I'm not sure how it does
because you said this:
That's what insurance is all about though. Covering things that you will probably not need, but that if you do would be too expensive to deal with out of your own pocket. If you are covering things that happen all the time, you should not be using insurance to pay for it because all you're doing is making it more expensive.
This isn't really true in this case. The more you use it, the more you benefit. Of course it's also beneficial to those who put in more than they take, for exactly this reason; as a safety net.
I'm sorry. I wasn't clear enough. My statement was in reference to your claim that this went against something I'd said previously. I have never said that insurance doesn't benefit those who make the most use of it. Quite the opposite, my argument is that this is one of the problems with insuring things that are not both rare and expensive. Insuring the ordinary is a problem because it becomes the means to do something you do regularly, thus amplifying the increased total cost for insurance itself. It always costs more for the whole group to insure themselves then the insurance will pay, thus always being a losing proposition for the group as a whole. It's only a winning proposition for those within the group who "win" the lottery by having something bad happen to them which is then covered by the insurance. Everyone else loses, and the group overall loses. It's one of those situations where each individual, pursuing their own advantage, hurts the whole, and in the long run, themselves. It just doesn't seem like it at the time.
It's gambling. The house always wins, the gamblers as a group always lose. While individual gamblers can win, it's at the cost of a whole lot of other gamblers losing, with the balance being more loss than gain. Gambling makes sense only if you can win a significant amount of money to make it worth while. So everyone plays the lottery (for example) knowing that their odds are low, but the prize is worth taking a relatively inexpensive shot. Comprehensive health insurance is like telling every single gambler that they'll just take $20 from them every day and pay them $19 in winnings. No more, no less. It's a guaranteed loss for everyone. We're just paying the overhead for the insurance for no real reason at all. It's stupid as hell.
Obviously, I'm not comparing lunch directly to health care, but the same principle applies.
Not really. Even if it does drive prices up (which seems reasonable enough), it'll still be cheaper if everyone uses it excessively.
No, it wont. It will become progressively more expensive the more people use it, in exactly the same way you'll lose more money if you "gamble" $20 in the system I mentioned above. Every time you use it, you are paying a percentage of the cost to the insurance company (for profit and overhead). You're paying them to be a middle man. That's it. And the more people who pay this way, the more inelastic the demand becomes and thus the higher prices will become in addition to the cut the insurance company is taking. It's lose/lose. Again, I'm just talking about comprehensive care, not major medical style insurance.
Why? Because it's cheaper to prevent a problem than to fix it. I'm sure you can find plenty of diseases that can be prevented, or cured early on for a few dollars, but by the time they are a real problem cost tens, or hundreds of thousands of dollars to treat. Even if the price of each individual thing goes up, the overall cost will be lower.
This is a myth though. It doesn't work that way, never has worked that way, but some politicians and pundits will claim it does because it's politically advantageous for them to get you to think this is true. It cannot be less expensive in the long run. I know this flies in the face of what you've been told, but you've been told a lie. Well, not really a lie, they just only tell you half of the true.
It is true that if someone who contracts a major illness had gone to a doctor earlier and the illness had been detected and treated, the total cost would be much lower. But that's for that one person, after the fact. The problem is that since we can't know ahead of time which one person out of 10,000 will be in the early stages of this sort of illness in any given year, we have to test every single person for every single possible illness every single year for this to work. The cost to do that is vastly higher than the cost to treat the one person who will get sick.
Think about what percentage of people each year contract an illness that costs say $100,000 to treat. Now think about how much it would cost to test everyone ahead of time for that illness. If 1% of all the people in the country will get sick with that in a given year, the cost to test for it would need to be $100 to break even on cost. Guess what? The odds are likely lower than that and the costs higher. It's a nice sounding theory, and it does sell well when some charming politician says it from a podium, but in the real world it simply does not work. We really are better off waiting for people to get sick and then treating them, then trying to detect when people will get sick ahead of time.
That may not get cheering crowds to jump to their feet, but it does have the virtue of being true. Edited, Mar 22nd 2013 7:21pm by gbaji