If you step back and really think about it logically, health insurance is a colossal waste of money for most people. I’ve seen figures that claim that nearly 90% of Obamacare enrollees never reach their annual deductible in any given year. You spend about $7,000 per year, on average, to mitigate a risk that is statistically unlikely. Granted, insurance is supposed to be for things that are catastrophic but unlikely. Yet the risk premium for health insurance is a poor value. Indeed, the average cost of family coverage for employee health insurance is nearly $27,000 a year. That’s a lot of money for a handful of wellness visits, hormonal birth control, and the once or twice in a lifetime colonoscopy. A young couple benefits when they have a couple kids, but for most years of life insurance is a poor investment.
Where does all that money go? It goes to cross-subsidize other people. It is used to care for the least healthy 20% of the population, who account for 80% of medical spending each year. Sometimes we are subsidizing the same set of people year-after-year but, analysts tell us that the unhealthy 20% is not always the same from one year to the next.
The social contract assumes you pay into the sickness fund knowing you will get something back in your time of need. While that may be a nice thought the details get messy. Whereas you expect value for your money at the grocery store, you care less about value when someone else is paying the tab. Say your kid falls off the monkey bars at school and you decide he needs an MRI, because your health plan will pay for it (this happened to a friend of mine). A relative was prescribed an expensive prescription pain medication comprised of two over-the-counter drugs. The list price of the drug was about $3,000 per month, while the ingredients were available OTC for less than $20 a month. However, the $3,000 version was mostly covered by insurance and more convenient.
Moral hazard doesn’t just affect those with coverage; it also affects doctors, hospitals and drugmakers. I’ve had a doctor grab my file and simultaneously ask what kind of health coverage I had. Finding that I had a high deductible he helped me hold the costs down, but the implication was that his recommendations would be far more expensive had a third party been paying the bill.
Obamacare was an attempt to expand cross-subsidies rather than rein them in. The latter would lead to efficiency gains, the opposite effect of Obamacare. Kaiser Family Foundation Health News reported that, absent generous Obamacare subsidies, some people are turning to so-called skinny, limited benefit health plans.
When Melanie Miller saw that her health insurance premium payment was set to nearly triple to $914 a month this year, she stopped shopping on the Affordable Care Act marketplace.
The 59-year-old retired teacher, who recently moved from Ohio to Michigan, now pays $341 a month for a pair of plans, one that covers routine and urgent care and another that pays fixed amounts for hospital stays. Neither meets federal standards for comprehensive coverage.
Ms. Miller is gambling (her words) that she doesn’t’ suffer a catastrophic health problem that is statistically unlikely to occur. If she renewed her Obamacare plan, the cost was going to be nearly $11,000 a year. She doesn’t mention what her ACA plan deductible would have been, but I suspect it would have been at least $9,000. Her current plans (she has two) pay for routine care and urgent care. Her hospital coverage is fixed at $2,000. Neither of her plans appear to be worth the money she is paying for them. Her costs are still not cheap, more than $4,000 a year. She would be better off uninsured with a direct primary care (DPC) membership.
Americas need access to health coverage that better meets their needs. To that end, Congress needs to figure out a better way to subsidize those whose health is precarious. The first order of business should be reducing the runaway costs, and the perverse incentives that encourage them. The health system in Singapore is a notable example. It works more like saving for retirement. Everyone is required to withhold a percent of wages into a MediSave account that accumulates for use on date-to-day medical needs. Patients have an incentive to shop for value. By contrast, systems that promote excessive cross subsidies can never be efficient. Neither is subsidizing inferior quality insurance.
Read more at KFF Health News: Cheaper, Alternative Health Plans Are Having a Moment, but Critics Urge Caution
You are too stupid, Devon. You lied and said I didn’t enroll America’s 1st HSA in 1996 in your Brief History of Health Savings Accounts! If you remember, I told you then it should have been titled a Brief History of TIME! You are going down in the history books as one of the PhDs who worked for the non-taxed think tanks that killed millions of Americans with your lying ways to prolong the death trap and the murdering ways of Blue Cross’s Murder Machine. Like I have always said, “How can you look at yourself when you shave?”