Sunday, March 26, 2017

Sick People: Unite!

You've heard the ironic quip, "I lose money on every sale, but I make it up on volume."

That inanity came to mind when I heard Tom DeLay opine on how to skin the "preexisting condition" cat:

"I would take Rand Paul's idea that I heard last night: Come to the Senate floor next week, and pass a bill that allows people with pre-existing conditions to join pools, associations, co-ops, to buy insurance, and show that you're going to remove the government and the regulatory structure away from it, so that the insurance companies can sell to people the kinds of policies they want."

Because if you can just let all those sick people organize, to band together as a big pool of sick people, then, by golly, the insurance calculus will change, and those sick people will magically be able to buy "the kinds of policies they want."

No, really. Imagine the market power all those sick people would have if we'd just allow them to join forces without any government meddling. What insurance company wouldn't want to insure sick people if only there were enough of them?

As for "the kinds of policies they want," you might presume that means polices that cover their health conditions.

Except that is not what DeLay means. DeLay means not policies that cover their conditions, but policies they can afford. And because we are talking about people who are sick, these are mutually exclusive outcomes when the sick are segregated and delivered to the tender mercies of insurance companies.

Come to think of it, when DeLay says "insurance companies can sell to people the kinds of policies they want," the "they" perhaps refers to the companies, not the customers. Which is why you need to get government and its infernal regulating out of the way.

This is, truly, how many on the political right think, and they're not embarrassed to say it on national radio.

Reminds me, too, of how in the years leading up to the financial meltdown, reams of low quality subprime mortgages were bundled into tranched securities. The lower tranches of those securities, consisting entirely of crappy loans top to bottom, were then themselves rebundled and retranched, sometimes through multiple iterations, sometimes forking off into CDOs or other exotic instruments, until what came out the other end were triple-A-rated investment grade securities. All it took to get to the desired result was a sufficient number of iterations through the sausage mill. It probably all made perfect sense to Tom DeLay.

Can't we do something like this with health insurance? No.Whether with mortgages or with insurance, there is no alchemy that turns lead into gold. You can't do it with obfuscation, either.

Health insurance works by spreading the risk widely, among the sick and the healthy, and having everybody share in the cost of paying for benefits, preferably over a lifetime. The healthy pay for the sick. It's as simple as that. They do so willingly, on the assumption that they too will some day be sick. Everybody gets his turn. It's a good bet.

The larger the insured pool, the more uniform the cost sharing, and the greater the overall stability of the system. Except that if the pool consists only of sick people, the "distributed" costs will be uniformly high, and thus not affordable. This goes against the very reason for having insurance. It's like having an auto insurance group consisting only of policyholders who will total their vehicles this year. What good is that?

Risk pools made up exclusively of sick people don't make sense, except to insurance companies, which profit by collecting premiums but not paying benefits.

Or to governments, which want to pretend they are subsidizing premiums paid by members of "high risk pools," but with a way of limiting that subsidy to something less than necessary. High risk pools are a way of doing things on the cheap, and you get what you pay for.

High risk pools, whether government run or not, don't magically reduce risk or lower costthey just move it around. There is no alchemic benefit to such slicing and dicing. Because eventually everybody will be sick, segregating the sick into separate groupings guarantees that each of us will one day be unhealthy outcasts.

It ought to be clear that what's good for insurance companies isn't good for society, but you can be sure that a lot of ostensibly smart people don't get it.

Copyright (C) 2017 James Michael Brennan, All Rights Reserved

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