When discussing health care, people often jump into a public versus private debate. Do we want socialized medicine or private competition? For today, I’d like to skip that discussion. Regardless of how coverage is paid for or provided, the risk from illness needs to be socialized. Everyone needs to be covered, healthy or sick, so that the risk can be distributed over the largest possible group.
Insurance companies have a phrase for people who try to buy insurance when they know they’ll need it: adverse selection. In health insurance, insurers use limitations on pre-existing conditions to prevent someone from simply picking up insurance after they get sick. If you know you’ll be taking advantage of your insurance immediately, then you’re not really buying insurance at all. Insurance requires hedging against future risk. Instead, you’re simply trying to buy medical services on the cheap.
The best way to avoid adverse selection on a large scale is to require everyone to buy into the insurance system. This could mean a single-payer model, with services provided by some combination of public and private sources. It could also mean universal basic coverage with private insurance covering the balance. Either way, the key is to require everyone, sick and healthy, to pay into this system every single month.
It is especially important for those that are young and healthy to be paying into the health insurance system. There are tens of millions of healthy people who don’t have insurance right now. Their employers don’t provide it, it’s expensive to buy an individual policy, and the need for it doesn’t seem immediate. Unfortunately, when something does go wrong, they show up at the hospital and we foot the bill with our tax dollars. It is especially important to get this group paying into the system early when they are most likely to be healthy.
Wait! This sounds like Universal Coverage! Isn’t that expensive?
This is universal coverage and it is less expensive. The United States spends a massive amount of money on routine and acute care to uninsured people at hospitals every single day. That’s a big reason why we spend over twice as much per person to provide care than they do in the United Kingdom. Think about that. We spend twice as much and don’t have universal coverage!
I am not arguing to adopt a socialized medicine model mirrored after the National Institutes of Health. But we do need to find a way for everyone to pay into the insurance system and get coverage. It’s the only way to perfectly distribute the risk, minimize cost, and maximize coverage for all.
(As a fringe benefit, a single-payer system would be excellent for people with diabetes. If everyone is paying in to the system, adverse selection is not possible. So there is no need to disallow pre-existing conditions like diabetes.)
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