Medical Care Pre-Fee Versus True Insurance coverage

William M. Briggs thinks that “true insurance coverage” is the higher thought. He begins with this clarification:

Well being Insurance coverage needs to be, however isn’t, a guess you make that you simply hope you lose.

It has grow to be as a substitute an inefficient type of socialized drugs, rising prices. Right here’s how.

Right here’s what insurance coverage needs to be. You guess with an Insurer that you simply get most cancers, say. In the event you get it, the Insurer pays prices of care X. In the event you lose and stay most cancers free, you pay Y. You re-bet each month (or no matter). You pay Y each time you lose. The X and Y are negotiated between you and the Insurer, and the chance of most cancers is determined by you and individually by the Insurer. That’s the naked bones of true Insurance coverage. Or, certainly, of any guess.

It’s also possible to group illnesses, say most cancers and CHF. Then you definitely pay Y_1 + Y_2 (say) and the prices are X_1 + X_2. The result’s a contract guess simply the identical. However with larger stakes for each.

Suppose you already have most cancers and guess the Insurer you gained’t get it. You instantly win the guess! The Insurer should pay X.

How a lot ought to the Insurer cost you for this sure-thing guess? X. In spite of everything, your “pre-existing situation” is a sure-thing guess the Insurer is sure to lose. There isn’t a sense in you making the guess.

Except a Ruler steps in and says “Insurer, you need to take this guess!” Which, after all, occurs. Then the Insurer should unfold the prices of X to others.

If the Insurer doesn’t unfold the prices, he has certain loss (assuming calibrate bets, about which extra later). Which implies when you guess you’ve got most cancers while you do, when your neighbor makes a guess for most cancers when he doesn’t have it, he should pay Y+S, the place S represents the unfold. The extra individuals within the system, the smaller S is.

Voilà! With protection mandates Insurance coverage mechanically turns into socialized drugs. Very inefficient, too, as a result of not solely are we paying a non-public entity to handle this, and take his earnings, we pay bureaucrats to observe all of it. Prices should enhance. Well being care gained’t get higher, however prices should rise. 

It’s worse than all this, too!

RTWT. I talk about the professionals and cons of the “true insurance coverage” thought in my guide beneath. Dramatic value reductions performed right this moment.

Steve Parker, M.D.