CDR: Re: why should it be trusted? (insurance)

[Bill Stewart]

At 06:25 AM 10/20/00 -0700, Marshall Clow wrote:
>At 2:11 PM +0300 10/20/00, Sampo A Syreeni wrote:
>>On Wed, 18 Oct 2000, Marshall Clow wrote:
>>>So these people are entitled to something for nothing?
>>>(or in this case, $1500 of treatment for $1000 of premiums)?
>>>Why?
>>
>>Because keeping people operable longer makes for net savings for the
>>society?
>That's a nice belief.  Can you show it to be true?

>>This perhaps isn't a reason for *private* companies to issue
>>insurance fairly, but is a clear incentive to the society to nevertheless
>>maintain a public health insurance infrastructure.

So it's a clear call for charity.  Charity is a Good Thing.

Insurance works by letting people pool risks - most people in
an insurance plan pay more in premiums than they collect,
and a small number collect more, sometimes far more,
than they paid, and the participants consider it a good deal
because the potential costs they're risking are higher than
they can afford, compared to the guaranteed small loss of the premium.

Most health care "insurance" plans in the US aren't primarily
insurance - they're employer-paid benefit plans that cover
routine costs as well as covering premiums for shared risk.
Mixing the two systems leads to lots of policy confusion.

The tax advantages primarily come out of social policy
during the World War 2 government interference in the economy
and the industry and public attitudes gradually adapting to it.
The other cost advantage of employer-paid routine health costs
are that the employer may be able to negotiate a better price
by buying in large volume, whether directly or through
an insurance company that also negotiates better prices
by buying in large volume.   In return, there's the extra
cost of bureaucracy, though in much of the US, the
extra hostility of bureaucracy reduces use of the system :-)
Employers do also benefit from higher productivity of healthy 
workers with healthy families, and they need to do something
to manage the costs of care for work-related injuries.

Without massive employer-funded health care, most people
would be more likely to pay for their routine costs directly
and buy insurance for excessive costs.

Before the institutionalization of the insurance and banking
businesses a century ago, large numbers of Americans belonged
to mutual benevolence groups - unions, Masons, Moose Lodges,
farmers' granges, the Chinese Mutual Benevolence Association, and churches.
They provided a number of services to their members in addition
to social interaction, typically including money-lending
(new immigrant comes to the country, needs loan to start business)
and also help for sick and injured members and support for 
people who couldn't find work.  Medical costs themselves
don't really correspond, because medicine was different;
nursing was something your family or friends generally did,
and modern medicine hadn't quite emerged except for 
fixing some injuries.   The main exception was tuberculosis,
and TB sanatoriums were often run by fraternal organizations,
though some were government-funded.




				Thanks! 
					Bill
Bill Stewart, bill.stewart at pobox.com
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