Wednesday, November 23, 2005

Michael: Socialized vs... um, Socialized

There is little that is more nonsensical than the argument against universal healthcare coverage that goes, "We don't need socialized medicine in this country because..." As if the system of healthcare we currently have isn't 'socialized'. We have a 'socialized' medical system in this country already. It's just a crappy, peicemeal, unequal 'Socialized' system. The choice this county has to make is not between 'socialized' medicine and 'private' medicine (the only people who have private medical care in this country are the uninsured, and they would prefer almost anything else), but between efficient, lower-cost, equitable 'socialized' medicine and ever-more expensive, bloated, profiteering 'socialized' medcine that leaves millions of Americans out.

'Socialized' means under group control. Specifically, in this context, the word is a proxy for 'government' control. In either case, it denotes a mechanism of shared benefits and control in order to spread risk. That is exactly what insurance is. Our current system is 'socialized' to the core through the mechanism of insurance. Recall that Social Security is insurance. Workman's Comp is insurance. Unemployment Insurance is, of course, insurance. Most of the social programs that insulate American families from risks both catastrophic and chronic are insurance programs at base. We simply allow private insurance companies to extract a profit from their management of people's health insurance policies.

Using the private market to manage people's insurance is surely more efficient than having government do it, right? Well, not so much. The overhead costs of private health insurance, including management, infrastructure, wages, and profits, averages about 25% of revenue. Government run Medicare/Medicaid/SCHIP programs? Less than 5%. How does an industry that is comaratively so grossly inefficient stay in business? By spending millions to lobby against the expansion of more efficient government systems.

But surely there is a good reason to have private companies in the insurance, i.e. 'socialization', of certain risks? There is. Moral risk. When a loss is insured against risk, there is a tendency of people to treat those risks in a more cavalier fashion, either by neglecting to take reasonable steps to avoid the risk, or to positively use their insurance against risks to take unreasonable, or even fraudulent risks, knowing they have nothing to lose. A classic example of a moral risk meltdown due to poorly overseen insured risk is the Savings and Loan Bailout of the 1980's. The GOP significantly reduced government regulation and oversight of how these institutions managed the risks the government insured them agaist. The result of was taxpayers left holding a 100 billion dollar tab. Private interests have a stronger incentive to police such moral risk to ensure that they don't lose their money, cause they can't print more.

But moral risk is not a major factor in health care insurance. People don't choose to get sick or have accidents. Fraud does occur, but it is usually a conspiracy between providers and patients which private interests are in no better situation to detect or punish than the government. People really don't want to take pills, or be shut up in hospitals, or have major surgeries. Moral risk is just not a major factor in health care insurance, any more than it is with flood insurance; people don't flood their own properties on purpose all that more frequently than they choose get hit by a bus on purpose. Flood insurance is thus a good moral risk, increasing the productive use of areas that might not be developed fully if private insurance had to be underwritten. Likewise, universal government insurance allows the full development of human capital that private insurers might consider to not be worth underwriting.

The flip side of moral risk is a problem in health insurance, however: bad faith. Bad faith is when an insurer withholds payment for an insured risk without good cause. This tends to happen a lot in health insurance: it's the reason you likely hate your HMO. The reason it happens is because the private profit incentive combines with people's natural aversion to medical treatments to produce the bureaucratic hurdles and hoops that cost a large chunk of that 25% average overhead. The result is predictable; people just give up trying to get needed medical services because it's such a pain in the ass and, well, they often really aren't all that excitied about having the service in the first place. The government, having no incentive for bad faith, and no need of profit, thus comes in at a svelt 5%.

The result of all this bad faith is a failure to invest in what might be called epidemiological risk. Large numbers of people simply don't take very good care of themselves. Discouraged from engaging in preventive care by tightfisted private insurers, and lacking substantial investments and motivations to make needed lifestyle changes on a massive scale, people suffer poorer health outcomes because there is no single insurer with an incentive to reduce costs by addressing such risks. The solution is, of course, to have just one main health insurer, the government, who will be empowered and encouraged to create wise policies to reduce epidemiological risks, thus reduce costs to the insureds (the taxpayer), and improving Americans' standard of living.

So if you want the flabby, hyper-expensive, 'socialized' medicine that most Americans can not participate in, and that suffers of massive bad faith and out-of-control epidemiological risks, then don't change a thing about the American healthcare system. If you want 'socialized' medicine that is lower cost, administratively efficient, operates in good faith to insure every American, and addresses epidemiological risks aggressively to improve the health of all Americans, you want 'socialized' universal government run healthcare. If you really believe that 'private' healthcare is better, drop your health insurance coverage now and join the over 40 million Americans who are currently enjoying the benefits of ideologically pure medical care.


At 2:19 PM, Blogger A Christian Prophet said...

Over on The Christian Prophet blog the Holy Spirit's message today explains why government health insurance has no redeeming spiritual value and why health help programs must be voluntary.

At 4:17 PM, Anonymous Blue Cross of California said...

Universal health care would be a great aspect to our health care crisis and I hope we can soon adapt to that type of health care system.


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