Updated: Jan 15, 2020
The previous article “Democrats should stop blaming health insurance companies for a problem the US Government created” had been amended to include moments from a previous Democratic Debate Democratic debate.
In the previous Democratic Debate, we heard an argument between Senator Elizabeth Warren, Senator Bernie Sanders, and Rep John Delaney on the feasibility of Medicare for All.
Delaney correctly pointed out that there is no reason to make the current insurance lane carried by half of America illegal. I pointed to the only reason Sanders and Warren would want to make private insurance illegal in a previous article. Hint* It’s because the private version would pinpoint inadequacies in the public option.
There’s one more moment from that exchange I wanted to address. Throughout the conversation, Elizabeth Warren continued interrupting with her story about a dear friend of hers that has ALS, and is unable to pay his medical bills (Apparently not a close enough friend for her to help with her $18 million net worth).
Warren passionately described the financial situation facing the family, and then mentioned the $9,000 per month the insurance was refusing to pay. She then went on to mention that her friend’s wife was having to go online and beg friends, family, and strangers for money to pay the medical bills (most likely through a gofundme).
Stop me if I’m missing something, but I’m not sure we’re heading down the right path if it’s considered wrong to ask for help from complete strangers, but it’s right to force those complete strangers to help you under the threat of violence. Thats what we’re talking about here. That’s the point that Warren seems to miss. Listen to the clip of Warren, and pay attention to the attitude and inflection in her voice while speaking of how terrible it is for people have to go to others for help.
People like Warren seem to forget the fact that “there’s no such thing as a free lunch.” Sure, Medicare for All will cover your medical bills, but that does not mean it’s free. Medicare for All will be paid for through taxation. Where do taxes come from? The people. Warren and Sanders would like to tell you that “millionaires and billionaires“ will be paying for the government-ran healthcare system, but where do millionaires and billionaires get their money? You.
The only thing this system can potentially do is help the 30,000 people that allegedly die each year from a lack a healthcare coverage.
The problem with that assumption is that economics is merely a series of trade offs. This system does not account for the 30,000+ people that will likely be hurt in some other industry- leading to increased poverty, malnutrition, or all the deadly consequences stemming from failed socialist States throughout history. It does not account for the insanely high national debt, and the depression that is statistically likely to occur in the next few years.
Now continuing to the previous article “Democrats should stop blaming health insurance companies for a problem the US Government created.”
The B.S. tweet that inspired the article-
Do not take this article as a complete defense for every decision made by a health insurance company. There are evil people on all sides of the situation. Which one of the evil sides has complete control over all industries with the threat of violence? The US Government.
Let's talk about "insurance."
The point of insurance is to protect yourself in the unlikely event that something bad happens. It's a bet, nothing else. The majority of the population do not actually have any major medical issues, so the insurance company is willing to protect you against that risk.
How many times has this happened? You walked into a store and handed them $500, then immediately walked out with $200,000 worth of product? That probably seems crazy, even though that's what we all expect from our insurance providers.
Do this exercise: Choose yourself and your 3 closest friends or family members. Imagine that of the last 5 years, each of you has been paying $500/ month to Blue Cross or United Healthcare. That comes out to $30,000 per person or $90,000 for all three of you over the five year period. What amount would you estimate the insurance company has paid out to medical providers over that amount of time?
The health insurance industry is also one of the lowest profit margin industries in our economy.
Take United Healthcare's profit margin as an example:
Now contrast that with another Industry like technology(Apple).
Which one of the above industries continues to innovate, and offers you a product you don't even truly need?
The ACA and other laws like it have been price fixing the industry for about 100 years. Currently under federal law, health insurance providers must pay 80% of their income to medical costs for it's customers, and no more than 20% of it's revenue to administrative costs (including salaries).
If you're a healthcare provider, you have no incentive to be efficient- because you know the insurance company will pay the bill. If you're an insurance company, your incentive is to allow for healthcare costs to skyrocket- because regulations on your industry dictate that you can only pay 20% of your revenue to administrative costs (and you'd rather have 20% of a trillion than 20% of a billion).
There's no downward price pressure on the healthcare provider from the insurance company because the higher the prices go, the higher dollar amount the regulated 20% administrative cost can be. By the way, there's no downward pressure on the insurance company because heavily regulated industries often have little (or zero) competition.
Why can't your local bank, with their fairly sizable credit line from another bank, sell health insurance to their customers? Let's say you're a checking customer, and they see that you've spent a very low amount on medical bills over the past several years.
Why can't they just offer great health insurance for $100/month? Better yet, they could take on 90 healthy people and 10 unhealthy people (risk pools)...
They can’t because:
Reason 1/10,850- Regulations wouldn't allow them to cross industries like that.
Reason 2/10,850- Something called a community rating.
The 10,850 thing is a sarcastic joke, obviously. That’s just the number of pages added to the US Government Rules and Regulations book after “Obamacare” was passed.
A community rating says you can't charge different prices for health insurance in a given region. This regulation has been in place since the early 1900's, and it's quite possibly the biggest reason we've made it to where we are now with healthcare prices.
If one person needing car insurance had 12 speeding tickets and three accidents on file, would you recommend they pay more, or less, than the person that has zero tickets and zero accidents? Pretty simple answer on that one.
If two people from the same region walk into a health insurance office, they are mandated to pay a rate within a certain % of each other. That means if a 40 year old man walks in with no medical history, in great shape, doesn't smoke, etc- he's not going to pay much less than the 40 year old man that rode in on a scooter because his extra 400 lbs have damaged his knees and kidneys.
Since the insurance company can't charge the healthy person $75, and the unhealthy person $500- they'll both pay $500. Why not $75? The math is obvious on that one..
So what's the point?
1. We should realize that the current healthcare "crisis" is not only due to insurance companies because they don't even set the prices. They're also paying the largest amount of healthcare costs in the US.
2. This is a very complicated issue. As usual, it's not as easy as "I'm going to fix this."
3. My great grandparents were the last people to see a potentially free market in healthcare.
How can we look at one of the heaviest regulated industries in the US and say it's not working because of "the free market?"
We'll dive deeper into the healthcare industry on goodmorningliberty.us as time goes on.