Think about your typical insurance system: Car insurance (accident), home insurance (earthquake, flood), other insurance (damage, theft). These typical insurance systems all operate very similarly:
- Most people pay a relatively affordable premium once or twice a year. In this case “affordable” means most people won’t go hungry because they have to pay their insurance premiums.
- There is a good chance that an “event” (accident, damage, theft) will never occur for most people. In the rare instances in which events occur repeatedly in certain areas (hurricanes, floods, wildfires), the insurance system breaks down; that is, people find it very difficult and/or costly to get insurance against that type of event.
- If an event does occur, the cost of repair is relatively affordable for most people. The cost of repair is usually some fraction of the original price of the item being insured. Since, presumably, people can afford to buy the item originally, they can generally afford to pay some fraction of that price to repair it.
Does health insurance fit into this scheme? Surely not.
- Health insurance premiums can easily eat up a significant portion of one’s monthly income.
- In contrast to insurance systems for “normal” things, there is a very good chance that a “health event” will occur at least once in a person’s life.
- Again, in contrast to insurance systems for “normal” things, there is a good chance that if a health event does occur, it will be unaffordable.
The health insurance system in its current state is not really an insurance system, but rather a payment plan. And the reason the system is breaking down is that many (most?) people receive healthcare treatments that they never would be able to afford if they had to pay for it themselves out of pocket.
The problems with our healthcare system cannot and will not be resolved unless or until two issues are resolved:
1. Should people be responsible for the costs of their own healthcare?
Chronic illnesses account for a significant portion of healthcare costs, and most chronic conditions can be traced back to one’s genes. So this issue boils down to whether or not people should be held accountable for having bad genes. If the answer is yes, then the free markets should be able to handle the healthcare system. If people should not be responsible for bad genes, then the free markets break down, and the government must intervene.
Acute illnesses also account for a significant portion of healthcare costs. But in this case, whether people pay for their own healthcare or not, they can, and should, be encouraged to take preventative health and safety measures to help decrease the chance they will suffer a chronic event.
2. How much medical care are people entitled to?
Most people would agree that everyone should be given (subsidized) access to treatment for the flu, for broken bones, and for other minor injuries. But should everyone be entitled to a CAT scan or MRI upon demand? Coronary by-pass surgery? Indefinite life support? If people should be entitled to treatment for minor injuries and illnesses but not major (however you define “major”) medical treatment, then the free markets should be able to handle the healthcare system. If people should be entitled to more expensive medical care, then the free markets break down, and the government must intervene.