The Problem with Insurance: Some Thoughts on Health Care

No reasonable person is against caring for the poor.

But where we debate is HOW to best do that.

Do we promote systems that look compassionate, but end up robbing self reliance?
Do we promote measures that cause more problems than they solve?
Do we promote systems that hurt freedom and assaults the individual?
Are we comfortable with some variation of socialism?

Insurance has a major flaw. Insurance drives up costs. And if you insure the wrong things, you force costs through the roof.

Let me explain. I am a tightwad. When I go to the store, I take limited amounts of money and make constrained choices. Because of my limited money, I seek to maximize the use of my money to get me the greatest benefit for the least cost.

But imagine that the government insures food, so that everyone pays more taxes and is permitted to obtain food for three meals, two snacks, and one desert per citizen per day. Can you see that when I go to the store, I am going to get every last product I can as long as I stay within those limits? I will get the best cheese, meat, snacks, and everything else. I will freely claim things I would not have gotten before because they were too expensive. But with my food insured, that doesn't matter anymore. I get the best of the best!

This is wonderful! Right?

But boy, things are getting expensive.

I already purchase foods to get those three meals, two snacks, and a desert per day. But without insurance, I shop carefully, maximize my resources, and exercise frugality. But as soon as we insure food, I no longer make choices to maximize my resources. I become wasteful and indulgent.

When society insures things that ought fall within the scope of individual responsibility, we drive costs beyond our capacity as a people to maintain.

And what then happens in the insurance world is administrators and bureaucrats step in and regulate such choices in a fruitless attempt to keep down costs. But costs remain wacked and the freedom of individuals withers.

But should we force health issues into tough, constrained, efficient choices for individuals? Is it wise to require people to "shop" and "barter" for medical procedures? Is it wise to place so much decision making power into the hands of individuals and doctors rather than have bureaucrats, doctors, and administrators (experts) make such choices?

And here is my conclusion. Let us insure the thing that should be insured: risk. Nobody should face catastrophic medical costs with their own wallet. That is foolish. But let us leave to individuals those choices that are more basic and that involve mere expense but not major risk. Let parents choose their doctor and hospital, and let the market regulate prices in basic health care. Let us provide market-driven insurance for catastrophic needs, so we can all shop wisely and securely. But then leave to individuals the power to choose in all else. We will then make wise choices that keep costs down while still providing the care we need.

But let us be aware that our current trends toward mass insurance of all things medical and the socialization of that insurance will create inefficient burdens that no society can bear over time.