January 5, 2014

Broken Clock

Hatched by Dafydd

Barack "You can keep it" Obama is well along the path to utterly demolishing the American health-insurance system. He bulldozed a series of grotesque "reforms" through a supine Congress, market distortions that will swiftly kill all the old insurance plans Americans have used for years. He schemes to replace them with Obamacare exchanges and ultimately single-payer, government-controlled medical care. Far from ensuring against medical catastrophe, these monetary black holes will instead "spread the wealth around"... that is, suction it from the middle class and redistribute it to politicians, Progressivists, and rent-seekers.

Yet Obama has inadvertently done us a huge favor: The destruction of the American health "insurance" monstrosity will in fact usher in a new medical paradigm that is rational, workable, and fair, and a tremendous improvement over what we used to have.

Many have pointed out that what we call health "insurance" is anything but. Real insurance is like what you have on your house, a policy that pays for unexpected catastrophes: If your house catches fire, for example, the insurer pays a very substantial portion of the cost to repair or replace it.

But it doesn't pay the homeowner to repaint the house, exterminate termites, fix leaky faucets, or replace burnt-out lightbulbs. Those problems are not "damage" but maintenance or ordinary living expenses.

Similarly, your auto comprehensive and collison insurance pays for unexpected damage to your car due to an accident; but it won't give you a dime towards changing the oil, fixing the valves, or tanking up with gasoline. Again, those are considered maintenance or ordinary operation of the vehicle.

But so-called health insurance -- pre-Obamacare -- paid for many things that should have been considered either maintenance (the annual checkup) or ordinary health-care expenses (prescription drugs). Insurance is intended to be a gamble: The company bets that you will never have a catastrophic health problem, while you bet that you will, by gum. But expecting a payoff from the insurer every time you refill your prescription for Nexium or Lipitor is no gamble -- it's a regular expense.

When the health insurer must pay for regular expenses, "insurance" has instead become a pre-paid health-care plan. And naturally, the premium reflects that distinction, causing the rapid rise in health-care premiums and higher deductables: An insurance company that doesn't raise rates when consumers increase their service demands will quickly find itself out of business.

But now, with falsely so-called health insurance falling into a death spiral, due to Obamacare, the One has inadvertently brought some real light; Obama has swept away the dreck of our former health-care Ponzi scheme and cleared the decks for what we really need to replace both the old third-party system and the looming enormity of government monopoly: a doctor-patient private subscription plan.

A number of doctors, revolting against Obamacare's intent to turn doctors into government employees (as with horrific Britain's National Health Service) have already begun the transformation. Here's how it could work:

  • Doctors form coalitions with other doctors and specialists, hospitals, and alternative health-care facilities such as nursing homes and outpatient care.
  • A consumer then buys a subscription to the coalition of his choice. He would make his choice on the basis of a particular doctor he likes, or on the facilities available, or the types of services the coalition offers. The subscription is a monthly payment the consumer makes to the coalition -- superficially resembling an insurance premium, but without the third-party middleman, the insurance company: The consumer deals directly with the coalition run by doctors.

    The subscription entitles you to some treatments or consultations that require no extra fee; and for more expensive services (surgery, long-term care, access to a specialist, etc), the subscription gives the consumer substantial discounts.

    Coalitions will offer many different subscriber plans, just as your cable or satellite TV over various tiers of service: The more you pay per month, the more services you get for "free" (fully covered by the subscription) and the greater the discount for services that require further payment.

  • Finally, the subscriber should also buy a very low cost catastrophic care policy. This would be real, honest to goodness insurance, where the insurer only pays for serious and unexpected events, like a heart attack, cancer, or severe injury, where the medical costs are bankruptcy-threatening.

Young, healthy people would buy a minimal subscription with very low monthly payments. Older people and those with chronic problems would buy robust subscriptions with much higher monthly payments, and they would get correspondingly better discounts and more coverage. But the health-care coalitions, entirely privately run, would set the monthly payments such that they would make money either way... thus the system would be self-sustaining and require no government subsidies. The goal, of course, is to get government out of the picture to the maximum extent possible.

But what about people with pre-existing conditions?

It's bad public policy to have a batch of people who cannot get medical care because coalition subscriptions are utterly out of reach; nobody wants to see the deserving poor dying in the streets because they have medical problems. But the problem of people with pre-existing conditions could be handled by an assigned risk system randomly and evenly assigning such patients to coalitions at affordable subscription rates -- much like accident-prone drivers who get assigned to auto-insurance companies. (Though the coalition assigned-risk system is more just, since most assignees did nothing to bring on their own pre-existing conditions.)

The coalitions would be required to sell subscriptions to such patients at a loss, making it up by a small premium on everybody else's subscriptions.

Note that coalitions are not tied to employment, so changing jobs would not affect one's health care. And there would be no restriction on who could buy a subscription from whom, regardless of the state or even country in which the coalition is incorporated.

And because patients are directly paying doctors without any third-party insurer, they will have a great incentive to become prudent consumers of medical care, keeping costs down.

The more Obamacare obliterates the erstwhile health-"insurance" system, the faster will health-care providers create health-care coalitions and begin offering subscriptions. Even a broken Obamacare can have at least one good effect, however serendipitously!

Hatched by Dafydd on this day, January 5, 2014, at the time of 1:22 PM


The following hissed in response by: mdgiles

The problem of people with pre-existing conditions has never been that they couldn't get insurance; it's that they couldn't get into the pool with healthy folks, so their insurance cost more - which was "unfair". It sort or like how you would have to pay more for homeowners if your house was already on fire.

The above hissed in response by: mdgiles [TypeKey Profile Page] at January 7, 2014 3:36 PM

The following hissed in response by: Dafydd ab Hugh


It sort or like how you would have to pay more for homeowners if your house was already on fire.

Have you any suggestion for those who are born with their house already on fire, with some serious condition that insurance companies, left to their own devices, would refuse to insure?

Consider those born with cystic fibrosis, or a weak heart needing surgery shortly after birth; few insurance companies would voluntarily insure such people at any price.

In a pure Randian MarketWorld, with no other constraint upon human action, letting defectives die -- or killing them at birth -- would be a reasonable solution. But we do not live in such a pure state of commoditized people; we value innocent life transcendentally, and judge sociopathic those who have no ability to empathize with others.

If Republicans were to propose a health-care system where the disabled were simply discarded like used Kleenex, the mass of voters would be after us with torches and pitchforks.

Thus both empathy and politics demand provision for the deserving poor and disabled. I have set forth one solution to the problem; I'm sure there are many others.


The above hissed in response by: Dafydd ab Hugh [TypeKey Profile Page] at January 8, 2014 1:31 AM

The following hissed in response by: wtanksleyjr

It should be noted that Dafydd's solution is not so different from the American solution prior to New Deal and WWII -- the tipping point being Roosevelt's focus on destroying the old solution. (By the way, the old solution largely used things like fraternal orders, which is why those things were so much more common and important to our grandfathers.)

I think you may have uncovered a truth, though; I expected this kind of solution to require incentives, but you're right that radical and dramatic destruction just MIGHT produce the change we've been waiting for.

(You see what I did there.)

I can only join you in hope. I also hope that we can unseat some more bastards -- I'm really unhappy with the gutting the Democrats triumphantly performed against HSAs. Those could have been a major help now, but the new law made them dramatically less flexible... And I think it was done simply because the Republicans promoted them in the past, not because they were incompatible with any plans.

The above hissed in response by: wtanksleyjr [TypeKey Profile Page] at January 8, 2014 11:35 AM

The following hissed in response by: snochasr

Before Obamacare came along, my company offered a plan at HALF the cost of the usual plan, and it performed better. Yes, there were co-pays, but there were fewer things to copay for. Often a phone call would suffice to get doctor's advice. The way it worked was that the doctor-hospital group would be paid a fixed amount (plus agreed co-pays) to "take care of you." The doctor will thus treat you as quickly and effectively as possible (no unnecessary tests or drugs) because any waste comes out of his pocket. But he won't under-treat you, either, because if you get really sick, THAT comes out of his pocket, too. It's like real insurance except that the doc has a real stake in your best treatment, not in scamming the insurance company or jumping through paperwork/approval hoops.

The above hissed in response by: snochasr [TypeKey Profile Page] at January 9, 2014 10:55 AM

The following hissed in response by: White Fang

Dafydd, do you have any thought on the increasingly common assertion by many pundits on the right (including at Powerline, Rush Limbaugh, and numerous others) that single payer is now inevitable? Whether or not that was the "plan" all along, do you not think we're right to worry-- given the Democrats' determination and disinterest in public opinion, the Republicans' uselessness, and Obama's unchecked tendency to rule by executive fiat? That might be a worthy follow up post.

The above hissed in response by: White Fang [TypeKey Profile Page] at January 22, 2014 11:00 AM

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