Monday, February 28, 2011

Health Insurance

Discussion of individual health insurance (with or wihtout pre-existing medical conditions) often overlooks the point that a pay as you go system is inherently expensive here in the United States. Consider:

Why did we even need insurance? First, we wanted to know that, if we had a medical catastrophe, we would not exhaust our savings. Second, uninsured patients are billed more than the rates that insurers negotiate with doctors and hospitals, and we wanted to pay those lower rates. The difference is significant: my recent M.R.I. cost $1,300 at the “retail” rate, while the rate negotiated by the insurance company was $700.

Obviously standard market mechanisms are not going to be able to kick in when the only way to get affordable care is to be part of a pooled insurance plan. And, with rate differentials this high, no sane person will exit the health insurance market. So the whole idea of free market heakth care is a bit of a distraction: our system is designed for people who have insurance.

[Not to mention the impact of policies that can be rescinded for good faith errors; these factors make the market opaque and resistant to market forces]

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