2: Problem #1, Our use of Medical Insurance

Insurance is a wonderful concept. I understand that the first insurance policies were created when British ship owners created a pool of funds to insure against the loss of ships. We have fire insurance for our homes and collision insurance for our cars. These insurance policies protect us from losses which, although unlikely to happen, would be devastating if they did. The result is that we pay just a little bit of money, and we get a lot of protection. It’s a good value.

However, insurance isn’t a good tool for every situation. For example, let’s say that we decide that everyone should have food insurance to make certain that no one goes hungry. The concept seems straightforward enough: everyone is required to carry food insurance. If you get hungry, you go to the store or to a restaurant. Submit your insurance information, get fed, and the store or restaurant gets paid by the insurance company.

However, this proposal is silly. We all know that our favorite restaurant might end up being out of network, every restaurant would need to have a billing department, and we would constantly be arguing with our insurance company about whether our policy should cover a particular type or amount of food. It would be a hassle to go to a new restaurant because we would have to spend time providing the restaurant with all of our billing information. This arrangement would be a lose-lose proposition for the consumers and the restaurants. I suppose that the winners would be the insurance companies, companies who produce billing software, and the army of people employed by the complicated billing processes.

Medical insurance isn’t just used for major expenses. We use it for every little doctor’s visit, medication purchase, vaccination, and dental checkup. In utilizing medical insurance, we collectively take the illogical position that we cannot afford to pay for our own medical care, but by involving the insurance company, we are able to turn something that we cannot afford into something that we can afford. This is clearly a fallacy. If we shovel umpteen billions of dollars into the black box called the insurance industry, how much money will flow out the other end to actually pay for medical care? The answer is obvious to me: the amount has to be LESS THAN umpteen billions of dollars. Additionally, the medical provider is saddled with additional administrative chores (i.e. the cost of maintaining a billing department) which further detracts from the resources available for patient care. Just like the silly-sounding example of food insurance, utilizing an insurance product for routine medical care doesn’t make things work better; it makes things worse. It’s not a good use of an insurance product.

The Affordable Care Act (AKA “Obamacare”) mandates that medical insurers cannot refuse coverage based on a preexisting condition. Like many (most?) other people, I don’t believe that people should be denied medical care due to a “gotcha” situation, which is what the old preexisting clause was. The problem is that the Affordable Care Act is forcing insurance companies to do something which is antithetical to the nature of insurance. The ability of a person to purchase insurance for a preexisting condition would be like being able to insure your ship after the ship has sunk. However, let me be clear:  I am NOT saying that we should be creating a situation where some people are unable to get medical care. What I am saying is (again) that insurance is the WRONG TOOL to pay for healthcare. Let’s go back to the thought of being able to purchase insurance coverage on your ship that has already sunk, or your home that has already burned down. What would happen? Well, the cost of the insurance would simply skyrocket. It would no longer be a good value. When we use insurance in a situation that it is not suited to, it doesn’t work well. So, my opinion is that the problem with the Affordable Care Act is that it focuses on insurance policies to finance healthcare, when this is not the best tool.  Unfortunately the GOP’s proposed American Health Act (AKA “Trumpcare”) seems to suffer from the same defect.

In closing, I am not someone who hates the Affordable Care Act (AKA “Obamacare”).  I think that it was well-intentioned, and pehaps the only thing that president Obama was able to get the various players to agree on.  However, there have been suggestions of replacing it with something better.  My point is that our “something better” (whether the AHCA or something else) should not doggedly focus on insurance policies as the only way to pay for healthcare.

My proposed solution:

As stated before, I went through a period when I supported the concept of having socialized medicine in the USA. (Of course, we hate the term “socialized”, so we would call it something else.)  I will discuss the “S” word in the next section – section 3.

However, I also believe in free enterprise.  I think that people should be free to choose where they get medical care, and I don’t believe that medical providers ought to have their career options limited to working for a governmental health agency.  I will discuss the free enterprise portion of my proposal in section 4.

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