Posner's Great Mystery

That's why I've always been confused about the term "health insurance" to cover predictable, non-catastrophic things.

It seems like an abuse of the word "insurance." It would be like your car insurance covering your gas. Whenever you pay someone to "insure" against things that you can predict, you are paying too much by definition -- because you are adding a 3rd party and they need their cut.

"Health insurance" should always be defined as "major medical" or "catastrophic coverage" -- i.e. the relatively low-risk things that, if they occur, you could not afford. Why on earth would you insure against "events" that are A) predictable, like needing vaccinations or regular checkups or B) things you can afford to pay for?

http://www.angryblog.org/?p=2098

Not much of a mystery; the advantages of tax free income (health insurance) and the service insurance companies offer as negotiators of price (what they're willing to pay the physicians), in which they're specialists.

Why should negotiations of price be necessary? In every other field of consumer commerce there is simply a listed price which you simply choose to pay, or not. Even in non-insured domains of health care this is true. I can shop around for dentistry, or eyeglasses, or laser eye surgery, or veterinary care just as easily as I can shop around for a stereo or a gallon of milk.

You shouldn't forget that low cost preventative care is a near perfect substitute for some forms of high cost emergency care.

It's cheaper for insurance companies to bundle than it is to pay for only the more expensive option.

Granite26:

You shouldn't forget that low cost preventative care is a near perfect substitute for some forms of high cost emergency care.

That may be true for some things, but for a lot of chronic conditions, the healthcare industry would lose money. For example, if there is a low-cost test to detect a condition that will kill you unless you get on dialysis, if we are focused merely on costs to the healthcare industry, we should never perform that test and let the poor guy die.

It may be that detecting this condition is better for society as a whole, (because the patient remains alive and able to contribute) but doctors and insurance companies are still going to have higher costs, and pundits will write columns about it.

Why is third party payment a problem in health insurance but not car insurance?

Well it depends on what type of car insurance you're talking about.

If you mean direct claims by an insured for property damage, usually under collision or comprehensive coverages on his own policy, then insurers do usually pay the repair shops directly and not the insured. And this has all the same problems as the medical industry in miniature.

If you mean personal injury claims against the insurance of the other driver, then payments are almost never made to anyone but the victim or his attorney. Typically, the only payments made to anyone else are made to medicare or health insurers to satisfy the liens they have asserted against the recovery.

I am talking about the direct payments for car repair. You say it has all the same problems in miniature, are you claiming the costs of car repair has gone up at the same rate as medical care? Or at least significantly higher than the general inflation rate? What specific problems has it caused in the car repair industry? Thanks!

For some reason my last comment hasn't shown up so it may appear I repeated myself. I was referring to the direct payments to car repair shops. What specific problems do you think it causes in the repair shop industry?

The blog post quoted Posner’s surprise anyone would buy anything other than major medical. Posner’s point was that current medical coverage is largely dollar swapping, not risk transfer.

The succinct reply is that when the government does it, it is not FOR risk transfer, but rather to hide evil doings deep in the dollar swapping.

(Original “fringe benefits” in the 1940s to circumvent pay caps and benefit unions, the current Obamacare to hide multiple transfers and subsidies — young to old and citizens to the “undocumented.”)