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!