• A few quick things that continue to annoy me

    Yeah, it’s Friday and I’m surly. But I’ve spent a week getting harassed, and I’m sorta done. So here are a few statements that are at the top of my list:

    1) “Why should I have to pay for someone else’s healthcare?” – Seriously, this one baffles me. All insurance is paying for someone else’s health care. Either your health care is being paid for by someone else, or you are paying for someone else’s care. Insurance is just transferring money to those who need it (the sick) from those who don’t (the healthy).

    2) “I shouldn’t have to cover someone else’s bills if they do [INSERT SOME ACTIVITY HERE].” – The problem I have with this one is that it sounds great, but it’s absolutely, positively impossible to implement. First, no one can agree on what [INSERT SOME ACTIVITY HERE] is. For some, it’s smoking. For others, it’s riding on a motorcycle. For others, it’s eating too much. For others, it’s having a vagina.  Regardless, if everyone got to design their ideal plan, they’d all be in risk pools by themselves.

    Moreover, how would you monitor this? Would you submit to observation to make sure you never did anything unhealthy? Would you really allow a company to do that to you? Would you allow the government? I think not. Until you can describe to me how your system of not paying for people who do [INSERT SOME ACTIVITY HERE], then please stop telling me this.

    3) “Just because you love Obama, you refuse to acknowledge that it’s a failure!” – So many things wrong here. First of all, I support an outcome, not a law (or a politician). Given a choice between two options, policy wise, I will choose one. I think the ACA is better than the status quo ante. But I don’t think it’s perfect, and I have said so many, many times here. There are lots of things I don’t like about it.

    I also have said – clearly – that the rollout last month was a disaster. But I don’t think that means the whole thing is a mistake or that it’s doomed to fail. Pointing out a problem is not equal to saying an idea was totally wrong. Remember, Medicaid did not achieve full adoption until the mid 1980’s, but today it’s so American-as-apple-pie that threatening to take it away was ruled coercive by the Supreme Court. So chill. These things take a while to settle out.

    Moreover, I still maintain that wonks who support ACA-like reform are way, way, way more willing to point out its failures than those who oppose it are willing to point out its successes. It’s not balanced.

    I reserve the right to add more to this list later.


    • People, Americans in particular, aren’t good at assessing risk. Heck, even some heads of the Federal Reserve get at F at assessing risk. Only the healthy would complain about ACA, for it is designed to protect the sick and injured. And they complain because they don’t believe they will ever be sick or injured, and believing as they do that the sick and injured are responsible for their plight. But even if they did suffer sickness or injury, they are confident their employer would never fire them and lose the insurance attached to their employment. Like I said, people aren’t good at assessing risk.

    • You sound like you need a hug


      I’ll send you some Halloween candy as soon as I can fit it in the USB port.

    • I work in the insurance industry, and your annoyance number one annoys me. The problem I have is that you conflate risk insurance with social insurance.

      Risk insurance is a contract where, for a consideration, the risk of financial loss, from a peril, is transferred to another party. Risk insurance has nothing to do with “sharing risks” or “sharing costs”. The risk is merely transferred. It can be transferred to one person or a group of people. Fundamentally, it is nothing more than a bet. The transferrees are betting the transferrer will not experience a loss; or at least a loss in excess of the premiums collected less expenses. In order for risk insurance to remain profitable it must be non-coercive for both the transferrer and transferree parties. So, from a risk insurance standpoint, you don’t pay for someone else’s healthcare when you pay your premium.

      On the other hand, social insurance is about sharing the costs of a set of benefits which a group of people want to partake. All parties entitled to a benefit must participate by paying or they do not receive the benefit. The benefits cannot be properly funded if all parties aren’t forced to pay. There is no moral hazard in social insurance. There can be fraud when people attempt to claim more benefit than they are entitled to.

      Health insurance can be pure risk insurance and health insurance can also be social insurance as it is with medicare. The ACA is neither risk insurance nor social insurance but an aborted amalgam of both.

      Your statement applies in the context of social insurance only. To restate your peeve, you should say, “Why should I have to pay for social insurance?” Your reply, though now technically correct, is still logically incorrect because it begs the question why should we have social insurance in the first place?

      • Um, no. Even with private insurance, those who are healthy pay more than they use and the money goes to sick people. Sure, some goes to overhead and profits, but that’s still how it works.

        You can call it a bet, but it’s not if you have a chronic illness. You’re sure you’re going to get more benefit that you pay, and those who are healthy are paying for you.

        • …at which point, it’s no longer insurance or a bet, but an attempt to socialize the sick individual’s costs to the larger group.

          I understand many of your frustrations, but this is one that isn’t understandable. It’s simple: if I voluntarily associate with a group of people who all agree to socialize one another’s costs (past, present, an future), that is a lovely collective action that makes us all better off.

          If I am involuntarily forced into a pool of people who have the same arrangement for costs, but all of us are being forced into the deal by some outside power, then this is neither lovely nor collective nor are we all better off. If you wish to be in a socialization pool, there is nothing stopping you from voluntarily associating with other people who feel as you do. If your wishes for such a pool cannot be realized without using force to compel others to join it against their wishes, then that is an argument for why your wishes are unworthy, not why you need to be granted the power of compulsion.

        • I stand by my prior statements. I provide the standard textbook definition of risk insurance. Underwriters and actuaries in risk insurance never refer to sharing costs. Only social insurance refers to sharing costs.

          As a matter of argument is certainly expedient to conflate risk insurance with social insurance. By conflating them, one can neatly avoid proving whether social insurance is desired by the majority, whether coercion is justifiable or even if it is expedient compared to other options. These are simply taken as given and you are off and running.

          • Stand by them all you like. Private insurance for someone with a chronic disease is a guaranteed win for them.

            • In pure risk environment, a person with a chronic illness is usually un-insurable. I note that you have altered terms and not defined them. Twice you refer to private insurance. I make no reference to private insurance, however that is defined. I speak only or pure risk vs social insurance.

          • These are all interesting intellectual arguments. Whether or not they reflect the real world, in which we live in a diverse society, is another issue.

            In a libertarian paradise, we’re all held responsible for our decisions and circumstances, positive or negative. If I had the forethought to purchase insurance and I get sick or injured, I’m protected. If I chose not to purchase insurance or I can’t afford it and I get sick or injured, too bad for me.

            But this world then assumes that those who make bad decisions, or are unlucky, or in unfortunate circumstances, or poor, will suffer the full consequences. In the extreme case, this means dying outside the entrance to the hospital because they can’t afford life saving care.

            So, out of curiosity, what’s your solution to this dilemma? If we decide not to let the injured person die at the threshold, who pays for their care? How do we do this in a way that is not “coercive”?

            • There’s no way to address the problem of the poor uninsured or the uninsurable without coercion. For the poor, transfer payments; for the uninsurable, high risk pools; and we all foot the bill collectively via taxation. Everyone else pays their own freight.

            • Sheldon Weisgrau (November 1st, 2013 at 18:06) writes, “If I had the forethought to purchase insurance and I get sick or injured, I’m protected.”

              Please forgive me for jumping into this somewhat arcane discussion about libertarian idealism versus societal necessity. I take exception to the formulation quoted just above.

              Even under an ACA policy, the insured is not protected when it comes to exclusions and disallows. Who here knows their family’s level of risk when it comes to these items?

              But at least the ACA protects us from bankruptcy due to exceeding lifetime limits. And it makes us free to shop for insurance among different providers, because we can no longer be held hostage to the one we had the first time we got sick.

              And also, the “Nanny State” Federal Government is now looking over our shoulder at all the policy choices. We’re all getting into the same boat. So all of us now are inspecting for leaks more carefully than we used to. That includes your Congressperson and mine. (Well, not mine: I live in Texas.)

              “I’m protected,” the gentleman said. No, not quite. But under ACA, quite a bit closer to it.

              (($: -)}

            • Exactly, an academic exercise.

              Right now, the uninsured get emergency care at hospitals (often called “free” care). This is paid for by the Gov’t (ie taxes), increases in hospital charges (everyone with insurance or who goes to the hospital). However, it’s invisible, so no one is looking at the subsidies or bleating about the unfairness.

              The problem with voluntary risk-sharing associations is that the sick can’t leave insurance and the healthy can. So, over time as people get sick (yes cancer happens), the costs rise and healthy people leave either because they move or get a better deal and new healthy people don’t join. As a group, the young can get a better deal, so ultimately, without regulations (restricting freedom of association) the young and healthy can always form a new risk pool, leaving an increasingly older and sicker behind.

              Without regulation (Gov’t intrusion in the market), no healthy 20 something would join a risk pool with 50 and 60 somethings, meaning they would be uninsurable or face very high costs.

              Or, the association kicks the sick people out, meaning it’s not much in the way of insurance.

            • Exactly.

              Thank you.

              Arguing for pure risk for something like this, in a civilized society, is nothing less than uncivilized.

            • Watermelon…, taking money from the lower income young families and giving it to those with more assets, higher income and no dependents is what one should be calling uncivilized.

        • Aaron:
          You make complete sense if risk is assessed on a year-by-year basis.
          If risk carries over on a multiple year basis, then the chronically sick do get more benefits than premiums paid in, but the low or no claimants can pay less than they get in benefits.
          The balance is made up from insurer reserves, which are “rented” by all policyholders.
          Don Levit

      • We should have social insurance, in this case to provide health care, because it is the moral and most logical thing to do. If we fail to create a comprehensive system (PPACA is not such a system) we are left with uninsured people who require care anyway in our Emergency Rooms. That is a terrible costly, inefficient way to provide care and we have very poor overall health statistics as a result. We accept responsibility for each other in this highly inefficient way, but not by taking the bull by the horns and doing the right thing. The point surely is to see to it that all of us receive the health care we need, not health insurance but health care.

        What we should logically do is create a single payer system, i.e. Medicare for all, so that Uncle Sam collects taxes from all of us so that our health care, provided by our present private delivery system, is paid for by the government. In the process we can do away with profit seeking health insurance companies and the vast sums they extract from us.

        What the PPACA gives us is a Rube Goldberg construction that will, at the end of the day, leave literally tens of millions with no secure, covered health care and will cost much more than we need pay.

        • ” in our Emergency Rooms. That is a terrible costly, inefficient way to provide care…”

          One has to ask themselves why if Medicaid patients end up in the ER so frequently are we increasing the number on Medicaid insurance? Why is there so much superficiality involved in looking at what happens in the healthcare sector?

          “What we should logically do is create a single payer system, i.e. Medicare for all…”

          We have had almost a half a decade to get Medicare right. Why don’t we fix Medicare before placing the entire nation on a program that has failed in so many ways?


        Jardinero1 (11/1/2013 at 14:50) writes, “Risk insurance has nothing to do with ‘sharing risks’ or ‘sharing costs….Fundamentally, it is nothing more than a bet.”

        Part of our challenges come from looking at insurance as essentially a bet.

        If the comparison were apt, either more insurance companies would go broke, or more people would win at the race track.

        The basis of most insurance (at least, of personal insurance: auto, homeowners, health, life, etc.) is that a certain number of a certain group will experience unsustainable economic damage. Since we don’t know which of us it will be, but we can collectively manage the damage by pooling our resources, one set of “winners” gets the big-dollar payoffs and the other set of “winners” gets to keep their stuff (car, home, health, life)

        In this situation, the insurance company is not the “bookie.” The insurance company’s role is just to manage the pooled resources. It makes its money by correctly managing the relationships among actuarial data and premiums and disbursements.*

        How can insurance be a “bet,” if everybody wins?

        This discussion here, in relation to Dr. Carroll’s Friday Frustration Post, is confounded by these tangentially related topics, of “bets” and of “wealth redistribution,” etc.

        As a society, we all have to deal with the issue of the total of our healthcare. If we decide to go back to letting—to forcing—uninsured people die on the streets, someone still has to pay to clean up the bodies. Our American individualistic streak is at odds with the reality of living in a society.

        Sure, the Left is infamously “entitled” to living off the kindness of collective strangers. But the Right is also “entitled,” to live without having to bear any cost or inconvenience of collective strangers.

        As long as we keep having this childish debate based on our opposing senses of “entitlement”—

        Well, now we have Obamacare, which moves the challenge forward. Either it will work (and things will be better) or it won’t work, and we’ll finally get some form of the universal healthcare coverage that about half of us now want.

        (($; -)}
        *Okay, okay: if the insurance company “bookie” has to pay out too much, it’s in trouble. But at least it has bankruptcy protection, which offloads some of its losses.

    • Thank you, hearing people say #1 and #2 have been making me angry as well.

      I’ve heard it a lot in news stories where you see men, or folks past childbearing age, complaining about having to pay for maternity coverage. Like a 50’s-ish couple on Fox News smugly stating that they are done having kids. Well, I’m sure they weren’t complaining about other people paying for their pregnancy and childbirth expenses 20 years ago.

      • Well, in the past, people could choose whether or not to include maternity coverage in their insurance policy. Which means the smug Fox News couple who chose such coverage in the past paid EXTRA for it. The only “other people” paying for the smug couple’s childbirth expenses back then were other couples who also thought they might need maternity coverage, which was appropriate. Just like smokers who pay higher rates so that as a group they pay the additional expenses due to their smoking.

        • What planet were you living and working on? If you got employer-based insurance – which the vast majority of the currently insured do – you can’t choose what procedures and conditions your insurance will cover. The HR dept of your employer determines that. You get to choose whether to have insurance or not, and whether to try to get another job that has an insurance policy more to your liking. That’s about the extent of your “choosing” to have maternity coverage or not.

          I love all this whining about covering maternity care. It’s like how old people move to Florida and then refuse to pay for new schools to be built, arguing that their kids are grown up so they owe nothing to the people in the service industries (or their children) that support them now. As a young gay man who gladly pays school district taxes and health premiums that are higher than necessary for my own personal health expenses because all these young women in my office keep giving birth and old people keeping getting cancers and heart conditions… I’m just astounded by the selfishness of these old people who “got theirs” and now want to “be left alone” from taxation and govt inference in their lives.

      • That’s exactly what I thought when I saw that.
        I was recently mentioning this same thought on another blog…

        I’ll edit my rant and repost it here…

        Some years back, I left one job & kept the dental on COBRA even while I had started another job with health insurance benefits. I was allowed to keep the dental on COBRA for the full 18 months because my new job didn’t offer any dental coverage. It was well worth the $22/month I paid, when I added everything up for that time period that I spent, compared to what I would’ve spent.

        Now of course I understand how this works. Clearly the insurance company probably did not make out very well on me. But if they were going to make out on me, I probably wouldn’t have kept the dental on COBRA in the first place. The idea was, of course, that my former co-workers, many who barely used their dental plans provided by the employer, were subsidizing my dental care.

        Did I feel bad about that? I think some people think I should’ve felt bad about that.

        But the fact is my former co-workers were largely much younger than me. At that company I left, I was the 2nd oldest person in the whole place at the time, and I was only in my 30s. I figure someday those people would be older, and they would be the ones benefiting from some young whippersnapper being on their company’s dental plan but not using it as much as them. It’s just a fact of life with these things.

        But of course, insurance companies see it as it’s their job to make sure they make as much money as they can, and paying out as little as they can.
        Without laws like COBRA, or requirements that employer plans can’t refuse to cover certain employees… The insurance companies would surely just never sell insurance to people who would actually need it or use it. Seems like a no brainer if your goal is to make money.

        Now I would’ve thought that the purpose of the health care industry, including health insurance companies, would be to facilitate the providing of health care.

        But clearly some people don’t see it that way. They believe the purpose of the health care industry is to make profit. Regardless of whether any health care is actually provided or not.
        That it’s just another game where people can “get a piece of the action”, on the wave of a desired & needed service.

    • I like how the most recent winner of the Nobel prize in economics views risk management: in a perfect world, all risks would be shared, so that the per capita cost would be nominal. To him, risk management is about risk sharing (i.e., the dispersion of risk), and “financial engineering” (which is just the flip side of “insurance”) is about the enhancement of risk sharing in order to promote greater investment which increases economic growth and well-being. That’s why somebody like him wins the Nobel prize.

    • Most other nations believe that an individual should NOT be allowed to gamble on their health.

      If they guess wrong and have bought no insurance or the wrong kind, then they suffer and their families suffer and they are forced to free-ride on society.

      Americans have a stronger streak of individualism than most other nations. (cf the writing of Joseph White, especially in his book Competing Solutions.

      The Republicans (at best) are defending the right to gamble on your health. Those who have had cheap insurance and have been ‘winning’ the bet of course take their side.

      There is no perfect compromise between paternalism and gambling.
      Personally I would favor a special income tax to support safety net hospitals, i.e. find a way to support basic care without insurance companies.

      Bob Hertz, The Health Care Crusade

      • Bob writes: “individual should NOT be allowed to gamble on their health.”

        I guess according to you skydiving is out as is mountain climbing. Let’s end NASCAR, football and boxing. Immediately all people overweight should have their diets controlled by the state. Alcohol should be banned. Bicycle riding should only be done in designated parks and skateboards burned. Close Colorado and ban skiing along with skateboarding. All meats should be cooked well done and barbecue’s banned.

        • But here is the rub: there is no gamble unless and until you and everyone else agrees that if you do not purchase insurance and/or cannot pay through other means, you get no ER services or any other medical care. Period. End of sentence. That means if you have saved up to 100k and suddenly you get cancer and one-three months of treatment blows through your savings- too bad. Die. Unless you can pay.

          Until we all agree to do that, it is all smoke when people argue that s/he should be able to gamble on their health. Note to you: you are not gambling if you know someone else is picking up the tab. You have nothing to lose; hence no gamble. Unless you agree to die unless you can pay you are a fraud.

          • 1) The major reason behind traditional insurance of any type is to protect assets.

            Those without assets or significant income need to be subsidized for care or insurance so it is a wash except that insuring them costs more than just caring for them.

            Thus if one removes those that require subsidies one finds that the remainder with assets or income can be sued and forced to pay MORE than the going rate that hospitals (and other providers) receive from the insurers (That excludes those that fall in-between the two groups.).

            The insured group frequently does not pay their deductibles, co pays or things that their insurer doesn’t cover so they default on their bills as well. Many people are so called “underinsured” and that includes those that are on Medicare with Medigap insurance. They frequently don’t pay money owed either.

            Thus if one were to compare the actual losses (assuming they are not gains) that society faces when not paid by those uninsured that do not need government subsidization one finds those losses to be relatively insignificant.

            2) ERISA covers those that urgently or emergently need hospital care. Medicaid covers those without resources. High risk insurance plans in many states cover those that cannot otherwise be insured.

            3) Health insurance does not guarantee care or survival from cancer, etc. Take note of the suits brought against the HMO’s and their failure to treat medically necessary disease.

    • ” Private insurance for someone with a chronic disease is a guaranteed win for them.”

      Depends on the premium. If they join a risk pool of others with chronic illness and similar expected annual health expenditures, then their premium should reflect the estimated cost of insuring the pool, plus administrative expenses and profit. For someone with high estimated expenses the premium might be very high. The private insurance would only be a guaranteed win if someone forces the insurer to underprice the policy.

      • Do you people live in the real world? Work for a large company. The premium is based on the pool of employees. The sicker people win. The healthier people lose.

        • Clearly correct. But how does one know in advance into which group he will fall?

        • Part of the reason for that and the high cost of healthcare is that people are forced due to the tax laws to get third party insurance from their employers. Why individual insurance should act as a way to redistribute money is something I do not understand.


            Emily (November 1st, 2013 at 23:25) writes, “…Why individual insurance should act as a way to redistribute money is something I do not understand.”

            For some reason, many Americans believe that, since we can’t as a nation afford to cover healthcare defense for all, we should add to the insurmountable expense by inserting for-profit middlemen into the system, and then trust them to pack “exclusions” and “disallows” into our insurance policies, so that all Americans (outside of the VA and Medicare systems) remain at economic risk from the kinds of medical disasters that healthcare insurance is bought to protect us against in the first place.

            I’m sorry: what was the question?

            (($; -)}

            P.S.: While in most economic life, it pays to read the small print, when it comes to your healthcare-insurance policy, not so much.


            • Gozo, I understand you have difficulty with the question as you don’t have an answer. You realize of course that middlemen administer the Medicare program, don’t you? You did see that 60 Minute show regarding fraud in the Medicare program, didn’t you? You recognize that the prices of most items fall with time and are constrained by competition, don’t you? You realize that the government seems to work with outdated technology don’t you? Or have you not seen the problems with Healthcare.cov, haven’t you? Did you ever wonder why the prices of computer power keeps falling? Maybe not.

              There is no need to read the fine print because you are not generally the one purchasing your insurance and that is where the problem starts unless of course you know that third party payer was created by government tax policy. Third party payer is a big problem in health care.

              [explanation: Purchasing one’s own insurance is not third party. Third party is when a third party purchases the health insurance for you.]

            • Emily (11/4/2013 at 13:31) writes, “Gozo, I understand you have difficulty with the question as you don’t have an answer….”

              The way this site is formatted, I have no way to reply directly to Emily’s comment about my putative difficulty answering a question. The only difficulty I’m aware of is the complexity of information needed to respond to questions and comments fully, in relation to the limitations of space. (As it is, I know that I always go on too long in my efforts to explicate these things. I’m amazed that anybody reads my posts, and I greatly appreciate those who do!)

              In my initial response to Emily, I spoke to an assumptive aspect of her post. The literal content of her post rests on flawed assumptions. Let me try again, more-specifically:

              First, we are not forced to get third-party insurance through employers. I have not done this over thirty-plus years of marriage, even when offered the opportunity.

              Second, the function of insurance (as talked about elsewhere in this discussion) has nothing to do with wealth-redistribution. Forms of personal insurance serve to balance material possessions (if one can include health as a “possession”) with economic replacement value: one set of “winners” gets the dollar payoffs, while the other set of “winners” gets to keep their stuff.

              I regret any part I played in the confusion.

              (($; -)}

            • “The way this site is formatted”

              We all recognize the burdens of the site format that you mention. Since everyone is faced with it you don’t have any more of a burden in responding than anyone else.

              1) Gozo, you are correct, we are not literally forced to purchase insurance that is third party, but the vast majority are heavily incentivized to do so and like I said in the reply to which you are responding third party payer has increased the cost of healthcare.

              2) We agree again. The function of insurance is not to redistribute wealth even though some believe that is how insurance should be utilized.

              It seems that we have agreement on these points, but somehow I have a feeling that you are still having difficulty responding to one that holds the opinions that I represent.


              Emily (November 5th, 2013 at 20:31) writes, “We all recognize the burdens of the site format that you mention. Since everyone is faced with it you don’t have any more of a burden in responding than anyone else….Gozo, you are correct, we are not literally forced to purchase insurance that is third party, but the vast majority are heavily incentivized to do so and like I said in the reply to which you are responding third party payer has increased the cost of healthcare….We agree again. The function of insurance is not to redistribute wealth even though some believe that is how insurance should be utilized….It seems that we have agreement on these points, but somehow I have a feeling that you are still having difficulty responding to one that holds the opinions that I represent.”

              Well, all right then. It’s been a great discussion here. Perhaps we’ll all meet again at some other discussion on this important topic of American individualism and well-being and healthcare.

              (($; -)}

            • Gozo writes: “Perhaps we’ll all meet again at some other discussion on this important topic of American individualism…”

              Yes, that is a possibility, but somehow I get the impression that you find individualism a bit disconcerting. I personally was never a big fan of GroupThink, but for some I believe it is in vogue. Maybe it is because you drink tea exactly in the fashion of the master Nan-in and his disciples without concern as to whether or not you like it.

              I like coffee. The master Nan-in can spill all the tea he wants because it has no value to me and has no value to anyone else after it is spilt into the dirt floor. I on the other hand will share my coffee because that is my choice as an individual.

    • “1) “Why should I have to pay for someone else’s healthcare?””

      The question IMO is a bit off base. Maybe the question should be why should I be forced to buy insurance or why shouldn’t my purchase of insurance and the type of insurance be between me and the insurer (the buyer and the seller _Adam Smith)?

    • Note to Emily (and others):

      I must refine my statement on how much individuals can be allowed to gamble.

      Society does allow me to gamble on how much homeowner’s insurance to buy in case of fire.

      But society does not allow me to shirk the taxes I must pay to support the local fire department.

      Society does allow me not to buy life insurance even if I have small children.

      Society does not allow me to avoid the Social Security taxes that pay a monthly allowance for my children if I die before they are age 18

      America fluctuates between social provision and private insurance in many areas. Health care is one of our worst areas of confusion.

      The ACA is eventually going to make all of us buy health insurance.
      It would have been cheaper and faster to make all of us pay taxes to support public hospitals and sliding scale clinics.

      • Bob, you are wrong.

        You choose the community you wish to live in and that determines what type of taxes you must pay for fire insurance. There are communities where you need not pay taxes for fire and others where you pay, but the payment is based upon your risk. Got that? Based upon your individual risk.

        I won’t go on to demonstrate where your other arguments fail for I think the fire insurance example you always bring up has been once again demonstrated to be a faulty example. The rest are more of the same.

        • Are you asserting that this is a good situation?


          • It is neither good nor bad. It depends upon what one’s objective is. If the objective is that people get the best value for their dollar and have money to spend on things they want then perhaps it is good even though one that might have been a slacker suffered. Many more people were likely left with more than the slacker lost.

            In this case one person got badly stung, but if the firefighters had acted under this type of case all the others would have had to pay with higher premiums. Maybe that higher premium let one person wait before buying a new set of tires. Maybe that person had an accident new tires would have prevented and thus several lives were lost. These things are trade offs. Also in many cases where the premiums do not meet the sums of money necessary to pay for a fire department others watch their homes burn down because some refuse to contribute to the pool. I have a lot more sympathy for the one that was willing to participate and loses his home because others hoped to be covered without paying than with the one that willfully decided not to pay.

            What we really need to know is whether or not the opt out was by error or thought out by the person involved. When things of this nature exist I believe an opt out ought to be carefully and repeatedly documented so that there is no doubt that the individual was aware and non caring about others.

    • Most insurance is priced based on risk. Your auto insuranc price reflects an estimate of the cost if covering you and others of similar risk. If you drive a cheap car, have a short commute, live in a low risk area, and have a spotless record, then your premium will be low. Someone with a bad record, in a high cost area will pay much more. No need for federally mandated cross subsidies, Congressionally directed oilucy provisions, or federal tax penalties. Just market rate insurance.

      • Insurance does need to be priced on risk, particularly over the long run.
        If health is not being proved to determine the initial price, then long-run risk pricing is the other viable alternative.
        When viewing long-run pricing, why consider winners and losers?
        Everyone needs to be a winner, for any plan to be viable over the long run.
        Fully community rate everyone in the beginning.
        That becomes the highest premium the insurer can charge.
        Discounts for low claim filers can be provided yearly.
        Over 36 months, the discount can grow to 60%.
        Over 60 months, the discount can be 80%.
        Don Levit

        • Man, I see all kinds of perverse incentives with that when it comes to health care.

          What’s to say that some really nasty unfair things would happen in this scenario regarding rich or poor.
          The rich could get “low claims” status by paying out of pocket instead of filing claims, thereby paying less in premiums toward the risk pool.
          And then you might have poor people who really desperately need that discount for low claim filing, foregoing needed medical care altogether, until it’s so late that it winds up being more expensive.

          Sounds like that system would be harder to regulate than Obamacare or anything else.

    • Or life insurance.

      Do we need to equalize the cost of term policies across age and health status? Consider a 25 year old woman in perfect health and a 60 year old smoker, obese, hypertensive, diabetic man. If he could buy life insurance at all, the 60 y.o. guy would pay much more than 3 times the premium charged to the 25 yo woman. Should there be a federal cap on the relative cost of insurance? The young woman might never have a Y chromosome, and she may believe she will never smoke. Some day she will be old, and and she might well have some chronic health problems.

      A system that required her to subsidize life insurance for the 60 yo might pay off for her in decades to come. Do we need a federal law setting rates and terms for life insurance?


        dbh (November 3rd, 2013 at 19:10) asks, “…Do we need a federal law setting rates and terms for life insurance?

        What we need are Federal systems for those things that we cannot provide for ourselves individually. These include healthcare defense, military defense, and roads and courts and etc….

        Government is our collective authority to do these things collectively. As individual Americans, we mostly do not like this idea. But its necessity is clear to all of us. We just disagree on what constitutes such collective necessities. (Even that word, “collective,” makes our blood boil.)

        In terms of our private lives, healthcare is the one thing that we cannot generally afford to provide for our neighbors:

        When you lose your job—or your parents lose their lives—your friends and relations can provide all other necessities: shelter, food, clothing, transportation. The sole exception is healthcare.

        (($; -)}

        • Gozo, we pay for our own food, shelter and clothing. Why can’t most of us Americans that have adequate incomes pay for our own healthcare and health insurance? Remember we either pay for it on the front end or the back end through more taxes which makes the cost of health care and insurance that much more expensive. In fact it is government policy that accounts for a significant portion of unnecessary expenditures.

          Understand I am not saying that subsidies cannot be provided by government. What I am saying is that we should not interfere with the market place more than necessary.


            Emily (11/4/2013 at 13:23) asks, “Why can’t most of us…pay for our own healthcare and health insurance?…”

            I can think of three specific, valid conditions that answer your question. But the rest of the words surrounding your question convince me that you already have your own answer firmly in mind.

            A person is entitled to hold his or her opinions intact, no matter the strength of evidence to the contrary. I see little reason to attempt to alter your clear, strong opinions here, with information from my own.

            “The master Nan-in had a visitor who came to inquire about Zen. But instead of listening, the visitor kept talking about his own ideas.

            “After a while, Nan-in served tea. He poured tea into his visitor’s cup until it was full, then he kept on pouring.

            “Finally the visitor could not restrain himself. ‘Don’t you see it’s full?” he said. “You can’t get any more in!’

            “‘Just so,’ replied Nan-in, stopping at last. ‘And like this cup, you are filled with your own ideas. How can you expect me to give you Zen unless you offer me an empty cup?’”

            (($; -)}

            *From ZEN BUDDHISM: An Introduction to Zen with Stories, Parables and Koan Riddles told by the Zen Masters. (c)1959 by The Peter Pauper Press

            • “The master Nan-in had a visitor who came to inquire about Zen. But instead of listening…”

              Gozo, I appreciate your point of view , but you haven’t really expressed counterarguments. I have waited for them, asked for them and listened hard. But, they seem not to be forthcoming.

              I have seen a lot of these ‘masters’ that you talk about. They have all sorts of cures, but are reluctant to place them in the light of day because they know their cure cannot stand the scrutiny of sunshine.

              Ideas are not like liquids that can fill an empty space. One with many ideas has learned a lot and instead of his cup being full his cup has been enlarged. That is what ideas do. They enlarge the mind. A lack of ideas shrinks it.

          • Obviously you don’t know about the plethora of protectionist laws that already interfere with health care, that make it so expensive.
            I suggest you look into the various U.S. laws, already long in place now, that make sure health care is anything but a free market.

    • Per your first proposition, everyone should be assessed a uniform premium with no regard to risk. Once you introduce variable premium based on individual risk, you have abandoned the notion that insurance is simply a mechanism to collectivize the per-capita costs of providing medical care and have returned to the realm inhabited by actuaries, insurance companies, and all of the other people who have demonstrable expertise, formal training in the actuarial sciences, an operational track record maintaining solvent insurance companies spanning many decades but who, evidently, don’t understand what insurance *really* is and have mistakenly incorporated premiums based on differential risk into their operations all this time.

      2. Does the fact that all insurance companies covering every insurable activity have done so in practice for scores, if not hundreds of years do anything to temper your confidence in the veracity of your claim that it’s impossible to do so in theory? Someone needs to tell insurance companies that it’s impossible to construct insurance policies that, say, assess higher premiums for smokers, right away. Life insurers, forget about those policies that omit coverage for suicide. Can’t be done.

    • Emily, you are incorrect to say that one’s taxes for the fire department are based on risk. In every community that has a professional fire department, (I,e, medium to large cities), one’s taxes are based on income or the value of one’s property.

      I have nothing against the insurance industry. All I want to point out is that a system of accurate actuarial premiums will never produce universal coverage. I have worked in the life insurance business, which has no regulation of prices or policy types. After years of effort by many honest salesmen and women, many Americans die with no life insurance or very small amounts of it. Social Security provides some protection for surviving spouses and children.

      Health insurance is in the same situation. We need government to provide a floor for persons who either cannot afford health insurance or take a gamble and do not buy what they could afford.

      • Bob, how can you say I am incorrect if the taxes (a percentage of which goes to fire fighting) might be based upon how expensive my home might be? More resources will be spent on areas with expensive homes than on less expensive ones. Fire insurance is also based upon risk. I made it clear that different communities tax fire fighting differently. Some even have volunteer departments and the individual chooses where he wishes to live. There is nothing wrong with my statement.

        Risk and cost based benefit are part of the reasons some communities opt in or out of larger fire departments. If those departments become too expensive some cities will create their own or if less expensive will give up on their own departments.

        Finally, remember that we have fire codes to equalize the risks from one home to another. The home owner pays for the improvement to balance out the risks or he pays hefty fines.


      Robert (November 1st, 2013 at 16:08) wrote, If you wish to be in a socialization pool, there is nothing stopping you from voluntarily associating with other people who feel as you do. If your wishes for such a pool cannot be realized without using force to compel others to join it against their wishes, then that is an argument for why your wishes are unworthy, not [for] why you need to be granted the power of compulsion.”

      If your wishes for [healthcare—or roads or courts of law or military forces or etc.—for all] cannot be realized without using force to compel me to join [in funding these] against my wishes, then…your wishes are unworthy, not [that] you need to be granted the power of compulsion.”

      “When I was a child”

      —but we are no longer children.

      (($; -)}

    • Gozo,

      You have made a great argument for why certain things should be provided by government. We make a collective decision that some things are common goods, and the most effective way to deliver them is to have them become government functions.

      However, this is not what the ACA does. It does not, for example, charge everyone an actuarially fair premium and use government funds to close the gap between the cost of insurance and what we, as a social decision, believe an individual should have to pay. Instead, the ACA identifies a subset of the population, the young healthy women in my example, and makes them pay for the high risk people. In doing this, if prevents insurance companies from charging risk-based premiums, and obscures the true cost of this approach.

      The young healthy people have a legitimate complaint that they are forced to subsidize this Rube Goldberg mess.

      • Are you saying you shouldn’t have to pay for someone else’s health care, and that someday when you’re old, you should either pay more then or suffer?

        I mean what’s the alternative? You pay little when you’re young, and then when you’re old, you better be rich to afford what you’ll need?

        (FYI: I don’t think the ACA is a great system. But I do recognize that it’s better than a free-for-all, where people pay for other people’s healthcare anyway.)

        • You messed up. There is no obligation created that makes the US government have to pay for your care or even your social security even though you paid in money expecting a return. That money does not incur a federal debt and that is where your problem lies.

          If you wish protection from higher bills when you are older then you can purchase a type of insurance that fixes premium levels at a certain rate. So, yes, it would be good for the younger one’s to start paying early for their own care when they get older, but paying for someone else’s care doesn’t do the job.


        dbh (11/4/2013 at 12:33) wrote, “Gozo, …the ACA…does not, for example, charge everyone an actuarially fair premium and use government funds to close the gap between the cost of insurance and what we, as a social decision, believe an individual should have to pay. Instead, the ACA identifies a subset of the population…and makes them pay for the high risk people. In doing this, it prevents insurance companies from charging risk-based premiums, and obscures the true cost of this approach.”

        dbh, I’ve been trying to craft a response to your question, but my answers are all too complex. However:

        In terms of targeting a young, gender-specific population, I don’t believe that’s an accurate assessment. Rather, I believe that we are being charged what ultimately will turn out to be somewhere near the correct amount, for each of us as we age through our lives and the system.

        The young have no legitimate complaint (other than that they are young, and young people know better than we do, and are entitled to complain). What they are paying in now is part of the lifetime aggregate of premiums they will pay to insure their healthcare coverage. From now until the end.

        Cradle-to-grave healthcare premiums.

        This is the best I can do in a reasonable space.

        Insurance is a bit complicated, and in this discussion here, people seem to be conflating a bunch of different types and elements of insurance. The most-enjoyable analysis of insurance I ever get to read is in Warren Buffett’s annual Shareholder letters. These are all available for reading on the Berkshire Hathaway website.

        (($; -)}

        • “analysis of insurance I ever get to read is in Warren Buffett’s annual Shareholder letters. ”

          Yes, and reasonable insurance depends upon adequately determining unpredictable risk no matter what method one uses and requires a willing buyer and a willing seller.

      • DBH – Yeah, I agree with Watermelonpunch. What’s the ideal for you, DBH? To save upfront in your early years and hope that when you finally do get that expensive disease, you’ll have enough money or a good enough plan to get through it? That just sounds willfully stupid, like people who “save” by not fixing up their house year after year… and then when a hurricane rolls in, the house collapses and they lose everything they own… and end up being a burden on government, charities or their own families and friends. That’s not really a plan. That’s the ultimate cop out to avoid responsibility.

    • Gozo,

      You are forgetting that individual policies are separate from the group market. By capping the relative premiums in the individual market the ACA requires an intergenerational subsidy in that market. The pricing in the group market, federal and municipal plans, Medicaid and Medicare are unrelated. This means the only way high risk individuals in the individual market can get affordable premiums is for low risk people in the individual market to pay for them. Or for the federal government to pay a larger subsidy. In effect the ACA forces some members of this market to pay the subsidy for others, rather than distributing this over all taxpayers.

      We hear all this talk about socialization of the risk, but this risk is not shared equally. Instead, it is dropped on the low risk people in this relatively small market.

      Hope that helps.

    • Gozo,

      In all the space you have devoted to telling us that you have answers, but they are too complicated, or telling irrelevant stories, you could simply give these promised answers. Why don’t you try that on your next post?

      Dave and Watermelon,

      First, I am saying that redesiging a national healthcare system is a massively complex undertaking, and I doubt that ANYONE or ANY COMBINATION OF PEOPLE has the knowledge to do this correctly. We can be promised that when the federal government takes over everything will be fine, but we have seen how successful that has been so far.

      Specifically on who should pay, I encourage you to look at who is being asked, or rather forced, to pay for this change in the individual market. You are pretending it is society as a whole that funds the high cost of coverage for high risk people. That is not what is happening. The cost of coverage for high risk people in the individual pool is coming from low risk people in the individual pool. Most of of these low risk people are younger people with lower incomes. The money is NOT coming from the broad sweep of the population. It is coming from those who both do not get their healthcare through their employers, and are relatively healthy. Pointing this out does not mean that I think older sicker people should die in the streets. Pointing this out just means this is fact, that does not seem to be in dispute.

      Either making young healthy people in the individual pool fund healthcare for older sicker people in the individual pool is a good idea, or it is not. That is a matter of opinion. Whether that is the ACA design is not a matter of opinion. It is a matter of fact. That is why the individual market risks a death spiral. If it did not rely on intergenerational subsidies from the young, then there would be no concern about them declining coverage. If they were being charged an actuarially fair premium, then signing them up would not support the cost for older people.

      It is possible to think of the premiums a young person might pay now as an investment that lets them pay less than their cost of care in the future. However, that is a very bad investment. There is no assurance that the large excess payments now will result in a better deal in the future. First, given the annual open enrollment periods, the TYPICAL young person can do better by declining coverage now, and signing up in the future when their premium is closer to fair. Under current design they are not required to join now in order to get low prices in the future.

      The young can decline to buy insurance, and by arranging to owe federal tax at the end of the year they can also decline to pay the penalty. Yes, each individual who does this is gambling that they will be typical, and some will lose. However, as a group, it is the smart thing to do.

      A young healthy person who subsidizes the care of older sicker people in the individual market now has not assurance that this Rube Goldberg system will even be around by the time they were to benefit from it. The ACA is looking like enough of a disaster at this point that it may not survive in its current form. If the courts decide that the language about subsidies means what it says then the federal subsidies for those in federal exchanges may go away. That would put quite a few nails in the coffin.

      None of the above has anything to do with whether I think society should provide healthcare for all. It has everything to do with whether the ACA is a mess. It is a mess.