Monday, August 3, 2009

Health insurance

Health insurance companies have never been overly popular but they are currently being abused even more than usual as liberals try to rally support for their reform plans by scapegoating them. Here is Kevin Drum:

Health insurance is a weird industry. Healthcare itself is provided by doctors, nurses, hospitals, pharmaceutical companies, hospices, and device makers. Insurance companies do none of this. They don't do research, they don't perform surgeries, they don't change bedpans, and they don't make diagnoses. They're just middlemen. All they do is pay the bills after marking them up 30%. They don't do anything at all to make healthcare better or more efficient.

However the claim that insurance companies just mark the bills up 30% is false. They first negotiate the best price they can get from the doctor or other provider. This is generally better than an individual could get. For example a couple of years ago I had hernia repair surgery. The surgeon's list price was $12916.00 but the insurance company price was $363.38 which is a 97% discount. I don't mind paying a 30% markup to get a 97% discount. Of course this is an extreme example but insurance companies routinely get prices which are unavailable to individuals. In fact this is a big part of the reason it is risky to be uninsured, if you need medical care you will be gouged.

This sort of dubious argument from the left does not increase my confidence in their health reform plans. Perhaps it is fortunate that they may not pass.


  1. A self-employed member of my family has a congenital heart condition and skeletal damage caused by a pituitary adenoma; so he cannot at present obtain health insurance. He once had an individual policy, a conversion obtained when he became too old to be covered by his parents' group policy. He eventually had to give it up when it became too expensive; its premium was rising 60% every year, compounded.

    My own group policy once covered fee-for-service. My experience was that no negotiation occurred between the insurer and the provider. Instead I would get a bill from the provider, which the insurer would declare "unreasonable" and then base their payment on a smaller figure, leaving me to cover the difference, in addition to my co-payment. My current group policy is with a Kaiser HMO, which is essentially a single-payer plan. It has worked just fine. Medicare is a government-sponsored single-payer plan that I find also works well.

    In short, Drum's view of insurance companies is much closer to my experience (and that of many others) than are those of Shearer and oTUHV59....

  2. Here is a 2001 NYT article on how the uninsured get gouged.

    Around here generally the first time you see a doctor you find out if they will accept your insurance companies rates. If not you find another doctor if you aren't willing to pay extra.

  3. And here is a 2004 USA Today article on how the uninsured are gouged.

  4. The uninsured and the underinsured do get gouged, true. Many people just can't afford to have good health insurance on their own. But when they buy a health care policy they can afford, and have a major illness, their share of the costs are higher. This can leave them without assets, a bankruptcy, and eventually, after assets have disappeared, they are picked up by Medicaid and Social Services for their living expenses. Taxpayers still end up paying the whole thing anyway.