Tuesday, October 6, 2009

Insurance: Hedging yourself

CARPE DIEM: Thomas Sowell's "Single Payer Plan": HIMSELF!

My Perspective:

It wasn't even until the 1940's and WWII that employers started to subsidize healthcare for their employees. It was done because of government mandated salary caps so employers needed to find other incentives to pull the best and brightest to their company. Before that, most people either had their own private insurance (which would not be lost when they changed jobs) or no insurance at all. They put some money aside for medical costs they knew they would need such as yearly check ups and physicals, and the smart ones had a savings account for sever problems that were unforeseen. Others picked up very cheap catastrophic insurance to cover those unforeseen problems. That is the point of insurance, it is to cover the things that you aren't sure if they are going to happen. Medical Insurance is essentially you betting the insurer that the cancer will come sooner than not. If you are right you have cancer which sucks, but at least you suckered the insurer into paying for it after only paying them a few years (or months) worth of installments (definitely not enough to cover the costs of your care). That is why most insurers don't like to cover people with pre-existing conditions, for they are betting on health problems and have weighted dice, the insurers would be fools to cover that. It would be the same as if you were at a craps table and told the casino you were going to use your own dice which are weighted. they would kick you out in a heartbeat.

If people realized this then they would just get catastrophic insurance and save up to cover their yearly health costs. They would probably save money doing it that way too since they are not paying premiums for coverage they do not need and they know they are not going to use. It is akin to car insurance, which is used to cover only accidents and such, not oil changes, new tires or a yearly tune up.
Moral of the story...Government caused the problem by placing salary caps yet letting employers entice employees with tax free subsidized health care which led to a society that has a distorted view of the true costs of healthcare, and now government is trying to lower those costs when really they have no such power. All government can do is lower the price, which they shouldn't do for it also distorts the market and leads to situations like that of Venezuala, where the government has made the price of beef affordable for all ($2 per lbs) but since the true cost to produce it is $3 a lbs there is no beef on the shelves. Just imagine what will happen when government tries to lower the price of healthcare to "FREE" for all, when it really costs a decent sum more than that...to borrow a phrase from the trusted 8 Ball "Outlook not so good."

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