Hunter, this was the second passage of your post that caught my eye:
My answer, based on my time as an analyst at a large insurance company, is that we should abolish health insurance altogether or make it work more like auto insurance. Basically, it would just cover the big stuff. I say that because the pricing mechanisms between providers and patients are utterly screwed up because of contract negotiations between big insurance companies and hospitals, doctors, etc. Hospitals set a price and insurers negotiate to pay a percentage of that price. Then a cycle sets in. The price keeps increasing and the percentage keeps falling as the two big forces fight it out. The result is that you get an unreal price that no one pays EXCEPT for the people without insurance or those with bad insurance.
I agree that we should make health insurance more like car insurance in that it will cover primarily catastrophic costs. A lot of what we call "health insurance" today is more accurately described as "pre-paid health care."
I think that making health insurance cover primarily the catastrophic and letting people pay out-of-pocket for routine care (like you do with a policy with a health savings account) will help bring costs down for insurance companies in a couple of ways.
First, insurance companies will need to employ fewer claims processors since they will only have to monitor payments for the catastrophic instead of the routine. I agree with lefties who claim that administrative costs in the private sector are too high. Whether turning things over to the government will reduce those costs is another matter. (Speaking of which, I'd like some lefty to explain to me why you believe that government will run health insurance more efficiently than the private sector. The government can barely get right something as relatively simple as delivering the mail, and you want it to be heavily involved in something as complex as health care?)
But I digress. A second reason that more people paying out-of-pocket will reduce costs for insurance companies is that they will have more information when it comes time to negotiate with providers. The reason is that as people pay more out-of-pocket, providers will have to advertise their prices. Insurance companies can then use those prices to ensure that the providers aren't ripping them off. Consider the following example: You are involved in a bad car accident requiring surgery. You've quickly hit your deductible, and now the insurance is paying. You later need some follow up visits to your doctor, which the insurance is paying for. The insurance company will be able to see what the doctor charges for an office visit since the doctor advertises his prices. This will keep the doctor from over-charging the insurance company.
Car insurance works something like this. Since we pay for a lot of car repairs out of our own pocket, auto-body shops and repair garages advertise their prices. I recently spoke to one of the bigger car insurance companies, and they have a program in place to monitor such prices in a given area. When one of their customers needs major repairs, they check the price being charged by the garage doing the repairs. If they think the garage is charging too much, they either negotiate a lower price, or send the customer elsewhere.
So, like I said in the other post, more Honda Civics in health insurance!
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