Sunday, October 18, 2009
A Political Quandary
We Americans are used to the concept of buying insurance from private insurance companies. We buy insurance on our homes, on our cars, on our jewelry, on all imaginable objects or entities that are worth something. We buy insurance to cover our medical bills in case we catch some terrible disease or have a serious accident. In each case, insurance companies hire actuaries who study the statistics of accidents and medical treatments and decide on a fair price for the premium to be paid for each kind of insurance. In the case of homes, actuaties look at the incidence of fires, earthquakes, floods, hurricanes, tornadoes, and other things that damage or destroy houses. They apply the data to the set of houses that a particular insurer insures. The premium divides the cost of the losses among the few houses affected among all the insurees. That's how insurance works. The insurance firm also adds a small amount to the premium to pay the salaries of the actuaries and other employees of the firm and also to pay dividends to the stockholders.
The same principles apply to medical health insurance. In an ideal situation, everyone would have health insurance and the big bills that a few insurees have would be borne by all insurees. However, some individuals do not care to buy insurance. They are healthy and they want no part of paying for others' medical bills. The result is that the premiums now have to be based not on an entire population but only on those individuals who have insurance. Hence, the premiums rise if not everyone participates. The high premiums also make it impossible for others to pay for insurance even though they would like very much to have it.
As long as we continue to rely on a system in which the majority of Americans rely on health insurance provided by private companies we are going to face rising costs of premiums. As the premium costs rise, more and more individuals are priced out of the insurance market and the smaller the pool of individuals for the actuaries' use in calculating premiums. One obvious reform is to require (or encourage) everyone to buy health insurance. In that way premiums would be calculated on the basis of the entire population, not just those people who feel they need the insurance.
The quandary is, how do political leaders compel or persuade everyone to buy health insurance? Subsidies can be provided for those too poor to afford the premiums. Health young people who want to keep as much of their own money as possible will resist buying what they regard as unnecessary insurance. They will also resist a tax imposed in place of insurance. (The tax would be the equivalent of insurance premiums and would be given to the insurers so that they could pretend that everyone is insured and calculate their premiums on that basis.)
I don't see any way around this quandary. That is why I support a universal national single-payer health insurance system in which everyone is covered and everyone pays through a fraction of their income tax. Naturally the insurance companies are terrified of such a possibility. Persons with an ideological conservative bent will oppose it on the ground that it would substantially increase the size and power of the federal government. Perhaps it can be done on a small scale, on a state by state or region by region basis. California is ready to start such a system in California and will do so as soon as a Democratic Governor is elected. Some states, such as Alaska or Rhode Island, are too small or have too small a population for such a system. They would have to join with other states in creating a regional system.
There may be another way. I can't see it right now. Perhaps I lack imagination. I leave it to you who may read this to suggest other ways around the quandary.