Socialized Medicine: On Health Insurance Profits
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A commenter at a previous post is confused:
This is, of course, utter nonsense.
Consider:
--Does a restaurateur make money by "denying people food," or by satisfying his diners?
--Does a lawyer make money by not showing up in court, or by satisfying her clients?
--Does an auto insurance company make money by denying claims, to the point where customers cancel their policies in disgust and retain a competitor? Or do they make money by satisfying customers? (Exhibit A.)
--Does a manufacturer make money by selling dangerous wares as cheaply as possibly — to the point of risking negative publicity (not to mention lawsuits), or by satisfying customers — even when that means a higher price for higher safety? (Exhibit B.)
Meanwhile, what enterprise is making money by denying claims? That's right: Medicare.
The idea that health insurance companies are somehow different from other insurance companies, that they somehow rake in the money upfront and then spend all day figuring out ways to keep it, reflects a fundamental disconnect from reality: Insurance companies — health care or otherwise — pay their claims first (or do their best to estimate them), and then calculate the premium schedule that will cover those claims. Competition, meanwhile, prevents them for charging much more than that.
If you think, however, that health insurance profits are "too high," then perhaps the problem is not with premiums but with the competitive, or anti-competitive, landscape that spawns those premiums. If the current tax code imbalance — a throwback from Second World War wage & price controls — were abolished, if your employer could just pay to you the money it currently pays "for you," and if you could choose your health insurer as easily as you could choose you auto insurer, life insurer or homeowners insurer, then maybe those "excessive profits" that give Michael Moore such hypertension might come down a bit.
From where I sit, a private bureaucrat gets money be denying service, whereas a public one gets support for giving service...This is the cornerstone of the most radical, Michael Moore style socialized medicine: the insistence that "insurance companies only make money by denying claims."
This is, of course, utter nonsense.
Consider:
--Does a restaurateur make money by "denying people food," or by satisfying his diners?
--Does a lawyer make money by not showing up in court, or by satisfying her clients?
--Does an auto insurance company make money by denying claims, to the point where customers cancel their policies in disgust and retain a competitor? Or do they make money by satisfying customers? (Exhibit A.)
--Does a manufacturer make money by selling dangerous wares as cheaply as possibly — to the point of risking negative publicity (not to mention lawsuits), or by satisfying customers — even when that means a higher price for higher safety? (Exhibit B.)
Meanwhile, what enterprise is making money by denying claims? That's right: Medicare.
The idea that health insurance companies are somehow different from other insurance companies, that they somehow rake in the money upfront and then spend all day figuring out ways to keep it, reflects a fundamental disconnect from reality: Insurance companies — health care or otherwise — pay their claims first (or do their best to estimate them), and then calculate the premium schedule that will cover those claims. Competition, meanwhile, prevents them for charging much more than that.
If you think, however, that health insurance profits are "too high," then perhaps the problem is not with premiums but with the competitive, or anti-competitive, landscape that spawns those premiums. If the current tax code imbalance — a throwback from Second World War wage & price controls — were abolished, if your employer could just pay to you the money it currently pays "for you," and if you could choose your health insurer as easily as you could choose you auto insurer, life insurer or homeowners insurer, then maybe those "excessive profits" that give Michael Moore such hypertension might come down a bit.
Related Posts (on one page):
- Are We Heading Toward Socialized Medicine? (Part Two)
- Are We Heading Toward Socialized Medicine? (Part One)
- Socialized Medicine: What's In a Name? Or a Dichotomy?
- Socialized Medicine: On Health Insurance Profits
Posted by Kip on
27 August 2007
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