Health Insurance: Sucker's Bets and Privatized Communism

There is no one with endurance like the man who sells insurance. Frank Crumit song

Insurance is a bet. That’s how they teach it to actuaries, salesman, law students and anyone else in the industry.

Every month when you pay $1,000.00 for your health insurance, you’re betting you WILL get sick. The insurance company is betting you WON’T. YOU win the bet if you get sick and they pay more than $1,000.00 for medical bills that month. THEY win the bet if you don’t get sick, or you get sick for less than $1,000.00 (colds, flu, etc).

While there are unfortunate people who get sick, serious illness for most people is rare for most of their lives. Every month working-aged families make a sucker’s bet: Betting $1,000 dollars that they will get sick when the odds say they won’t. Month after month they lose the bet, and lose another $1,000 that could be well spent elsewhere.

For most families, the only winning move is not to have insurance. In ten years they will save about $120,000.00, which will be more than enough to pay doctors for the usual sicknesses and calamities such as broken bones, etc.

Now if you are an American who has wealth to protect either in savings or home equity, you should buy medical insurance not for the bet, but to protect your asset in the rare instance you do get terribly ill. However, if you are the average American living “paycheck to paycheck” with little savings and little home equity, the better bet for you is not to buy insurance at these prices, since the $12,000 price tag is a whopping 23.9% of American median income ($50,233.00). Why spend 1 out of every 4 dollars on something you don’t use?

In America, we are free to not buy the products we don’t want. Cherished American freedom is based upon one concept: “Free will.” The concept has religious beginnings, was made politically important during the Enlightenment and was the main ingredient the founding fathers used in developing the concept of America: Live Free or Die.

President Obama last night promised to change that. He vowed to force every American to make the health insurance bet, to buy it whether they want to or not, even when it’s a sucker’s bet financially for their family.

While the word “historic” has been worn out in relation to Barack Obama, he’s finally done something that really is historic: This will be the first time in history the American government will force people to buy a product directly. This isn’t raising taxes so the government can buy a product – this is the government asserting control over a huge percentage of individual income, directing spending as the President sees fit, whether the wage earner likes it or not.

If you could smell arrogance, Barack Obama would stink. If you love your own American “Free Will,” you have to hate this new concept of government control of your discretionary spending.

The moral issue of taking care of one another is a canard in the health insurance context. My church requires me to tithe 10% of my income to them. My government hits me for 40% in all taxes. That means half my money is already gone before I decide whether I wish to be charitable. I’ll decide to whom I’ll give. It’s not the government’s job to force me to give more.

However, forcing me to give my money to others is the “social progressive” dream come true. Spreading around your wealth is exactly what Obama told Joe the Plumber he would do, and spent the rest of his campaign promising us he wouldn’t.

Having a nation fully insured is bad policy. Let’s see why.

Privatized Communism

As the President said last night, COMPETITION is what drives PRICES DOWN and QUALITY UP. The reason for having a Department of Justice Anti-trust Unit is to make sure there is no monopoly, no single source for goods or services, because that hurts price and quality.

Imagine a country were everyone is insured, even with PRIVATE coverage. Richer people will buy costly policies and poorer people cheaper policies. All of the money gets “pooled” and only the people who get sick, rich or poor, will use it. Those who stay healthy won’t use it.

So full insurance will work like this: “From each according to his ability [wealth], to each according to his need [illness].” Sound familiar? It’s how Karl Marx described the principle of Communism in 1875.

A system where everyone is fully insured is therefore “Privatized Communism.” Nothing changes if you include a “public option” or “co-ops” or go fully socialized with a government single-payer plan. The political theory of Communism still governs.

It’s bad policy because the more insurance you have, the less competition you have.

In America, there are approximately 630,000 physicians who could be competing for you medical dollars. They used to, and they hustled from house call to house call to be your doctor. Today, you sit for 2 hours in a waiting room to be seen, for no other reason than the doctor takes your insurance. Why’d that change?

Competition is now whittled down from 650,000 doctors to 1,300 health insurance companies. Also, you can’t buy insurance across state lines. Therefore, the competition for your insurance money is really a choice of about 25 companies authorized to sell insurance in your state. The president mentioned last night that in 34 states 5 or fewer insurance companies control the market. Don’t be fooled into thinking insurance companies represent the best of capitalism. They don’t. Insurance pools limit your choices instead of expanding them.

The Department of Justice Anti-trust Unit, who slept while so many companies became “too big to fail” and filed no charges while the companies bragged about it get tax dollars, are still sleeping.

Here’s what they should be focusing on:

Unfortunate Death of “Hospitalization” and “Catastrophic” Insurance

Ever wonder why Ozzie & Harriet, Howard & Marion Cunningham or even Fred Sanford never complained about the cost of health insurance? In the 1940’s, ‘50’s and ‘60’s people could buy a “Hospitalization” policy to cover only when they went into the hospital, and a “Catastrophic” policy to cover when they had a disease that needed constant care. Since those events are rare, the policies were cheap. They paid their family doctor directly. That was choice.

In the 1970’s, the concept of the HMO was unveiled. Suddenly there would be coverage for EVERY LITTLE THING, from the doctor visit right down to the 10-cent aspirin. Ask anyone with health insurance how much their doctor charges for an office visit. They don’t know and don’t care, even though they are paying $1,000 a month for insurance to cover that 10-cent aspirin.

Doctors and Insurance companies love it! You HAVE TO buy the whole package now, even if you rarely or never use it, or you can buy nothing. It’s called an “illegal tying agreement” when a company makes people buy a second product in order to buy the first. That’s whey the DOJ Anti-trust Unit sued Bill Gates for selling Windows bundled with Internet Explorer. Yet the insurance industry is so powerful, the Dept. of Justice keeps on slumbering while they make you buy an all or nothing policy.

Insurance killed competition among doctors. Insurance killed competition further by forcing you to buy comprehensive coverage instead of just coverage for things you want. Making you unable to buy insurance across state lines kills competition further. Paying your doctor directly is the better, more competitive option.

In a power grab that would wow the pants off Mussolini, President Obama is going to force you to purchase insurance, even if it’s bad for you, to satisfy his utopian fantasy.