Is Health Insurance Socialism?

[HydrogenBond]

The American Healthcare system is based on capitalism. But if one looks at how insurance works, it uses a socialist approach. In other words, everyone is required to pool their money (roughly similar amounts for similar services) irregardless of one's use of the health care system. In a free capitialist system, one should only pay for what they consume. Those who who consume more resources should pay more. But in the insurance commune the healthy are required to suppliment the unhealthy.

For example, consider the commodity, orange juice. If I only drink one gallon every two weeks and someone else drinks one gallon per day, we are both required to pay for 7.5 gallons every two weeks. This is not free market capitalism but socialism. The socialism approach increases the incentive to drink more orange juice, to get your money's worth, causing the price we pay for OJ to increase faster than inflation.

In the social insurance situation, working hard to be healthy is not rewarded by the commune. One's hard efforts are put into the commune pool, where those who are slack with their health will recieved more than their efforts would dictate in a capitalist situation. The result is the harder worker to be healthy losing incentive and gradually getting lazy with health, lowering the amount of healthy output, causing the commune's resources to get scarce or prices to rise.

Maybe insurance premiums should be broken down into their capitalists and socialists components to reflect the free market price and the supplimental socialist cost/benefit. If one is in the black with respect to the socialist benefit they are given the choice to contribute to the commune's health charity or not.

[HydrogenBond]

Consider if the insurance industry was require to go capitalists instead of socialist. The healthy would get lower capitalists premiums but may still contribute to the commune pool, but less than before. Those who are used to consuming extra resources beyond the free market nature of captialism, would have to cut back toward the free market level. This would create an excess of medical goods and services, causing the price to drop for everyone. It comes down to demand side insurance capitalism driving prices down. Supply-side insurance socialism causes the prices to increase.

[HydrogenBond]

I am not trying to be cold blooded with respect to healthcare. We are at a crossroads for healthcare with the debate centered around the pro's and con's of free market versus socialized medicine. The current situation is already a compromise between the two because of socialist insurance. I still think demand side economics is the answer. The government needs to help set up, but not administer, buying groups for its citizens. The result will be lower prices for the same level of goods and service, since the buying groups can negociate for direct purchases at wholesale prices. The supply side will need to get more efficient to meet profit projections as the price drops. What will be left will be cheaper and more efficient health care.

[Buffy]

Originally Posted by HydrogenBond

... But if one looks at how insurance works, it uses a socialist approach. In other words, everyone is required to pool their money (roughly similar amounts for similar services) irregardless of one's use of the health care system.

In the social insurance situation, working hard to be healthy is not rewarded by the commune. One's hard efforts are put into the commune pool, where those who are slack with their health will recieved more than their efforts would dictate in a capitalist situation.

Have you tried to obtain insurance lately? If you have anything wrong with you at all, you may not be able to get insurance at any price except through government supported "high-risk" insurance pools. Even if you can get it, you may be slapped with a long list of pre-existing condition exemptions that basically say if you have a chronic condition and it causes problems, the insurance company won't pay for it.

This situation has been getting much worse as companies force their workers to become contractors who do not get company health plans, and of course the growth in smaller employers who are exempt from requirements to provide health plans are both resulting in huge increases in the numbers of people who must obtain their own insurance and are at the mercy of these insurers who basically charge individuals twice what group health plans charge once you figure in all the exclusions mentioned above. As a result, record numbers of people are going without insurance, which means when they get sick, we *all* pay for it (just like shoplifting).

I find it hard to call this sort of behavior on the part of insurance companies, "socialist." Its the ultimate in capitalism.

You might want to study the situation in more detail: Just from a macroeconomic view, the main thing you're missing is that that "glass of orange juice" is only something you need every 5-10 years at most, and when you need it, it will cost you 2 years salary. That's the kind of expenditure that insurance is built for, capitalist or socialist.

Actuarially speaking,
Buffy

[eric l]

From what has been posted here so far, I get the impression it is mainly about the American situation relating to Health Insurance. From a European point of view, the American Health Insurance is almost non-existing !!!
And if, to Americans, European Health Insurance is Socialism, then I'm a socialist and proud of it !
The whole idea about Health Insurance is mutual help; by comparison insurance by privately owned companies is not much more than instituionalized gambling : if there is any risk that your job or your environment or your age is more liable to making the company pay, you'll have to pay more.
It's a bit like with democracy : the idea of one man (or woman) - one vote does not garantee that our leaders always make the best decissions; but all other systems that have been tested in the course of history turned out even worse.

[Pyrotex]

Originally Posted by HydrogenBond

The American Healthcare system is based on capitalism. ...For example, consider the commodity, orange juice. If I only drink one gallon every two weeks and someone else drinks one gallon per day, we are both required to pay for 7.5 gallons every two weeks. This is not free market capitalism but socialism. ....

Your example of an explanatory model is way off base. Totally bogus.

Let's fix it. People only drink orange juice when they suffer from Vitamin C Deficiency (VCD); otherwise they don't drink it at all. An attack of VCD can kill you or lead to permanent disability. Only 10% of the population ever comes down with VCD. A gallon of orange juice costs $50,000.

Now, THIS is a realistic and useful model.

Unfortunately, 90% of people who come down with VCD cannot afford a gallon of orange juice, and become disabled or deceased. This means that in each generation, 9% of the population gets disabled or dead from VCD and only 1% gets VCD and recovers (because they have the $).

Another fix: nobody tells anybody what to do about this. However, the general population (say 51%) vote to instigate an "insurance" program. Everybody pays $100 a year for 50 years. Total: $5,000. Out of this pool of money, everybody who gets VCD now gets their gallon of orange juice. And nobody has to worry and fret that they or their family members will suddenly die from VCD, or become disabled (which would cost the family $10,000 a year in care).

So, what's wrong with this arrangement? And that's all it is -- an arrangement. A social contract. We do the same thing with police and fire services. You pay for protection whether you ever need it or not. You benefit from a lessening of worry and concern, which frees you up for your personal "pursuit of happiness".

This isn't "socialism". What it is, is sound business management.

[jackson33]

mandated, required and government control are socialistic symbols.

the US insurance programs are all voluntary, un-mandated and there is no government involved. even the group policies a company or organization provides are optional. if you are on social security, a government program, you are liable for Medicare payment or insurance. even here you can opt out, but lose the SS benefits.

age and pre-existing conditions, occupation do require additional premiums.
an 80 yo skydiver, with a heart condition is not likely to get insurance in the public sector. however under the government program, SS/Medicare, he/she is eligible (if had worked 10 years and so on) and pay the same rate as the
60 yo grandma that knits.

every person in the US, is provided medical service via any emergency room in the country. this has a combination of reasons, but primarily a mandate of government.

the US is a mix of Capitalist and Socialistic ideas. the notion of some in politics to Nationalize will not cure the built in problems created, which boils down to government control. those on Medicate and Medicare are limited to who or what type doctor they may see, the doctors and hospitals are limited to time spent, quality and methods they can use. the idea of a National System is to centralize these controls and eliminate any ones personal preference for quality.

[Michaelangelica]

Why are Americans(USA) so frightened by the word "socialism"?

[InfiniteNow]

Originally Posted by Michaelangelica

Why are Americans(USA) so frightened by the word "socialism"?

I think it would be inappropriate to generalize that all Americans have such a fear... Why do you see it as an issue specific to Americans?

[CraigD]

Originally Posted by HydrogenBond

The American Healthcare system is based on capitalism. But if one looks at how insurance works, it uses a socialist approach. In other words, everyone is required to pool their money (roughly similar amounts for similar services) irregardless of one's use of the health care system.

This is an incomplete description of how health insurance works in most states in the US, and the few other countries with which I’m acquainted.

What HydrogenBond describes is know in the insurance business as community rating modeling. Under this model, insurance premiums (payments by the insured, or, more typically, the insured’s employer) are based on the expected utilization cost of all people living in the insured’s geographic area.

Since the late 1980s, purchasers of insurance – mostly employers and brokers – have aggressively sought, among other things, to obtain the greatest insurance benefits (services) for the least money. One of the ways this has been done is to offer employers adjusted community rates based on demographic factors from age to behavioral factors, such as smoking. Another is cost sharing, where the purchaser pays a lower base rate, but must pay an additional fee based on utilization. Cost sharing is also typically passed to the insured in the form of copayments and deductibles.

The competitive pressure to provide insurance for less the traditional community rate has been intense, causing a substantial “die off” of insurance companies unable or unwilling to do so. Experts are divided on whether this change in the industry is good or bad. On one hand, incompetent companies have been driven out of business, and many jobs have been created to design and administer increasing complicated insurance products. On the other, people with “adverse demographics” – the old, or people with even minor pre-existing health conditions, are often unable to afford health insurance, and may as a result receive dangerously sub-standard healthcare.

One can, of course, completely opt-out of having health insurance, and receive very high quality healthcare on a fee-for-service basis, but such a choice is available only to a small percentage of the population, the most wealthy.

Originally Posted by jackson33

the US insurance programs are all voluntary, un-mandated and there is no government involved.

It is true that, in the US, no one is required by the government to provide insurance, and no one require to purchase it. I don’t think it’s accurate, however, to say that there is no government involvement.

Insurance companies require special business licenses in the 50 US states and the District of Columbia. Getting and keeping such a license is a lengthy and complicated process, requiring cooperation within-depth financial, medical, and ethical audits by the various state insurance agencies. The rate that the insurance company charges for its services, what services it offers, and how it advertises them must be approved in advance by the state. If the company refuses to cooperate, even absent evidence or allegation of fraud or similar crimes, state law (at least, to my knowledge, in DC, MA, and VA) permits the agencies to, through the state’s governor, seize the companies monies, close its places of business and take its records and equipment, and even jail and prosecute its officers and employees.

Although these laws exist, my experience with state regulators is that they are cooperative and helpful almost to the point of being wishy-washy. I’m aware of one business in the state of MD that has been substantially adversely audited for over 20 years, but has not suffered legal sanctions of any kind by simply claiming each year “we’re working to correct that, and expect to do so within a year”.