Health insurance for the elderly?

by Russ Roberts on August 18, 2010

in Health, Uncategorized

Blroll commenting on this post, writes:

How or why would private insurance companies insure anyone over the age of 65? I think any system private or governmental would require younger participants to support retirees.

I’ve heard this point made many times and it’s half or maybe a quarter right. Private insurance for old people in the absence of government intervention is unlikely. The reason is that old people are likely to get sick. The premiums that would make coverage profitable would probably be very high. Would people pay that premium? Probably not. The point of insurance is to insure against the unexpected. You are willing to pay a premium, literally, to avoid a large unpredictable expense. But no one wants to pay a premium for an expected, predictable expense. And when you’re old, getting sick is predictable and expected. So when you’re old, you’d be unlikely to buy private insurance.

[EDIT: Should have made it clear (as some commenters have correctly pointed out), that I meant private insurance that pays for everything, lifesaving (bypass surgery) and the simply pleasant (a better knee). Yes, even old people might want catastrophic coverage, but that too would be very expensive because it is likely. But as I point out in the next paragraph, it's the health care that's the issue, not the insurance. Health care is going to cost the elderly more. That is the problem not some problem in the insurance market. The expense of health care for the elderly is made worse by the fact that EVERYTHING is paid for by someone else other than the consumer and not just care that is most valued.]

But it isn’t health insurance that keeps you healthy. It’s health care. Would old people be able to buy health care? Sure. It just wouldn’t be free. That would be unpleasant in some dimensions, but pleasant in others. One of the benefits would be that health care would be cheaper because some procedures would be skipped. Another would be not forcing others to pay for your health care. For people who are poor or whose families are poor, we might expect to see private charity or even government assistance such as medicaid. But universal health insurance for the elderly, rich or poor, is a bad idea.

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