Aug 22

Health care and health insurance are not the same thing.   Yet our increasingly contentious public debate is largely addressing these issues as if they are, and that is a chief source of problems with our resulting public policy prescriptions.

I’m going to define health “care” as all of the things we do (or should do) to take care of ourselves in a planned fashion.   Things like annual physicals, eating well, getting exercise, taking our prescription medications, and so on.   Taking personal responsibility for these things reduces the risk that we will have a physically devastating event down the road.   But to protect ourselves from financial devastation, health “insurance” is entirely appropriate.

Notice that in the case of health “care” the actions we take have (or should have) a high probability of happening.   Yet in the case of a medical catastrophe (heart attack, long term disability, etc.), we all hope that the probability of that happening is very low.

Because of the probabilities, insurance should play an important role in the latter, but has no place in the former, with one exception:  an insurer would likely be willing to lower their price if they were assured that the buyer was taking “care” of themselves – because the risk of them having to pay would be lower.   Other than that aspect, why should an insurance company be involved in what doctor I want to see, and what services they will provide to me, and what that will cost?  Why shouldn’t “care providers” be free to advertise and compete for their customers like the sellers of any other product?   And for that matter, why heavily regulate insurance companies and hamstring them from providing a whole host of products at different levels of service and pricing?

Health Savings Accounts are the answer.    Very simply, the annual money that would typically purchase a family insurance policy is split into two parts:  one part is placed into an account to be spent on “care” and the other part purchases “catastrophic insurance”.  The account holder spends money in the account with no external interference or paperwork, but sleeps well knowing that if a huge expense comes up, they are fully covered.  Most notably, they keep any unspent money that accumulates in the account.  Consumers now have every incentive to be fully informed and involved in their purchases, and health costs drop from the service provider competition that ensues.

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