I have been trying and trying to wrap my head around PK's blog post on why markets can't do health care. Tyler has already discussed some aspects of this in his very gentlemanly way, but I want to focus on something different. In the middle of the post, PK says:
"insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there’s a widespread sense that our fellow citizens should get the care we need — not everyone agrees, but most do — this means that private insurance basically spends a lot of money on socially destructive activities."
I really don't understand parts of this. Look beyond the emotionally loaded "deny claims" and "avoid coverage" phrases. How does denying coverage to high risk people use a lot of resources? Does the case for the government plan really turn on eliminating the insurance physical?
I also can't understand what "our fellow citizens should get the care we need" means. Should the "we" simply be a "they" or is it that everyone should get the same care I want for myself?
Then there is the claim that "private insurance basically spends a lot of money on socially destructive activities".
I assume this last bit refers to reviewing claims for their validity and screening applicants. Would a different approach not review claims for their validity? And if applicants are not screened and price discrimination based on risk is not employed, doesn't that simply mean that the low risk people will have to subsidize the high risk people?
Where is the free lunch here?
Are we really considering providing the same policy to everyone at the same "cost"? So a 45 year old overweight male smoker, drinker and couch potato "pays" the same price as a 30 year old female non-smoker, non-drinker yoga instructor? If so, then the scheme is just plain "stupid" (if I can be permitted an Obama quote here).
If rich people really have lower risks than poor people and the insurance is being funded through progressive taxation, then it's kind of a double whammy for them.
But maybe that's just gravy?