Friday, November 18, 2005
Health care economics 101
Paul Krugman in a New York Times column, "Health Care Economics 101," aptly points out that free market don't work in health care.
The essential problem is that as a society, we don't let people die in the streets (thank goodness), and we let them have expensive health care even if they can't pay for it. Those costs are shifted to people who do pay for coverage or the government.
Naturally, many healthy people don't try to get health care coverage because they don't need it. As health care costs rise, the problem gets worse because more healthy people are tempted to go without coverage. That means there are fewer healthy people to pay for the sick who do have coverage.
Another problem is that our health insurance industry is based on an actuarial model rather than a social contract model. The health insurers do all they can to keep from covering people who actually need coverage: Demands for profit in a free market require them to limit and deny coverage as much as possible. Were we using a social contract model -- which, I think, most people errantly assume we do -- in which we all pitch in to help each other (and oursleves) when help is needed, there would be no need to limit or deny coverage. That would require, of course, insurers to give up the pursuit of profit. Not likely, heh?
For more information:"'Free Market Health Insurance System 'Doesn't Work,' Op-Ed Says,"Kaiser Daily Health Policy Report, November 14, 2005: <http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=33722>
"Fixing America's Health Care System: A Progressive Plan to Cover Everyone and Restrain Costs,"By David B. Kendall, Progressive Policy Institute, September 22, 2005:<http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=111&subsecid=298&contentid=253538>
The essential problem is that as a society, we don't let people die in the streets (thank goodness), and we let them have expensive health care even if they can't pay for it. Those costs are shifted to people who do pay for coverage or the government.
Naturally, many healthy people don't try to get health care coverage because they don't need it. As health care costs rise, the problem gets worse because more healthy people are tempted to go without coverage. That means there are fewer healthy people to pay for the sick who do have coverage.
Another problem is that our health insurance industry is based on an actuarial model rather than a social contract model. The health insurers do all they can to keep from covering people who actually need coverage: Demands for profit in a free market require them to limit and deny coverage as much as possible. Were we using a social contract model -- which, I think, most people errantly assume we do -- in which we all pitch in to help each other (and oursleves) when help is needed, there would be no need to limit or deny coverage. That would require, of course, insurers to give up the pursuit of profit. Not likely, heh?
For more information:"'Free Market Health Insurance System 'Doesn't Work,' Op-Ed Says,"Kaiser Daily Health Policy Report, November 14, 2005: <http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=33722>
"Fixing America's Health Care System: A Progressive Plan to Cover Everyone and Restrain Costs,"By David B. Kendall, Progressive Policy Institute, September 22, 2005:<http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=111&subsecid=298&contentid=253538>
