Is health insurance a "myth"?
I read an article today that got me thinking. At first I was inclined to agree with Thomas Szasz's opinions, but the more I thought about it, the more I understand why health insurance doesn't work the way he thinks it should.
Basically, the premise of the article is that health insurance is unlike any other type of insurance one can buy. Unlike, say, car insurance, health insurance pays for the normal upkeep of one's body, whereas car insurance only covers accidents. His whole article boils down to maintenance versus catastrophic coverage. See this for a nutshell summary of his premise:
The typical contractor of homeowner’s insurance is the homeowner. He buys insurance to protect himself from costly loss caused by events outside his control, such as fire, not to defray the recurring expense of maintaining it. The ideal outcome for both the buyer and the seller of home and automobile insurance is for the policyholder to never make use of his policy.
Szasz argues that health insurance shouldn't do this. It should be one's own personal responsibility to pick up the cost of "human" maintenance; that health insurance shouldn't be an egalitarian system (to use his word). It's an interesting concept, but one that is fundamentally flawed.
What Szasz misses — and is the whole point of programs like the new Part D benefit — is that proactive medicine is less expensive than reactive medicine. By paying for someone's cardiovascular medications (maintenance), an insurer is saving themselves money in the long run by avoiding paying for the costly, catastrophic hospitalization that results from a heart attack or stroke. Szasz argues that insurance should only cover catastrophe. After all, your house insurance doesn't cover the cost of replacing the siding — it pays out when your house burns down for one reason or another.
It's in an insurer's best interest to keep their customers healthy. They get to keep more money that way. That's why you see many insurers reimbursing their members for things like gym memberships: it's cheaper to pay out $150 a year in prevention than it is to cover the cost of obesity and the secondary problems it causes (diabetes, depression, etc.). And these problems can land someone in the hospital just as easily as a heart attack, and it happens. One night in the ICU can run over $10,000.
$10,000 buys a lot of gym passes.
Somehow I think insurers' actuaries have crunched the numbers — something that Szasz obviously has not done — and come to the same conclusion both myself and Bejamin Franklin came to.
[tags]Medicine, pharmacy, prevention, health, economics, insurace[/tags]
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