She adds much-needed conceptual clarity in the discussion over health policy by discussing the nature of genuine insurance, as opposed to our current system. From her piece:
What is insurance? Think about your auto, life and homeowner’s insurance. Each of these is designed as a means to pay for unexpected, unpredictable, very expensive occurrences outside of the control of the policyholder. Insurance is a means of financially protecting people from the risk of unlikely but high-cost events. To build up sufficient funds, the insured pays a premium calculated on their specific chance of experiencing a covered event. Insurance companies can only stay solvent if what they take in as premiums is greater than what they pay out in claims (plus business expenses and a competitive profit).
So what is it we have that we call health insurance but isn’t? We have the prepayment of medical expenses. We expect our “insurance” to cover predictable, relatively inexpensive events like health maintenance checks, minor illnesses and injuries — and to pay for them with minimal out of pocket spending. Under Obamacare, these expectations will be mandated by law. The new law actually makes it illegal for insurance companies to charge individuals premiums equal to their risk of making claims. It’s like having a law requiring homeowner’s insurance to pay for lawn care, house painting and water heater replacement, while at the same time prohibiting the companies from operating an actuarially sound business.
Instead of genuine insurance, we are moving towards a system of bad pre-paid care.
For more details, read the full text of “Almost All Americans Lack Health Insurance“.
And by the way, under Dr. Haynes’ leadership, the Benjamin Rush Society has been sponsoring an excellent series of debates on important health policy issues. Go check out their website for details and videos!