So. Months ago I started this health-care cost topic. We started off on the topic of routine costs.
And to summarize the main point of that post: Routine health care — all those preventative check-ups, and the care and treatment of run-of-the-mill colds and flu and stubbed toes is not something we actually “insure”. These are planned expenses.
Insurance is the means of having everyone contribute a modest amount to a funding pool, so that the few who suffer the unlikely catastrophe are not devasted by the enormous costs. So, we insure against a car wreck — many drivers will never be in one. But gasoline and oil changes are part of our routine costs — costs every driver will incur, no matter how careful you are.
When we say we have “insurance” to cover routine health care costs, what we really have is a pre-payment plan.
(The same can be said of larger unplanned-but-still-expected expenses. Sprained ankle, the weird stomach thing that felt like a heart-attack but you went to the ER and it turned out you were okay, the routine delivery of a healthy baby. You might not know exactly when and what expenses are coming your way, but come on, you knew something was bound to happen. You set aside an “emergency fund” of cash to cover these odds and ends.)
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On the other end of the health care spectrum are insurable costs. Not everyone will get cancer, or suffer massive injuries in a car wreck, or contract some other equally expensive ailment. Insurance to cover the cost of treatment makes sense. We all contribute a modest amount towards paying those expenses, and if you are the unlucky one, the pool of funding is there to help pay your enormous bills.
–> Now it should be observed that as with home insurance or car insurance, there are factors that affect how likely you are to suffer the big disaster. Within reason, it makes sense to allow the health-care corrollary to safe-driver and good-homeowner discounts. Recognizing, however, that unlike obeying the speed limit or installing a sprinker system, a significant chunk of a person’s health is not within their control. Like being male & under 25, slightly elevated rates are understandable, but it isn’t fair to price a guy completely off the streets for something he can’t control.
But here’s where health insurance differs entirely from car and home insurance: You can’t buy a cheaper body.
If my budget is tight, I can choose to live in a small home and drive an inexpensive, easily-repaired, fuel-efficient used car. My insurance rates will, correspondingly, be lower. Likewise, my routine maintenance costs will be lower.
(Indeed, how do we measure a living wage? We aren’t looking for a wage that will pay for a mansion and a cadillac. We look at whether it will cover such basic needs as modest housing and frugal transportation.)
With health care, we aren’t so lucky. If I take a big pay cut, I can’t go sell my McMansion body and rent a modest little apartment of a body instead. I can’t take my late-model BMW body to Car Max, and come home with a cute little ’92 Civic in exhange. I can’t even park my gas-guzzler body in the driveway and take public transit for all my bodily needs instead. Indeed, for the most part I never got to choose whether I wanted an expensive body or frugal one to begin with. I’m stuck with whatever body I was given, and bodies aren’t given out according to income.
What does this mean for health insurance?
It means that the point where health care becomes unaffordable depends on your income. Partly a living-wage problem, of course. But let’s imagine a worker earning enough to cover routine appointments and modest amount of emergency health-care besides. The illness that is an inconvenience and a bit of a strain to a wealthier family is something that would be absolutely unaffordable to a person of more modest means.
(Check out the wheelchair world for a specific example: Some people can just go out and buy the chair that suits them best, even though it costs something in between a high-end racing bike and a quality new car, depending on their needs. Other people have to hope someone, anyone, is willing to fund a chair approximating what they need to function in a healthy manner.)
It also means that the ability to afford insurance premiums varies. How much of your monthly budget can you set aside?
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Two very obvious points, I know. And hence the importance of sliding-scale charges for health care. If we mean to have a fair health care system, it is reasonable to give discounts to people who cannot afford as much. Kind of the way we have student discounts for opera tickets.
Does that mean we have to go with a tax-funded, nationalized health-care system? Not necessarily. Physicians could be allowed to post discounted prices. Insurance companies could be allowed to issue policies where the premiums and deductibles are percentages-of-income rather than flat rates. Employers that offer health insurance benefits could be allowed to vary the “employee’s share” of the expense according the employee’s income. If we are creative enough to think up double-coupons, Sam’s Club, and Early Bird Specials, we can figure this out, too.