Friday, October 28, 2011

Insuring Predictable Events Predictably Increases Cost of Healthcare

There's a very simple reason why America's healthcare costs continue to soar:  TOO MUCH INSURANCE.

Insurance is meant to protect us from the cost of UNEXPECTED occurrences like getting cancer, breaking an arm or getting hit by a car.  Society insures things that don't happen to everyone--unexpected occurrences--so that their cost is reduced for the person who is actually affected.  But is death from old age unexpected?  Of course not, yet an extraordinarily large portion of the nation's healthcare expense occurs in the very short time period immediately before that point.  Why?  Because insurance enables us to use other people's money to pay for it!  The trouble is, those other people are doing the same thing!  My question to you is, how much would you spend of your own money for an extra week of Grandma's time?  Or better yet, how much would Grandma want you to spend?  I'm guessing that you would spend more than Grandma but that you wouldn't spend your family's last cent.  Insurance throws that question out the window:  you spend all of my money and I spend all of yours, and together we go bankrupt while insurance company executives buy vacation homes.

Similarly, imagine how much an oil change for your car would cost if it were covered by insurance.   Seven layers of bureaucrats (exaggeration) would have to be hired to manage the paperwork!  The same analysis applies when we pay for our annual physical or dental cleaning--which are entirely predictable--with insurance.  Why would we do something so stupid?  Because most of us get our insurance from our employers, who are able to deduct the cost from their tax bill while we as individuals cannot.  What this does is encourage us to get as all-encompassing a policy from our employer--like one that covers annual checkups--as possible.  Of course that distorts the cost of a doctor's visit since half the people they employ are in collections!

Both death from old age and annual checkups are entirely PREDICTABLE events and insuring them PREDICTABLY results in higher medical costs and insurance company profits.  The answer to rising medical costs is not to insure MORE events--it's to insure LESS!  Doing so also might encourage a little more personal responsibility--like better eating, more exercise and weight loss.  Of course, why do those things when--as things are currently--someone else picks up the tab?


  1. Oil changes are already covered under insurance (warranty) for many people and there is no 7 layers of bureaucracy or increased cost.

  2. Most new car warranties do not cover oil changes. If your warranty does then you paid for it in the price of the car. And don't you think that your dealer and the automobile company who manufactured the car have personnel employed to handle warranty claims?

  3. When the government mandates that certain things be covered by insurers (like mammogranms or birth control or IVF) they never say and you (Aetna, Blue Cross, United etc) must cover these items and you cannot raise the premiums. They just say such and such item must be covered. My insurer recently sent out a notice that they "applied" to the state for a 24% increase to cover the increased cost of health care. Duh. If they legally HAVE TO cover "maintenance" items like pap smears (the health care equivalent of an oil change) then they have to charge for it and if they have to charge for it everyone's costs go up.