23 October 2012

Health care: You didn't pay for it

The Economist: Free Exchange | A.C.S. | Health care: You didn't pay for it

I recently came across a political ad which featured an elderly man telling politicians to stay away from his Medicare. After all, he paid for it, the ad suggested. That struck me as interesting.

Medicare's scope has expanded quite a bit since today's older Americans started paying taxes. Part D, which covers drug benefits, was introduced just six years ago. It is partly funded by premiums paid by current retirees, but mostly through general revenues from the Treasury (from current and future tax-payers). So for much of his working life, the gentleman in the ad paid taxes toward a different, smaller programme. [...]

Now in a contractual sense retirees that have paid their premiums are obviously entitled to that ever-improving basket of goods. That does not mean that they have really paid for it. According to the Urban Institute an average-earning couple who retired in 2011 would have paid about $116,000 in Medicare taxes over their lifetimes, but can expect lifetime Medicare benefits of $357,000 net of premiums.
This post reminds me of something I thought off when I was reading The Emperor of All Maladies. Specifically the chapters about compassionate care programs and patients fighting with insurance companies/regulators/clinics to get into experimental trials.

"Health insurance" isn't actually insuring your health. It's pre-paying for a particular set of services.

I'm a little tired or hearing some version of "I paid my premiums for years then when I got sick the insurance company bailed on me." I'm sure this happens. Insurance companies aren't staffed by angels. (I think the problem is made worse by a combination of state-level restrictions on competition and tax rules that mean their real customers are actually your HR department, not you.) But I get the impression that the people that say this think of their health policy as an open-ended promise by the insurance company to do whatever it takes to make them healthy again or to die go broke trying.

Paying your health insurance premiums does not buy you health. It does not buy you limitless attempts to make you healthy. It buys you a particular set of services {X, Y, Z, ...} which you pay for in advance, discounted by the probability of you needing them. (Or since we're getting community-rating, the probability that anyone in the population will need them.) Do insurance companies lie and cheat to get out of providing X, Y and Z when they are supposed to? Yes. And it makes me angry. But if your policy doesn't cover experimental procedure W, then that's that. The fact that you need/want W when you get sick doesn't change the fact that you weren't paying for W before you got sick. You were paying for {X, Y, Z, ...}.

Let's get mad at insurance companies for the actual shenanigans they pull, not for providing us with things we hadn't contracted for.


PS And before anyone says it, yes, I realize enumerating X, Y & Z is very difficult. That's part of the problem. Even if we can't list the exact set of things which are being paid for I think it helps to think of health insurance as pre-purchasing a basket of services rather than paying for "health."

PPS I caught the end of a piece on the local news about pet insurance. One of their recommendations for how to make it more affordable was to purchase a "wellness care" insurance policy that covers only routine medical needs.

This is the opposite of insurance. It's bad enough that we force human health insurance policies to insulate us against shopping for totally foreseeable, manageable expenses like annual check-ups, but an "insurance" policy that exists solely for forseeable, manageable expenses is insane. We have to stop calling this stuff "insurance."


The English language... becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts.
— George Orwell, "Politics and the English Language"

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