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Why American Healthcare is So Expensive Part 3 – The Insurance System

March 10, 2017 4 comments

Today the GOP is deep in its discussions about how to take apart The Affordable Care Act and to replace it with some other kind of system to pay for healthcare.  So far, everybody in the healthcare delivery system hates it, and it may go nowhere.   But I will continue to argue this – whatever they are trying to do, it won’t work.

Why won’t it work?

Not because the system that are creating is the wrong system.  Sure maybe it is wrong.  But that’s not the real problem.

As we said before, THE PROBLEM ISN’T HOW WE PAY FOR HEALTHCARE.  THE PROBLEM IS HOW MUCH HEALTHCARE COSTS IN THIS COUNTRY.

So why is healthcare so expensive in this country?  Last time we talked about how there are incredible incentives to create and use expensive healthcare equipment, even when such equipment does nothing for patients.  Today we’re going to talk about something else: The Insurance System.1382375480209

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I think a lot of people don’t fully understand why we have health insurance.  Let’s start with why we have insurance for anything at all.

Insurance is needed when there is a potential future expense that you may not be able to pay for, but that may never happen.   Ie its very expensive to repair your car if you smash it, and there is also heavy liability involved in potential damage to another vehicle or people within it, so you insure that potential expense.  The vast majority of people who buy auto insurance do not have to make a claim, so insurance is relatively inexpensive relative to the potential size of the claims.  You do not insure buying groceries because a) it isn’t that expensive to buy groceries and 2) everybody needs to buy groceries so there is no grocery-buying risk to spread out between different insured entities.

So based on this idea, and the current costs of serious healthcare interventions, it makes sense to insure healthcare.

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