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Health care vs. health insurance

In this post, I asked you to respond to this question I received from a reader, Tom:

Imagine we had entirely private health insurance market – no Medicare or Medicaid.  If I live to be sixty-five, I will probably have a personal and/or family history that indicates a strong probability of developing an expensive chronic condition. I would wager that is true of almost all sixty-five year olds.

So here is my question: which insurer in their right mind would take on my risk?

I suspect none. Once philanthropy and savings were exhausted, I would surely risk a painful life and preventable death.

Do I want this? Does anyone? Isn’t “socialized” medicine for older people an unpleasant moral necessity for our wealthy society? Please note I am deeply suspicious of most arguments cast in moral terms in discussions of politics and economics. I ask these questions guardedly.

Your answers were wonderful. Thoughtful, interesting, and perceptive. But no one really got to what I think is the key to the matter.  (Though AdamGurri hinted at it at one point and I stopped reading after about 150 comments so I may have missed someone else’s insight.)

Tom’s question is interesting. But it’s the wrong question. And that Tom asks it and that everyone answered it is fascinating in and of itself.

It’s the wrong question because when you’re 65 the problem isn’t getting insurance. It’s paying for health care. But the public debate has become so obsessed with health care insurance we’ve forgotten what the real issues are.

When you turn 65, the high cost of insurance isn’t the problem. The problem is that you’re old. A lot more things are going to go wrong. Yes insurance is going to be costly. But that’s because so many things are more likely to break in your body. The high cost of insurance at that point is just a result of the problem. It’s not the problem itself.

It’s like saying that if you drive your car in a demolition derby, it’s hard to get coverage for collision damage. No kidding.

What’s funny (well not funny, really) is that we’ve totally forgotten the point of insurance and why it’s economically sensible. Insurance is designed for the unpredicatable. There’s nothing unpredictable about bad health when you get old.

By the way, most of you in the early comments did make this point clearly and talked wisely about why it’s important to save when you’re young. But most of those comments if I read them correctly, were trying to explain why you’d still be able to afford insurance rather than health care per se.

Our current world of health “insurance” is absurd. It should not cover pregnancy which is a largely predictable and planned event. It should not cover an annual checkup. This is not insurance. This is just a subsidy.

What we have come to mean by health insurance is “cheap medical care.” They are not the same thing.

This confusion is most obvious when people talk about the uninsured as if the uninsured don’t get health care. Of course they do. They just pay more for it (or they get it for free under certain circumstances.)

Most importantly, the cost of health care, whether you are uninsured or over 65 has been increased and distorted by the public subsidies to insurance that artificially lower the out of pocket costs for those who are insured either via employer-based coverage or Medicare and Medicaid. This is what makes being uninsured in modern America, no matter your age, so unpleasant. It’s that what you pay when you do need health care is artificially high.

Let me ask Tom’s question in a different context.

Once I get married and have kids, how am I going to be able to get insurance coverage that pays for my kids’ college tuition? Who’s going to insure me against that?

The answer is no one. But people still manage to send their kids to college even though it’s really expensive. Hard to believe, but it would be a lot more expensive if people had subsidized insurance to cover the cost of college. And it would be a lot less expensive if there the current subsidies to education were eliminated.

This is not to say there aren’t challenging issues about how to allocate your income when you’re 80 years old and trying to decide on medical treatment. But the health insurance issue is a red herring.