Sebelius Doesn’t Know What Insurance Is

One of the problems that I encounter in the debate over healthcare reform is that a lot of people simply do not understand what insurance is. Insurance is not a magical money tree that gives you free stuff. It is a way of spreading out risk. It has a secondary function in aggregating purchasing power so that insurance can negotiate prices. But, in the end, insurance will always cost the average person more than paying for things on their own.

The primary purpose of insurance is prevent catastrophe. We buy home insurance hoping that we will lose money on it but knowing it’s there if our house burns down. We buy car insurance hoping we will lose money on it but knowing it’s there if we get in a big accident.

But health insurance, at least by the Left, is seen differently. Rather than being seen as a way to spread out risk or combine our purchasing power, it is seen as a way to get free healthcare. I’ve mentioned this before but it remains a perfect illustration of the problem. When I was in graduate school, the students were pushing for birth control pills to be covered by insurance. And they were shocked and angered to find out that this coverage would increase health insurance rates by … the cost of the pills (actually, very slightly less since the insurance negotiated a slightly lower price). They couldn’t wrap their minds around the idea that insurance is a device to mitigate risk, not a machine for dispensing handouts.

I and many other critics of Obamacare have pointed out that it is actually going to make healthcare utilization higher and costs higher by mandating first dollar coverage. When going to the doctor for every sniffle only costs $10, what do we think is going to happen? When you’re only paying 10% of the cost of an MRI, what is going to happen? Catastrophic plans or plans with high deductibles have been proven to keep healthcare costs down without compromising care. When their own money is at astake, people forgo unnecessary procedures and save up for real health problems. As David Goldhill pointed out, you could get every uninsured person a high-deductible plan, give them a $5000 voucher and you’d still save money over government-issued comprehensive coverage. And not compromise health.

Ladies and gentlemen, our Secretary of Health and Human Services:

But Kathleen Sebelius, the Secretary of HHS, thinks that catastrophic insurance isn’t really insurance at all.

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can’t be compared to the comprehensive coverage available under the law. “Some of these folks have very high catastrophic plans that don’t pay for anything unless you get hit by a bus,” she said. “They’re really mortgage protection, not health insurance.”

She said this in response to a report from the American Society of Actuaries arguing that premiums are going to rise by 32% when Obamacare kicks in, as coverage gets more generous and more sick people join the insurance market. Sebelius’ response is apparently that catastrophic insurance isn’t really insurance at all–which is exactly backwards. Catastrophic coverage is “true insurance”. Coverage of routine, predictable services is not insurance at all; it’s a spectacularly inefficient prepayment plan.

I want you to sit back and let the roll over you. Our HHS Secretary does not know what insurance is. She really thinks it’s a magical money machine that can give free care to everyone without prices going up. The only reason premiums would go up is because what they had before wasn’t “real insurance.”

Oh, yeah. Obamacare is going to go just fine. It’s totally going to cut healthcare costs when it’s run by people who have no understanding of insurance, medicine, economics or markets. Nothing to see here!

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  1. salinger

    Hidden due to low comment rating. Click here to see.

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  2. AlexInCT

    This has never been about insurance, damn it. It has been about someone else paying for something. Car or homeowners insurance is insurance. I do not get to do free tire rotations, oil changes, heating oil fill ups, or yard work, I only get money, and then after a deductible and up to some maximum agreed amount, when something real bad happens to my car or my home. Health insurance is not insurance of any kind, and has not been that in forever.

    If we wanted health insurance, we would sell policies that kick in for catastrophic medical events only, lets say when your annual costs go over $20K, and deal with the real bad and ugly stuff. Your doctor visit for a cold or to get birth control pills, and yes, even your check ups, would be paid by you, just like you pay for the maintenance of your car/home.

    What the left wants is government controlled healthcare. They want to make the decisions and control access & money. It gives government more power and grows it. They get to tell the petulant serfs what they can, can’t, must, or must not, eat, drink, do, and they can even wield it as a political weapon. The serfs think government bureaucrats won’t stiff them like the evil profit making entities that the left has spent the last 5 decades demonizing and regulating to cause exactly the effects we see now. The price increases, restrictive access & waiting periods, decline in quality, and the bureaucratic machines increased power to pick and choose who gets and who doesn’t get healthcare are intended features, not unintended consequences. Anyone saying otherwise is just to stupid to live, and deserves the fisting coming their way, or a liar.

    We are screwed.

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  3. Seattle Outcast

    You need to frame it the way the dimwit lefties see healthcare:

    1) The entire medical industry is nothing more than slaves that are there to fix them up for free on demand.

    2) The insurance companies exist only to pay for medical care so you won’t have to.

    3) There is no such thing as scarcity when it comes to medical care – as much as is needed for everyone will appear on demand.

    4) Anyone who disagrees with the above points is lying, immoral, steals, wants people to suffer, kills kittens, doesn’t own any Apple products, buggers small children, and doesn’t understand how it “really works”…

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  4. Ed Kline

    This is true – but health insurance is also responsible for maintenance therefor a health plan actually should help prevent catastrophe by including well care.

    Umm, who says it’s responsible for maintenance??! You? I love how you just arbitrarily claim that an insurance plan, sold by a private company, has an inherent ‘responsibility’. The lie being that preventative care is somehow cost effective, but it obviously isn’t. If it were, insurance companies would drop coverage for people who didn’t fully participate because participation would save those companies money
    Healthy 22 year olds don’t have the same typical health risks as 45 year olds. They don’t need the same type of coverage. Insurance is about spreading out the cost of risk to a pool of clients. It is exactly the same as car insurance of any other kind of insurance. It’s quite simple. Actuaries study the statistical risk of major illness or injury for people of particular age groups and gender. They then assign a monetary cost to that risk vs. the benefits they would have to pay out in a typical statistical sample. It’s just like life insurance. The question ‘what percentage of people will die before they reach 30?’ is treated the same as the question’ how many people under 30 will develop a major health condition or injury?’. We buy life insurance hoping we never need it, and the we should be buying health insurance hoping we will lose money on the deal, but knowing that if something bad happens we’re covered. Anything you add to that basic formula, be it gender reassignment therapy, or more to the point, paying for all of the prescription meds of everyone in the pool, costs the insurance companies more, and that cost is simply passed on to the consumers in the insurance pool.
    If health insurance is required to pay for everything, then it is simply wealth redistribution where the wealthier people pay more into the pool than they will require and the poorer get a subsidy from the wealthy. But you already knew that didn’t you? Because many people on the left know exactly that and pretend they don’t.

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  5. Hal_10000 *

    Simply buying the insurance does not prevent a catastrophe – I think you mean we buy it in the above cases in case of catastrophe. This is true – but health insurance is also responsible for maintenance therefor a health plan actually should help prevent catastrophe by including well care.

    Salinger, I have to disagree here. Cars and homes need maintenance too or they collapse catastrophically. But we rely on people to handle that aspect for themselves. Imagine how expensive gassing up would be if you had to file a claim with your auto insurance every time.

    The fact is that the biggest factor in overall wellness and prevention is behavior. Smoking, drinking, eating too much, not getting enough exercise. Insurance doesn’t really handle that. And we’ve seen that people still go for preventative care when they have big deductibles. They are simply a bit more circumspect on the sort of borderline stuff that drives up insurance costs. When I had a high deductible plan, I got skulled by a line drive in a softball game and got a concussion. I went to the doctor on my own dime to make sure I was OK. But I declined the CT scan she recommended as a precaution because I didn’t think it was necessary. Under my current plan, I’d probably have done the CT scan anyway.

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  6. salinger

    Cars and homes need maintenance too or they collapse catastrophically. But we rely on people to handle that aspect for themselves.

    But here – automobile insurance will not cover the replacement of an engine in your car if it blows because you neglect to put oil in it; whereas my health insurance premiums have to take into consideration the obese smoking booze hounds in the pool when they calculate my rates.

    Believe me – I’d make out in a scheme where one’s “preventive maintenance” was considered in determining rates. Why should I be penalized because there are still people stupid enough out there to smoke, drink to excess or allow themselves to become overweight by eating garbage and sitting on their backsides? As it stands – being self employed – my healthcare premium is by far my largest monthly expenditure.

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  7. Seattle Outcast

    Insurance companies are responsible for returning a profit to their shareholders.

    That’s pretty much all there is to it. They are corporations founded to make money – arguing that they have any other responsibilities is to mistake them for something they aren’t. The reasons we regulate them is to inhibit any tendencies for them to not make good on their contracted duties to pay when needed. If they charge too much, they lose customers to other companies. If they charge too little then they go out of business.

    If you choose to forgo the expense of insurance and instead make sure you have lots of weed, a smart phone with an unlimited data plan, or a high-end car, then you can jolly well go fuck yourself when you need a hospital. Unlimited medical care is not a right – it’s something you pay for, just like food.

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  8. Mook

    The obese smoker “booze hounds” actually SAVE the system money as they typically die relatively young and don’t collect social security, pension benefits and the extra years of health care as do their peers who outlive them. Smokers and obese individuals who die young on average don’t incur any more end of life medical expenses than elderly individuals who die from cancer, heart disease, etc. after receiving 20+ more years of medical treatments and social security and pension payments as compared to the smoking boozers.

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  9. salinger

    The obese smoker “booze hounds” actually SAVE the system money as they typically die relatively young

    Yeah right – who’s paying for those little electric carts, oxygen tanks and disability checks?

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  10. Mook

    Yeah right – who’s paying for those little electric carts, oxygen tanks and disability checks?

    As if elderly people who live until their 90’s don’t use all the same things but over a longer time period. You should educate yourself to the facts. I’ve read other studies that smokers die, on average, at age 65

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  11. Miguelito

    But here – automobile insurance will not cover the replacement of an engine in your car if it blows because you neglect to put oil in it; whereas my health insurance premiums have to take into consideration the obese smoking booze hounds in the pool when they calculate my rates.

    And before more and more gov’t involvement happened to “bring down costs” and make it more “fair” the insurance companies were able to charge the obese smoking booze hounds more, knowing that they were more likely to have future issues. Just like you’d charge someone with a pre-existing condition more (or not insure them at all since it’s possible the amount you’d have to pay out would never be made back with the premiums at all).

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  12. Mook

    This study does not take into account that healthier and longer living folks can contribute longer. A little off topic but relevant I believe; I see no reason not to raise the retirement age.

    I don’t see the “contributions” of the small number of retirees who work after the age of 65 or 70 as coming anywhere close to offsetting the cost savings of the obese and smokers who die younger and draw fewer benefits over their shortened lifetime.

    I agree that the retirement age should be raised in many cases, but this problem is most pronounced among govt retirees who draw much higher pensions as compared to Social security payments, and these govt. retirees can often retire in their early 50’s, some in their 40’s if they were in law enforcement. It’s a huge problem because most of these govt workers, unlike SS recipients, contributed little or nothing into their relatively lavish govt. pensions.

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  13. Miguelito

    but this problem is most pronounced among govt retirees who draw much higher pensions as compared to Social security payments, and these govt. retirees can often retire in their early 50′s, some in their 40′s if they were in law enforcement. It’s a huge problem because most of these govt workers, unlike SS recipients, contributed little or nothing into their relatively lavish govt. pensions.

    Case in point

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  14. Mississippi Yankee

    Insurance companies are responsible for returning a profit to their shareholders.

    And there is the crux of the biscuit.

    “From each according to their ability; To each according to their need”

    The real “crux” of your biscuit.

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  15. AlexInCT
    Insurance companies are responsible for returning a profit to their shareholders.

    And there is the crux of the biscuit.

    Profits are EBIL! Therefore I would much rather a government bureaucrat, protected by a union so they can not be fired ever, with delusions of grandeur and an ego from hell, pissed at the world and ready to take it out on everyone, like the people at the DMV, make the decisions for me!

    /liberal moron off

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  16. Dave D

    What is it with these liberals screaming about evil corporate profits yet again? Do they have 401K’s? Bank Accounts with a positive balance? I guess not………

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  17. salinger

    What is it with these liberals screaming about evil corporate profits yet again? Do they have 401K’s? Bank Accounts with a positive balance? I guess not………

    It’s so much easier to “win” an argument when one projects rationale on one’s adversary.

    Should I suppose that folks here believe the profit motive is the best in all cases. Should firemen only save houses of the highest bidder, cops protect only those whose protection will turn a profit as determined by a detached board of directors ?

    Is responsibility to shareholders the pinnacle of morality?

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  18. Mook

    Should firemen only save houses of the highest bidder, cops protect only those whose protection will turn a profit as determined by a detached board of directors ?

    Your fire dept. example is nonsensical because a) it would only apply in the rare instances where there were more than one major fire at a given time and not enough fire trucks to be dispatched to each, and b) there’s obviously no time or means to have bidding.

    As for your cops not protecting citizens example, it’s already happening – but with government bureaucrats making the choice who gets protected and who doesn’t. Cities and counties are cutting patrols and police staff instead of cutting bloated pensions. Entire neighborhoods in Detroit get little or no policing. It was just a few weeks ago that a story made national news that a sheriff announced that his staff could not be depended on to arrive at a reported crime in progress in less than 45 minutes. Wealthier neighborhoods almost always have more security and less crime than inner city neighborhoods

    Before govt stepped in with Medicare, Medicaid, and welfare, people were not dying in the streets. Charities stood up to fill the needs of the very poor and the indigent.. and there were far fewer able-bodied people laying about as compared to now because they knew that they HAD to work in order to eat and they knew that charities would not support them if they were willfully lazy and unwilling to work. Here in Houston, pretty much every single major hospital was started by a church or charity (Hermann, St. Josephs, St. Lukes, MD Anderson, etc.).

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  19. salinger

    Your fire dept. example is nonsensical because a) it would only apply in the rare instances where there were more than one major fire at a given time and not enough fire trucks to be dispatched to each, and b) there’s obviously no time or means to have bidding.

    You must be unfamiliar with the history of firefighting here in the States. Many early fire departments were private concerns run by insurance agencies to protect property that they insured. A metal sign called a fire mark would be placed on the outside of building designating which brigade was responsible for it. Other private fire brigades would put out fires and then bill the property owner. These crews would sometimes fight over who was to put out a fire while the structure burnt to the ground. It was the ineffectiveness of these schemes that led to public financed fire protection.

    So in this case – it was determined that the free market was not the best way to protect property from fire damage.

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  20. salinger

    Before govt stepped in with Medicare, Medicaid, and welfare, people were not dying in the streets.

    The old Ron Paul canard. This is a straw man. The reason for medicare was not to keep people from dying in the streets but to keep from breaking the bank for seniors. How many of today’s seniors do you think would end up on the street if they had to pay all their medical bills?

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  21. Mook

    These crews would sometimes fight over who was to put out a fire while the structure burnt to the ground. It was the ineffectiveness of these schemes that led to public financed fire protection.

    From your own link, the stories you cite are described as “apocryphal” as in, of dubious origin likely containing little if any truth (aka ‘urban legends’). And even if those stories were true in some instances, the insurance companies would have incentives to correct the situation, since they would lose $$ every time a house burned down. If their system resulted in homes burning down because firefighters were fighting over who gets to save the house, the insurance companies would lay down different rules to ensure that their insured homes were protected. It’s as simple as that.. and you made a nonsensical unsupported leap to claim THAT is the reason for publicly financed fire protection. Govt., unlike the insurance companies, has zero incentive to respond to fires.

    The old Ron Paul canard. This is a straw man. The reason for medicare was not to keep people from dying in the streets but to keep from breaking the bank for seniors

    Do you have any citation showing that massive growing numbers of elderly were going broke with medical bills at the time Medicare was enacted? Because that wasn’t the case if you talk to people who were adults during that era. Sure there were some exceptions, but it wasn’t a massive problem. Your unsupported BS stories are the real canard. Elderly people back then were more likely to be helped by their friends and family and they were more likely to save for a “rainy day”. Sure, Medicare saved some elderly from bankruptcy, but at what cost to others? More money is wasted every year by Medicare in fraud than the combined profits of the 10 largest private health insurance companies because govt has no incentive to control costs. Much easier to rubber stamp pay the bill without rocking the boat. And like every massive parasitic govt program, it’s going down in flames. Latest estimates from Medicare trustees say that Medicare will be bankrupt by 2016, and continue to limp along until complete insolvency in 2024.

    Two of my mom’s doctors told her that if Obamacare stands, and the associated cuts to Medicare reimbursements go forward as they were passed into law as part of Obamacare, they will no longer be able to treat Medicare patients because the paltry Medicare reimbursement is not enough. It’s a trainwreck waiting to happen. The fucked up liberal mentality that believes that ever-expanding govt programs are the solution, and these programs will be paid by the magical “someone else”, that mentality has caused more harm and suffering than any liberal would ever admit.

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  22. salinger

    It’s as simple as that.. and you made a nonsensical unsupported leap to claim THAT is the reason for publicly financed fire protection. Govt., unlike the insurance companies, has zero incentive to respond to fires.

    What is simple is assuming that I meant the (amusing) anecdote of firefighters fighting while a structure burnt was the scheme I was talking about. The scheme I was talking about was private insurance firefighters period. Why has THAT form of firefighting fallen mostly to the wayside? But then, you really knew that was my point didn’t you?

    One need only to click on your link and see how a pay to play plan can backfire. In your link the town in which the house was destroyed had no publicly supported fire department and therefor residents had to hire out the nearby town’s.

    Do you have any citation showing that massive growing numbers of elderly were going broke with medical bills at the time Medicare was enacted?

    The U.S. Department of Health, Education and Welfare issued a report in 1959 that said the elderly faced disproportionate risk of illness, yet had less means — mostly because of fixed incomes — to afford medical care.

    Here’s a 1963 follow up report.

    Quote from the summation: The cost of medical care is high for the aged, principally for those requiring hospital care. Many aged persons never recover from the economic effects of a single hospital episode. Unfortunately, the heaviest burden is likely to fall on those with the least resources.

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  23. Mook

    The scheme I was talking about was private insurance firefighters period. Why has THAT form of firefighting fallen mostly to the wayside? But then, you really knew that was my point didn’t you?

    You falsely assume that when govt takes over providing a service, whether it’s firefighting or providing Obama phones, or providing health care, that it does so because that’s what’s “best”. As if it evolved naturally to that point. A ton of things that used to be provided through hard work and private industry have “fallen to the wayside” in favor of big govt. Maybe govt. taking over firefighting seemed like a good idea at the time and now isn’t as attractive. With more advanced fire protection systems in place driven by private insurance companies, there are fewer big fires. But reversing power given to govt. is impossible even when it makes sense to do so. Because the city will tax you for the fire dept. and other services whether you like it or not, regardless whether or not the service provided is crap, and fire and police service is deteriorating, not improving, while their budgets have skyrocketed thanks to lavish pension benefits and wild spending.

    Thanks you for your link to the 1963 report, but nowhere could I find a definition for “how many” or a definition for “never recover” economically. In order to justify new massive govt programs and bureaucracies, they want to pull heartstrings and exaggerate the situation in order to justify govt. action. In the case of medicare and social security, the govt. promised a windfall of unearned benefits in exchange for burdening future generations and they jumped on that opportunity.. now people are forced to pay into these Medicare and SS programs over their working life, and instead of the govt. saving that money and putting it aside for the future as would be required in private industry, the govt. instead spent it all and then some, and now the entire Medicare system is about to default as a result and Social security isn’t in much better shape, being further drained by bogus SSDI claims where able-bodied people are scamming the system for disability payments. Because that’s the kind of a disastrous result you get with any massive govt. program.. Are you unfazed by the imminent collapse of these and other massive clusterfuck programs resulting from big govt.?

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