all things? Of course not. Life simply isn’t fair.

Capitalism isn’t the answer either. The thing that makes sense about capitalism is that it works with regards to motivating production. Production and effectiveness is a good thing for any civilization that wishes to remain one. However, capitalism provides no way of making life fair. Let’s not try to coerce it and massage it into something it can never be.

So what about those people? The people who are born with horrible conditions or who are likely to develop them? Neither capitalism nor socialism can help them. We as people can. Instead of saying “Someone should do something about this inequality!” be the someone and stop passing the buck. We may not be able to make their lives longer or less painful — even with unlimited medicine this is probably impossible. But we can make a difference in their life by developing relationships with them and loving them. I think the hardest of hearts out there can understand how much more a real, genuine friendship means to someone than extending a life of misery and depression yet another day.

So that’s it! Your economic lesson for the day:  Love people and don’t become commies!

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  1. #1 by Bill on January 11, 2009 - 1:36 am

    Haha, the star wars shot is hilarious.

    You’re right about insurance. I’ve found that life insurance premiums can be as much as 70% higher for scuba divers. It’s statistically based – the insurance industry owns a whole profession (actuaries) that are trained in the mathematics of all this. (A friend who who is an actuary says the banking industry needs to start doing some of this kind of risk analysis). Of course, different companies come to different conclusions about risk so if you get 3 quotes you go with the company most willing to bet that you will live, say, another 20-30 years.

    Anyway, they definitely examine your individual risk. And that’s great by me, I would not want to be lumped with those who apparently are a substantially greater risk for a premature passing: smoke, have diabetes, sky dive, scuba dive, and are private pilots (they ask you about all those things, and if you lie, they can deny a claim later based on an investigation).

    I’m not terribly opposed to the government compelling individuals to act unselfishly on occasion. However when they go to extremes, they discourage people from excelling and it backfires, the society falls behind. Already in our society tax rates increase exponentially, the more you make. While aspects of what that money is used for may satiate some people’s sense of fairness, “bread and circuses” brings civilization to its close.

    We may be lucky enough to see witness that phenomenon within our lifetimes, with the $1,000,000,000,000.00 bailout(s) ahead!

    Obviously the government is not always the best judge of fairness or what is right. Like you pointed out, the disabled person’s life is not completely healed no matter what we can do for them. But their situation is “fair” from God’s perspective. We should consider ourselves fortunate for anything good that we get.

    So your idea of being kind and loving the unfortunate follows James 1:27. But the decision for a government to transfer massive funds or force special treatment for the less fortunate seems morally indifferent. I think it’s a matter of practicality.

    One other thing – note that capitalism enables the creation of wealth, making the generous more effective because they have more to give! In that sense might it promote the “general welfare”! But if the government looks out there and doesn’t see enough generous people taking care of the basic needs of the indigent I would not be shocked if a benevolent dictator decided to take care of them. That could help society by making the indigent people productive – the government does have an interest in that.

  2. #2 by Dave on January 21, 2009 - 10:22 am

    Capitalism enables the creation of wealth, which creates the *potential* for the generous to be more effective, and also creates the potential for the greedy to be enabled and even encouraged (they are in the US, now).

    I agree, no government solution is the perfect solution. I think there are a lot of benefits to a moderately socialistic government (like many modern European countries), but there are also downfalls.

    Really small government and free market economy may sound good idealistically (I agree with that), but practically I think most people require more boundaries, or else they are all too ready to follow their own interests at the expense of everyone else. Free market economy may promote growth, but it also promotes instability (as we can see).

    Again, there is not perfect solution.

    It’s sad that the quote from Ghandi gets so overused and sloganized, because it’s really good – “you must be the change you wish to see in the world”. I think it works, albeit slowly… and at least then there is the benefit of doing what you believe in yourself.

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