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06/26/17

Iowa Hurricane Insurance

We are in a series exploring the idea of a single payer healthcare system.  Click here to find the prior posts.

Too many bumper stickers on a car is the old school equivalent of oversharing on Facebook.  The guy in front of me the other day had the problem, including the old classic, ‘If you are not a liberal in your 20’s, you have no heart.  If you are not a conservative by the time you are 30, you have no brain.’  I am sure to media types he represents their imagined Alt-Right profile, someone proudly proclaiming a lack of heart as a sign of maturation.

For sure, there is a heart-based argument for a single-payer system, one that starts and ends with access to health insurance being a universal right.  Those coming from this position see this as a settled moral issue and any discussion of how to pay for it just confirms you are a Tin Man in need of a heart.

I am not dismissing that debate, but today, let’s consider the economic arguments for a single payer system. There are basically three.

The first we’ve already discussed – the idea that if we just stripped out the profits of the various players that would lower the overall cost.  No need to rehash why that is a dumb idea (if I had an editor, that would probably have been revised to a nicer word).

The second is the negotiating power of the government to simply set rates at a lower level.  Medicare and Medicaid, both generally cheaper on a ‘per whatever’ basis than commercial insurance, so just do this across the board.  Again, we’ve noted the negative consequences to this approach.

The third argument is the strongest and it takes us back to the big idea of insurance in general.  When we buy any type of insurance, we pay a manageable premium in order to offload the burden of having to deal with the unmanageable costs were something bad to happen to us. 

Central to the insurance model is the size and diversity of the pool.  The bigger it is, the easier it is to absorb and spread the risk. And it really helps if the pool has a bunch of people paying premiums who are not likely to suffer any losses. 

For example, if we could get a lot of people in the upper Midwest to buy hurricane insurance, we could really drive down premiums for people in Florida.

But that presumes a high level of stupidity among buyers will little risk of loss.

Which is what Obamacare presumed by requiring young, healthy people to buy on the exchange so the pool would be big and diverse.  But not enough people are that stupid, so the pool is skewed and the math doesn’t work and the thing is failing.

Ah, a single payer system solves the problem.  Everyone HAS TO go into the pool, so it is as absolutely big and diverse as possible.  

There, on a Post-It note, are the three essential economic arguments for a single payer system.

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ALN

Tim Coan, ALN’s CEO, writes an insightful and witty blog three times a week about a variety of topics relevant to independent physician practices.

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