I was wondering if someone can explain this part of the article-
http://www.politico.com/news/stories/0709/25421.html#ixzz0MOKcy0Qp
All insurance plans involve socialization of costs, and hence all insurance plans incentivize consumption. The way to combat this is to let premiums reflect risk rather than capping premiums with a tax. The upshot is there will be less medical insurance options instead of more.
What most infuriates me is the egalitarian mentality that just seethes at the idea that somebody, somewhere has enough buying power to bargain for better medical insurance. These people really do need to be hung from trees.
socialization of costs - i get that – that’s the idea that we all pay for each other’s illnesses by averaging the cost of coverage for sick and healthy ppl.
why does that incentivize (is that a word?) consumption? and what’s the rest?
The incentive to consume is increased under current health “insurance” because it creates a moral hazard. Under ordinary insurance, say, flood insurance, the event insured against is typically mostly beyond the control of the insured individual. He has no incentive to have his house be flooded, destroyed in an earth quake, or whatever. Should he happen to have the misfortune of having any of these natural disasters occur, the insurance company is prepared to pay.
Now let us observe what happens with health insurance. The typical insurance plan covers events that are mostly beyond the individual’s control (such as a sudden stroke) and events that are firmly within the control of the individual (such as a routine checkup). The former is not bad at all; they help to reduce uncertainty and aide the individual during a time of crisis. The second, however, is a direct subsidy of consumption. If my insurance plan covers, say, 5 routine checkups a month, why not take advantage of that? I have nothing to lose but time.
Or, in the case of medicine, why not take that pill that may or may not actually help me? After all, I’m not paying (or paying very little). I can keep taking it for as long as I want. I don’t have to decide whether the treatment is actually worth the money. This is not to say that any insurance subsidy of events under one’s control is totally bad; maybe the insurance company will find, through statistical analysis, that those patients who visit a doctor every 6 months are less risky. The subsidy then comes in the form of a lower premium.
This should not suprise anyone. Both major parties making up the “Criminal Gang” we call Washington will always in the name of equality point out how someone gets a better deal than someone else, actually someone gets a better deal than they have. The worst part is that this makes perfect sense. If you have an employee incharge of a corporation worth billions, you would want them to be healthy. So instead of a Cadillac insurance plan these companies will simply pay with cash and will not ever pay the tax.
Because it’s OPM - other people’s money. If you have to fix a scratch on your car yourself, you’ll haggle like crazy–or just let it pass. If other people are going to share the freight, you’ll try and connect every ding and dent on your car to that covered wreck.
The soak-the-rich economists are probably relying on this to show how those evil employers with lots of purchasing power are enabling their employees to become medical care-consuming layabouts. But if that’s the case for, say, Aetna, it’s also the case for Medicare/Medicaid.
The answer of course is to get government out of the ‘health insurance’ (there’s actually no such thing) racket all together and let insurers group people according to risk rather than the nonsensical grouping by employer, and let people bargain as they will for high deductibles, HMO’s, etc.