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Monday, April 14, 2008

The Health Insurance Mafia

This is an interesting article, and most of it is true. This article goes over the idea that the cost of health care would be less if nobody had insurance. He bases this assumption on an anecdotal experience he had when an MRI was not covered by the insurance company and he was billed - by the facility - $3000. When he told the provider that insurance would not pay the bill, they allowed him to settle for less when he paid out of pocket.

He goes over the idea that the health insurance companies don't really do anything but facilitate the transaction between patient and doctor. But actually health insurance companies do play a vital role in our health care dollars. They negotiate prices with the hospital and doctors before anyone is sick. Usually the negotiated prices are lower for the insurance companies than they would be for the patient alone. The reason this is important is because when you need the health care service is not the best time for you to bargain for the best price. It's like selling umbrellas. If it is not raining, umbrellas are one price. But as soon as the rain starts coming down, the price of the umbrella triples because the demand is greater.

If you don't need a service, it is not worth anything to you. But if a service will save your life, it is worth everything you have. I agree that health insurers go a long way beyond what they actually need to in order to make a profit. I agree that insurance companies should not make huge profits off of the health care industry. But they do play a vital role in the health care system.

I like this article from the Wall Street Journal. Enjoy the article.

The Health Insurance Mafia

April 14, 2008

Most discussions about the rising cost of health care emphasize the need to get more people insured. The assumption seems to be that insurance – rather than the service delivered by doctor to patient – is the important commodity.

But perhaps the solution to much of what currently plagues us in health care – rising costs and bureaucracy, diminishing levels of service – rests on a radically different approach: fewer people insured.

You don't need to be an economist to understand that any middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.

The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection." But even the Mafia doesn't stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture, but for occasional "cost of doing business" increases. When insurance companies insinuate themselves into the system, their first step is figuring out how to increase the skim by harming the people they are allegedly protecting through reduced service.

Continue reading the article here.

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