
Acts of God - llambda
http://raganwald.posterous.com/acts-of-god
======
raganwald
An enormous number of words just to say, "Health Insurance is anti-selective."
Which reminds me of a Jazz story. Miles Davis was chiding John Coltrane for
the length of his solos. John shrugged, "Once I get going, I don't know how to
stop."

Miles rasped, "Try taking the instrument out of your mouth."

~~~
tptacek
Did you seriously just preemptively write the thread-leading snarky comment
for your own post? Nice try, Reg Braithwaite. But it won't work: _how dare you
compare your blog post to a Coltrane solo?_

~~~
srl
And here I almost missed that, and was about to DV him for an unnecessarily
high snark/signal ratio.

------
untog
The only criticism I have of this comparison is that, well, maybe people
_shouldn't_ be living in flood plains. Yes, I understand why people want to
live near Winnipeg and that there's limited space, but we may reach a certain
point where we say "tough, the government won't bail you out for living in an
at-risk area". Certainly, in New York State the Governor has announced plans
to buy up waterfront land from people wrecked by Sandy to make sure that
others don't make the same mistake.

Health isn't the same. We can't say "well, maybe you shouldn't have gotten
cancer" to someone who develops it through no fault of their own. We can
choose where to live, but we can't (often) choose our health.

~~~
bmmayer1
You can certainly choose not to smoke, and to exercise, and to take care of
yourself in general. We do introduce a principal agent problem into the mix
when we start letting people get their healthcare paid for by other people.

~~~
untog
Yes, and that's why I added "often" to my last sentence. But while you can
certainly avoid some illnesses by making good life choices, it's still out of
your control. You can have never touched a cigarette and still get lung
cancer.

In fact, that opens up another reason for public healthcare- many illnesses
are caused by society as a whole. That second hand smoke from the man sat next
to you at the bus stop is an individual thing, but the pollution coming out of
the power station on the edge of town is a far broader issue.

You could say "fine the power company!", but that's short sighted- everyone
benefits from the power they provide. As a society we have decided that x
level of pollution is acceptable in order for us to have y level of comfort.
The side variable is the number of illnesses caused by that pollution, and I
think there's a strong argument that the costs of that should be borne by
society.

~~~
bmmayer1
I agree, but eventually everyone does bear the cost as individuals.

------
zacharyvoase
The points I got from this were:

1) People enjoy living in flood plains; 2) People who live in flood plains
can't afford flood insurance; 3) Therefore, it's everyone else's job to
compensate them for the cost of flood damage.

Finally, this is used (somehow) as an argument for universal healthcare. This
logic seems faulty.

~~~
raganwald
You seem to have an ideological objection to the argument. Maybe you should
simply state that you are perfectly okay with a city of people being left in
dire straits (heh) when the river overruns its banks or the levees break.

I can understand that, even if I don't agree with it, and that makes a lot
more sense than saying my argument is faulty when what you really believe is
that a society that takes care of its own is faulty ;-)

~~~
SlackerATX
People are naturally risk adverse. Government subsidized flood insurance
incentivises people into living in locations they wouldn't otherwise live. The
free market is telling people not to live there because it's prohibitively
costly. Government puts people's life in danger by manipulating the cost of
living in dangerous places. It forces society to fit the bill for the endless
cycle of destruction then reconstruction.

Besides the fact government interference in the insurance market does more
harm than good to those it intends to protect, the wealthy are the ones that
most benefit from government flood insurance. The vast majority of people that
live in places where insurance is unavailable or too expensive are those
wealthy enough to build a house on a hurricane prone beach. (Think too of the
fire/earthquake prone hills of glorious sunny California)

What you're really asking for is those of average means to subsidies second
beach houses for the rich. Not only is your argument faulty it's immoral.

We're all better off taking care of ourselves than being taken care of by
morons. The government solution to a problem is inevitably worse that the
problem itself.

~~~
astalwick
The cities are already there. That's a done deal.

And of the people that live there, not everyone lives there because they CHOSE
it. Not everyone has the ability to up and move to a newer, safer city simply
because they're worried about floods.

It's just not that easy.

So, given that cities ARE built on flood plains, and that flood insurance IS
refused for those people that live there, what are we going to do? Abandon
them entirely when a flood happens?

Good luck with that. What do you think will happen to the government that says
"too damn bad, you should've moved?"

By the way, if you think Winnipeg is 'beach houses for the rich,' dude..
yeah..

~~~
gojomo
Why do you (and raganwald) portray the choice as assistance-or-total-
abandonment?

Sure, provide infrequent rescues, emergency aid, and damage-mitigation. Just
avoid complete 'make-whole' reimbursements, and make the costs come marginally
more from those areas subject to frequent, foreseeable disasters... so that
there's an incentive gradient for future moves/development to get-out-of-the-
danger-zones. Not a "too bad" all-or-nothing ultimatum, but also not blank-
checks for folly.

Otherwise, you're subsidizing more destruction and misery. _That_ has been a
real legacy of much unconditionally-'compassionate' weather aid, at least in
USA flood and hurricane zones.

~~~
astalwick
I've never lost a house because of a flood or hurricane or whatever, but I'm
pretty sure that governments don't do make-whole reimbursements. Could be
wrong..

That said, at least in Canada, I believe that federal, provincial and
municipal governments share the burden of paying for restoration after a
disaster. That is more or less what you suggest - there's a slight incentive
to move away from Manitoba (for example), because they instituted a tax-hike
to pay for their last flood.
[http://www.cbc.ca/news/canada/manitoba/story/2012/04/17/mb-b...](http://www.cbc.ca/news/canada/manitoba/story/2012/04/17/mb-
budget-gas-tax-flood-infrastructure.html)

------
lutusp
> Up here in Canuckistan, we do have private insurance. _You must_ , for
> example, privately insure your own dwelling against things like fire or
> burglary.

"You must"? Not really, unless you have a mortgage. If you don't have a
mortgage, if you actually own your house, you aren't required to buy
insurance, and you may be much better off self-insuring.

And now for the best-kept secret in the insurance business -- if an insurer
evaluates your true risk and offers a policy, it's not worth it. Why? Because
on average, you will have paid out much more in insurance payments than you
will get back in the event of a claim. You would be better off putting the
insurance payments into an investment that (a) will grow over time and (b) can
be used against future loss.

Do you doubt this? Ask yourself why an insurer would be willing to issue a
policy on which he expected to lose money. Are insurance companies profitable?
Yes, they are. Any questions?

If you have a mortgage, you are required to buy insurance. If you don't, by
all means ask yourself why you are willing to give your money away to an
insurance company instead of investing it by yourself, for yourself.

More detail here: <http://arachnoid.com/wrong/index.html#Insurance>

EDIT: If you cannot afford to lose the insured item, then the above doesn't
apply. I should have said this at the outset.

~~~
mpyne
You're right of course, but the reason I don't invest the money myself is
mostly because I do not have the skillset to do so as effectively as the
insurance company, nor do I have the time to put into learning how to properly
invest money (including diversification) such that it does grow as I would
need it to in order to be useful as an insurance policy.

I pay the insurance company extra to take on that risk of non-appreciating
value for me (and maybe to do so more efficiently than I could, so that I
actually pay less).

~~~
lutusp
> You're right of course, but the reason I don't invest the money myself is
> mostly because I do not have the skillset to do so as effectively as the
> insurance company ...

That's what the insurance companies say -- you can't possibly invest the money
as well as they can. But you can -- just put the payments into a market index
fund, a fund that tracks a market indicator like the DJIA. Such funds have
almost no, or no, overhead because no one has to decide anything -- such a
fund grows in step with the market indicator that it tracks. And guess what?
There are very few mutual funds that do as well as a bonehead market index
fund, one in which there's no fund manager to screw things up and charge you
for the privilege. Here's why:

<http://en.wikipedia.org/wiki/Efficient-market_hypothesis>

Second reason -- it's true that insurance companies invest your payments
wisely, but it's not true that you benefit from their ability to invest your
money. Only their stockholders benefit.

> I pay the insurance company extra to take on that risk of non-appreciating
> value for me (and maybe to do so more efficiently than I could, so that I
> actually pay less).

Not if the insurance company makes a profit. And most do, with your money.

~~~
mpyne
Those are great points (especially the market-indicator fund which does the
work for you). That's still the kind of thing which you would need to
bootstrap enough of a nest egg to protect against the difference in risk
between little ol' me and the Big Insurance Co.

Once you have enough money to protect yourself against one early disaster then
you could shift over completely to saving up for self-insurance. I'm not there
yet though :) I suppose it's like they say, you need to have money to make
money.

------
jeffdavis
"They're such high risk, that no actuary will quote them a reasonable price."

That is just plain wrong.

The reason it's hard to insure people on a flood plain is _not_ that they are
high risk. It's because the risk of flood is too statistically dependent: if
you get flooded, your closest 1000 neighbors probably also got flooded. Unless
you are a _very_ large insurer (to the point bailing out ten thousand homes is
just another day at the office), it's just really hard to hedge that risk.
Same thing for earthquakes.

Insurance works best on independent risks: car accidents, major medical
events, lawsuits, even fires.

"The prevailing thought is, when nature strikes, the government must bail
people out."

So the author's claim is essentially that the people of Canada want to
subsidize the risky lifestyle of people on flood plains?

I guess it's probably true to a degree; people prefer to have costs hidden
from them by indirection. But that doesn't mean that it makes sense
economically.

What might be a better analogy is flood insurance and insuring the health of
people with unhealthy lifestyles. Do we want to subsidize people who eat junk
food all the time and never exercise? For the most part, we are (in US and
Canada, at least), but I don't think that's a good idea, either.

------
jdreaver
> They're such high risk, that no actuary will quote them a reasonable price.

That makes sense. There is such a high chance of the insurer losing out on
flood insurance money, that no one would want to buy flood insurance.

> Private insurers are unapologetic about this: The prevailing thought is,
> when nature strikes, the government must bail people out. > ...the "free
> market" doesn't work properly when it comes to flood plains...

Let me get this straight. The author states that the free market fails when it
comes to flood insurance, but in the next breath states why government is the
problem. Private insurers can't possibly compete with a free service provided
by taxation. If the government wasn't guaranteed to bail people out, then they
would probably buy flood insurance in droves (or leave because, like the
author said, it's expensive to live in a high-risk area like a flood plain),
therefore driving the cost down. All of this could happen without government
intervention. Furthermore, so many people have moved there because government
intervention prevented the price system could not reflect the high risk of
floods.

I really don't see how to author can blame the free market for the lack of
flood insurance when it is the government mucking up the price system.

~~~
wisty
No, the point is - flood insurance (on a floodplain) is so expensive people
simply don't get it. You can say people should leave if they can't afford it,
or they should suck it up and buy it, but it's not going to happen. The USA
has the same problem - you couldn't get people to move from New Orleans (until
they were actually washed away), San Francisco (an earthquake zone) or Seattle
(there's a _massive_ tsunami waiting to go off there any time in the next
millennia).

People are stupid. They settle in dangerous areas, then the government will be
forced to bail them out. It's not 100% efficient, but the alternatives
(letting people suffer, or draconian regulations like compulsory flood
insurance or strict zoning laws) aren't politically acceptable. And the costs
of the government insuring people just isn't so high that it's completely
unacceptable - especially when you consider the economic cost of them not
covering people (e.g. homeless people clogging up emergency rooms because they
couldn't get their cough looked at when it was simply a mild case of
pneumonia).

~~~
jdreaver
_People shouldn't have to evaluate the risk involved in living anywhere_ ,
that is the job of actuators. Their evaluation is presented to consumers
through the price system.

If the government didn't bail out homeowners who didn't have insurance, then
the risk would be reflected in the price of insurance, and a potential
homeowner can then easily compare the utility of living in that location
relative to the total cost of owning the home versus any other location. As I
said, insurance companies don't even try to offer risky coverage like that
because they are competing with bailouts based on compulsory taxation (they
are competing with a "free" service). When the government interferes in this
case, the consumer is falsely led to believe that the cost of living in that
area is lower than it actually is, because they don't have to pay for
insurance. Therefore, more people move there than can afford it, and more
people need to be bailed out by the government when disaster strikes. It's a
vicious cycle.

~~~
pdonis
_actuators_

I think you mean "actuaries". :-) Good post.

------
pdeuchler
A well written article but it seems mostly like a re-hash of the basic
argument for government provided healthcare, not something addressing large,
pressing problems facing implementations of public healthcare. I'll be the
first to advocate the right to be treated, but this needs to be done extremely
carefully.

For example:

\- Government is notoriously inefficient. How can we fix government
bureaucracy in a sector that requires speed ("Can we operate now?") and offers
lean margins?

\- Modern insurance companies pay top dollar for mathematical modeling and
financial services. Will/Can the government do this?

\- Does a morbidly obese person qualify for a life-saving liposuction on the
tax-payers dime?

\- Do you perform life saving abortions on the tax-payers dime?

\- Do you tax progressively based upon risk and past history? If yes, does
that mean that the poor are unfairly taxed vs. the rich since the rich have
better quality care? If not, should someone who is a health nut be taxed the
same as those who dismiss their body?

Private companies can throw away people's morals, prejudices, philosophies. If
you don't like it, don't buy it. But once you introduce government (and
something mandatory) you encounter issues that were never even remotely
related before.

A lot more needs to be discussed on this topic than just "it's like flood
insurance".

Edit: Formatting

~~~
sets13
I think those are an interesting set of questions, but for the most part
easily answered by "What does the law currently say?"

\- Public health care has absolutely no say on the speed with which a doctor
can decide whether life saving surgery is required. In fact I would imagine
that knowing that the surgery will be paid for regardless of whether the
patient has a job or not might make this decision faster.

\- The government pays for top end mathematical talent in other sectors
(security) so it stands to reason that if it were necessary, they could in
health care as well. Again though, removing the private insurance part of the
equation would probably remove the need.

\- Obviously yes, just like any other person who requires surgery to live.

\- Again, obviously yes. Current laws allowing abortions make this a non-
issue. I understand some people are morally or religiously opposed to
abortion, but we are governed by the laws of the society we live in. If that
is a problem the answer is to change those laws, not to ignore them.

-There are any number of taxing schemes that could subsidize public healthcare but I have never seen one that introduced a progressive tax based on health history (kinda defeats the point?). I would imagine that if the majority of the other countries in the first world can figure this one out, the US probably could too.

I think questions like these are intentionally meant to bring up emotional
responses and generate controversy around what could be a really simple
decision (either way).

~~~
pdeuchler
I'm really not meaning to bring up "emotional responses", I'm merely trying to
give some people with different opinions a voice.

Also, you seem to think I'm advocating we do not perform life-threatening
procedures, which I'm not. I'm questioning who _pays_ for them. Does the
public, including those who find abortion morally reprehensible, pay for those
abortions? Does the public pay for a liposuction that could have been avoided
with diet and exercise?

People seem to forget that this isn't a question of _doing_ procedures or not,
this is about who foots the bill for that procedure.

~~~
imgabe
> Does the public pay for a liposuction that could have been avoided with diet
> and exercise?

Does the public pay for emergency treatment of someone who's in a car accident
because they were driving drunk? Right now we do, directly or indirectly. If
someone doesn't have insurance, emergency care is still performed without
regard to whether it's the recipient's fault that they need it. If they can't
pay the bill it is passed along to other patients in the form of higher
prices.

> Does the public, including those who find abortion morally reprehensible,
> pay for those abortions?

Right now the public, including those who find war morally reprehensible, are
forced to pay for wars. I think the anti-abortionists can manage. If you find
it morally reprehensible to perform an abortion to save the mother's life,
then if you are ever in the situation where you'll die if you don't get an
abortion, you are free to refuse the procedure. Your personal moral code does
not give you the right to choose whether strangers live or die.

------
pmonks
As an American friend of mine once said: "why would we let facts get in the
way of our illogical obsessions with socialism, encroachment by the state on
personal liberty, etc. etc.?"

~~~
bmmayer1
True dat.

------
randallsquared
> This actually makes sense, because the "free market" doesn't work properly
> when it comes to flood plains.

"This item I want isn't cheap" does not mean that markets don't work
"properly", except where you define "properly" to mean whatever you want to
happen.

~~~
jacoblyles
I think what he means is that the people living on the flood plain want
protection from risk at below the price it costs to provide that protection.
The only way to do this is with taxpayer money.

~~~
skylan_q
That's the correct conclusion.

Now one has to ask why someone who didn't make the mistake of living in a
flood plain has to pay for those who choose to continue to take that risk.

This attitude is all about destroying the notion of personal responsibility.
Let everyone else bail me out.

~~~
NateDad
This is a straw man. The point of the article is health insurance, and no one
chooses to break their leg, get burned in a fire, or develop cancer.

But I'll take you up on it anyway, because it's still BS. How about the people
in tornado alley? Or hurricane alley? Or everyone in California with all those
earthquakes? Or mudslides or forest fires or or or... can you tell me no one
in your state/province/whatever has ever had a natural disaster destroy their
home?

~~~
randallsquared
> The point of the article is health insurance, and no one chooses to break
> their leg, get burned in a fire, or develop cancer.

I'm not sure if you're kidding. People do indeed choose to go rock climbing,
smoke in bed, and smoke, period. These things are statistically very related
to choosing to have accidents and get cancer. One would expect that removing
some financial costs of these activities would cause some increase in those
participating.

You might say that you'd be fine with higher rates of accidents and cancer as
long as the risk is spread, but it's not a straw man.

~~~
NateDad
I'm not kidding, are you?

You think that if the thought of being burned over 90% of their body isn't
stopping someone from smoking in bed... that the thought a big hospital bill
will do the trick?

Or that they're not afraid of breaking every bone in their body when rock
climbing, but boy, that doctor bill sure would be steep, so how about a nice
game of cards? Seriously?

------
scottmp10
1\. Providing government insurance is somewhat equivalent to having private
insurances that you buy into right before birth of a new child. The rates
would be very low (assuming you agree to pay the monthly fee consistently for
the entire life of the person, similar to taxes) despite full coverage for
life.

Unfortunately, many people would not opt for this coverage and would prefer to
wait until they need good insurance to opt in. Then they call insurance
companies greedy or unethical for not providing them inexpensive insurance.

Somehow paying a little extra in taxes doesn't seem as bad as paying for the
insurance. Although for most people, putting the cost to the taxpayer means
that people with more money end up paying for them. So in reality, the most
significant effect of government-sponsored healthcare, etc, is to have those
with more money provide coverage for those with less.

2\. The other effect is that buying into insurance makes people less risk-
averse. For instance, they would be more likely to live on a flood plain if
they know they will be compensated for damage to their house. This is a net
negative for society since it is wasteful of resources. Someone who doesn't
want to pay the extra taxes and instead live a more risk-averse lifestyle
doesn't have that choice when they are required to pay taxes that cover
insurance.

~~~
NateDad
#2 is a fallacy, which is what the original author had said. Look at all the
people buying mansions on the coast of Florida that then get wiped out by
hurricanes. Humans are very bad at gauging long-term risk.

~~~
scottmp10
I am sure that there are cases in which people are careless despite great
financial risk. But there are also many cases of people being careless as a
direct result of insurance coverage. This is most obvious in insurance fraud,
where people actually intentionally damage their property in order to get a
payout. But more commonly, people simply opt not to pay for garage parking
because they have theft insurance on their car or motorcycle.

------
bmmayer1
One question that no one asks: why do we insist on paying for healthcare with
insurance in the first place? Imagine a world where everyone paid for health
expenses out of pocket, where there was competition and price transparency for
all procedures which means much lower prices (instead of prices being driven
up by government-subsidized plans), and most importantly, doctors had to
answer to us as consumers instead of insurance companies?

~~~
raganwald
I think you need to first state what you're trying to accomplish.

Is lower prices an end unto itself? if so, I doubt that you will get it from
the "free market." It's too inefficient. When you slip and break your leg, you
can't take your time shopping around for the lowest price care. You can't buy
a lung transplant when it's cheap, save it, and use it when you need it.

Some people simply want people to pay their own way for ideological reasons. I
can understand that without agreeing with it.

~~~
DigitalJack
Calling the "free market" inefficient is the most absurd thing I've heard in
at least a week.

"Free Markets" clearly aren't the answer for everything, but they are when
efficiency is the primary goal. Laws and regulations aren't there to promote
efficiency. They are there, ideally, to promote safety. In my experience, the
overlap of safety and efficiency is vanishingly small. Would that it were not.

In every situation, we need some balance of efficiency and safety.

Yes, it's true, when you are having a heart attack, you probably don't want to
spend time shopping around. That is exactly what "insurance" is for.

When you have a cold and you go to the doctor, that is a waste of a limited
resource (the doctor's time specifically). If you as a consumer had to bear
the full brunt of the cost of seeing a doctor for non-catastrophic issues,
you'd think twice about going over a cold.

That doctor would then be able to take on more patients because their time
wouldn't be wasted on trivial things. This is more efficient.

The flip side, is that the expense of the doctor's office dealing with
insurance companies would absolutely be reduced. That's an immediate cost
reduction. The demand for arbitrary doctor services would be reduced (by
virtue of everyone with a sniffle not immediately heading to the doctor).

Simultaneously, doctor's would be able to reach more patients at a lower cost.

Prices for everyday type treatment would go down.

When you disconnect the scarcity of a resource from its price, you wreak havoc
on the system. The way we (in the US) use health insurance, it's more like
"prepaid medical services" than what insurance was meant for. The problem is
that you have disconnected the scarcity of the doctor's time and service with
the price of that service. It artificially inflates demand on that doctor's
time, because hell, you've already paid the premium this month, if you don't
go see the doctor for a cold, you are wasting money.

And that's true. You have wasted money, but going to the doctor for that cold
just wastes their time, so now you've doubled down on waste and inefficiency.

~~~
sets13
I wont respond to the rest of your response, but it has been pretty clearly
demonstrated by people smarter than you or I (at least in their respective
professions) that free markets aren't always the most efficient solution to a
problem, particularly when the desired solution is not just to come up with a
price that is profitable for for the seller.

[http://www.basiceconomics.info/market-failures-and-
externali...](http://www.basiceconomics.info/market-failures-and-
externalities.php)

~~~
pdonis
_it has been pretty clearly demonstrated_

What has been clearly demonstrated is that free markets don't always reach the
optimal solution. That is _not_ the same as saying that governments can do
better. In cases where there are market failures and/or externalities, very
often there is _no_ way to get to the optimal solution.

The real question is, which has worse failure modes, free markets or
governments? I'm going to go with governments on that one.

~~~
sets13
I guess I would disagree with you on that. Given that the U.S. is basically
the only first world country that still has private healthcare and it is
typically rated somewhere between 15 and 40 world wide on most healthcare
metrics, it seems like a number of countries have figured out a way to do
public healthcare better... (and more cheaply)

[http://www.businessinsider.com/best-healthcare-systems-in-
th...](http://www.businessinsider.com/best-healthcare-systems-in-the-
world-2012-6?op=1)
[http://en.wikipedia.org/wiki/World_Health_Organization_ranki...](http://en.wikipedia.org/wiki/World_Health_Organization_ranking_of_health_systems)
[http://www.reuters.com/article/2010/06/23/us-usa-
healthcare-...](http://www.reuters.com/article/2010/06/23/us-usa-healthcare-
last-idUSTRE65M0SU20100623)

~~~
pdonis
_it seems like a number of countries have figured out a way to do public
healthcare better... (and more cheaply)_

"More cheaply" if you only look at health care, perhaps. But not if you look
at total government spending:

<http://en.wikipedia.org/wiki/Government_spending>

But the real point is that all of those numbers have been increasing over
time, and will continue to increase until the governments and countries
collapse under the deadweight costs of centralized control. And on the way, we
get to have laws bought by special interests and government regulations
written by the companies that are supposed to be regulated.

~~~
sets13
I don't see any facts supporting your assertion that the countries will
spontaneously collapse due to the size or spending of their governments...
What I do see are a long list of countries with higher tax rates, budget
surpluses or much smaller deficits than the USA, and much higher ranked
healthcare systems (You point at Greece, I will point at Germany, Norway and
Sweden. Let's just get that out of the way).

Let's leave it at this, I am not going to say that a public healthcare system
(or a single payer system) is the only right way of doing things. What I will
say is there are a lot of other countries out there that are able to provide a
better health care system through that route while still remaining financially
stable.

Maybe that is just not something that is in the cards for the USA though,
maybe the trade off is that you have lower taxes, but a lower life expectancy
if you are not wealthy.

I certainly am not going to pretend to know all the answers, but I do think
refusing to learn from other countries because they are not doing it the
"American" way (read: with a free market) would be a silly reason to accept
having one of the worst healthcare systems in the first world.

~~~
pdonis
_I don't see any facts supporting your assertion that the countries will
spontaneously collapse due to the size or spending of their governments..._

Soviet Union.

 _they are not doing it the "American" way (read: with a free market)_

The US does not have a free market in health care, and hasn't since at least
World War II, when employers started providing health benefits to attract
workers because they were unable to offer higher wages (wages were regulated
by the government during the war). A free market would mean everyone sees all
of the costs of the health care they receive, and weighs the costs against the
expected benefits, and only buys health care for which the expected benefits
exceed the costs. Nobody that participates in employer-provided health care
(which is most workers in the US) does that; the only costs they see are their
portion of the premiums and their copays, so they want whatever health care
has a benefit to them that exceeds those costs.

The provider side of the US health care system is not a free market either; a
person can't just decide to be a provider. Doctors, nurses, x-ray technicians,
etc., etc., all have to be licensed by the government. That is supposed to
help guarantee that they are competent, but it also helps to keep costs higher
by restricting the supply of providers. (To some extent there are now private
clinics trying to end-run around this for basic services like blood pressure
or cholesterol screening; but they are limited, and mostly serve people who
don't have employer-provided insurance.)

In short, the US health care system is not an example of a free market system
that achieves less optimal outcomes than a government system; it's an example
of a bastardized part-government part-private system that achieves less
optimal outcomes (by some metrics--by others, for example wait times for
critical surgeries, it achieves better outcomes) than a government system.

~~~
sets13
Ahh, "Soviet Union", the answer to every question about the evils of
government. I take it that means you don't really want to discuss that point,
as "Soviet Union" is hardly and answer, and as I pointed out nearly every
other first world country has a "larger" government that the USA, and they are
almost all in better financial shape too.

But we have come full circle, and as I mentioned in my first response free
markets are not meant to create a solution for problems whose success is not
defined by finding the "fair price" for something. In my books, solution that
prevents people from being able to obtain/afford healthcare (and lets be
clear, no matter how many "inefficiencies" you might eliminate through
deregulation, there will always be a segment of the population that cannot
afford to pay for healthcare, just like they cannot afford to pay for housing
or food) will never be a success.

But this is all a moot discussion. The likelihood of the United States moving
further to the left on healthcare is exponentially higher than the likelihood
of the industry being deregulated to the point where you scenario starts to be
able to realize real benefits. As-such, if a true "free market" healthcare
system is not politically palatable for the country, then I think both of us,
and the facts, are all in agreement that a single payer or public system would
do a much better job than our current "bastardized part-government part-
private" system.

~~~
pdonis
You're probably right that a true free market health care system is not
politically palatable, just like a true free market in any aspect of the
economy is not politically palatable. That doesn't mean free markets don't
work; it means they're not tried.

 _free markets are not meant to create a solution for problems whose success
is not defined by finding the "fair price" for something_

Your definition of a free market is too narrow. Free markets are applicable in
any situation where there are scarce resources that need to be allocated.
There may not be a "fair" price for health care, but it is certainly a scarce
resource that needs to be allocated. There isn't a "fair" price for groceries,
computers, etc., but the free market allocates them.

------
praptak
You can move away from flood risk, you cannot move away from an unlucky
mutation. So covering the former from public money feels less justified than
the latter, at least from the veil of ignorance point of view.

~~~
DannyBee
I'm okay with this, with the proviso that it may not have been a flood risk
when you built there.

I mean, there are plenty of houses that have been around 50-70 years, and with
water levels rising, are now in flood plains that they weren't.

This of course, could be taken care of by subsidizing it based on when you
bought the place vs when it became part of a flood plain (FEMA issues flood
maps, so you don't have to deal with local politics at least)

------
ctdonath
_This actually makes sense, because the "free market" doesn't work properly
when it comes to flood plains. In theory, people would never put their homes
on a flood plain if they couldn't get flood insurance. But the market for
dwellings is highly irrational._

Dunno about Winnipeg's historical geography, but take a look at old New
Orleans maps: people didn't build in the floodplain, for obvious reasons. Once
government stepped in with grand assurances of levees ("we'll stop the
flooding") and welfare ("if that doesn't work, we'll take care of you"),
buyers were blinded to the natural realities. For decades, I'd see annual
magazine articles opining "ya know, New Orleans is gonna flood again" - then
it did.

It's not that "the free market doesn't work properly when it comes to flood
plains", it's that government interference with its promise of what amounts to
(and the article advocates) "free insurance" doesn't work properly. People
build there because they're lied to: "yeah, sure, if something bad happens
we'll confiscate the money you need from others and give it to you". We're now
in a time where a whole lot of promises by a whole lot of governments -
promises of "free insurance" included - are coming to hit the reality that
"socialism fails when you run out of other people's money."

People take risks of natural disasters (floods, tornados, ice, whatever)
everywhere. Hurricanes in Florida, blizzards in Canada, tsunami in Indonesia,
tornados in Kansas, flooding in Winnipeg... It's up to them to decide what
risks they'll take, what potential losses they're willing to accept as
tradeoff for what probable benefits, and how they're going to prepare for
disaster. Free market takes the very real facts of availability & limitation
and disperses it in a fair manner; government intervention all too often
distorts these facts, overpromises, underdelivers, and on the whole operates
by garnering the support of many by promising to take from few by force.

------
rjknight
The argument appears to be that we should compensate people for bad luck,
whether that's living on a flood plain, or suffering from poor health. But why
stop there? Why not compensate people for their less-than-optimal genes? It's
well established that people of below-average heights earn less over a
lifetime than tall people, and one can hardly tell them to just knuckle down
and grow a bit taller. They're entirely innocent victims of forces beyond
their control.

I think it's possible to divide people into three groups: people who accept my
above statement and think that we _should_ compensate the unfortunate, people
who also accept that above statement and think that we should not, and
therefore (perhaps) should not compensate the flooded or the ill, and people
who simply don't accept the statement.

Right-wing libertarians are pretty much in category two. Socialists (real,
actual socialists) are probably in category one. The group that interests me
is category three, which seems to consist of most people, and which doesn't
seem to have a coherent view on this. Why should we help flood victims or
cancer sufferers and not the vertically-challenged?

For my part, I'm ethically in category one, but I don't really know if it's
possible to compensate people for their misfortune without having to make a
vast range of impossible judgements about what constitutes 'misfortune'.

------
spikels
Wrong analogy - Not a valid argument for government health insurance. There
may be other justifications but this is not one. If this were really true we
would already have government provided health insurance everywhere because
private insurers would have gone bankrupt long ago.

Flood insurance is fundamentally different from health insurance because
floods cause large losses for large numbers of people at the same time (i.e.
highly correlated incidence of losses). This means the insurer or insurers
would have to make a huge payout in the event of a flood. If this payout is
greater than all their resources, then everyone can't fully rebuild their
home.

Most people can't afford to rebuild their home if it is destroyed because they
do not have the resources. Similarly private insurers simply can't afford to
rebuild everyone's home at the same time. And while some insurers might be
willing to take the risk any responsible regulator should stop them.

Governments are often the only entities with the enormous resources to make
these huge payouts. Therefore we have an vaild argument for the government
providing flood or earthquake insurance.

Health issuance is entirely different because large health expenses do not
occur to large numbers of people at the same time. Health insures are not
going bankrupt because of flu epidemics. Instead they set their rates to cover
these predictable payouts as well as generate a profit.

Unlike rebuilding an entire home most health expenses are affordable by most
patients. It is only occasionally that the required treatment is so expensive
that we need a third party to pay for it. In some countries this is done by
private insurers and providers and in some it is done by governments.

While this is not a good argument for government health insurance there are
many. Unfortunately this is a very complex area requiring expertise in many
areas: insurance, economics, regulation, politics... and perhaps even software
development.

------
snowwrestler
Private health insurance works fine for a large percentage of the U.S.
population. It's worked well for 3 generations of my family, for example, and
there is plenty of data that shows similar successes for many millions of
other people.

There are situations where it does not work well, and it is appropriate that
the government steps into those situations. The U.S. government already does
this, with Medicare, Medicaid, and Social Security. Just like they provide
flood insurance to the few people who need it.

But neither the U.S., nor Canada, have stepped in to take over the entire
homeowner insurance market. Why not? Because it works well enough the way it
is. There's no need.

Likewise, replacing the entire private U.S. health insurance industry with
government-run single payer is not needed. It would be hugely risky, but with
little marginal benefit for those who would be most affected.

~~~
OldSchool
Unfortunately, health costs have far outpaced inflation and earnings. Just(?)
20 years ago I worked as an IT consultant for a large health insurer and the
comfy corporate group PPO "family coverage" option (2 adults and an unlimited
number of children) cost $300/mo total, not just the employee's portion.
Today's total rate on a similar plan is about $1500/mo. That's almost 10x the
net increase in the CPI over the same period.

Put it another way: in 1993 there were plenty of IT pros (not company owners)
making $100K+. Are there just as many percentage-wise making $500K+ now?

~~~
snowwrestler
This is a common misunderstanding; _health care_ costs have gone up faster
than inflation, not just _private health insurance_ costs. Costs have gone up
for government-paid programs as well, which is why there is such focus on
entitlement spending in the political discourse recently.

It is a real problem, but not one that rests solely on the shoulders of
private insurance companies.

~~~
OldSchool
Yup, I totally agree. To make matters worse, the off-contract rates on the
invoices are often astronomical compared to what they actually get from your
insurance - like 10x or more.

Normally you're good if you stay in-network, but an ER visit to an in-network
hospital can result in a separate bill for say $600 directly from a doctor who
might've seen you for five minutes but doesn't work as an employee of the
hospital. Unless you just can't pay or want to white knuckle it and play poker
negotiating you can't get a lower rate because that doctor's "not on your
insurance." I've seen this virtually every time someone's gone to the ER.

------
nagrom
Whenever I read about natural disasters affecting some large urban dwelling,
e.g. Winnipeg, New Orleans, I always wonder why we still have that problem.
Not that people are building on that land, but that we haven't yet figured out
how to live safely and conveniently on flood plains, etc.

The health care analogy is rather than spending public money on fixing broken
people, spend money on making fewer people broken in the first place. Better
preventative measures, better safety rules, healthy eating campaigns, more
anti-ageing research, etc.

Surely when looking for 'stimulus' plans, this kind of thing that will work
out net-positive financially for the government and result in a better quality
of life for people in the affected area should be amongst the first thing
getting funded?

In short: why on Earth are we still subject to the whims of God?

~~~
__hudson__
I think you are right as there are ways to mitigate natural disasters. The
question is whether or not there is political will to pay for the mitigation
measures until the disaster happens. Winnipeg had been flooded severely
several times in the last hundred years until the 1970s when a giant floodway
was created which could divert a river's worth of water around the city. Since
then the floodway has saved the city from numerous large floods and has just
recently been expanded to provide protection for a 1 in 700 year flood.

It seems unfortunate the city was catastrophically flooded several times
before that monetary expenditure was politically acceptable.

------
chris_mahan
Except of course that if person A chooses to be very health-conscious,
exercises, eats healthy, and doesn't abuse coffee, sugar, salt, tobacco, and
alcohol, and pays more for better food and gym membership that person B who
eats fast food, drinks, smokes, and eats kit-kats all day long, then person A
gets taxed to pay for person B's surgeries and other treatments. This doesn't
seem fair at all. It makes it look like all the people living in the hillside
because they didn't want to move to the floodplain have to pay for the guy's
house in the flood plain even though they warned him not to build there.

Seems to me that everyone would then say: "well, let's not be healthy, let's
not eat well, since the government will pay for all our surgeries and
medicine..."

What happened to personal responsibility?

~~~
wisty
> Seems to me that everyone would then say: "well, let's not be healthy, let's
> not eat well, since the government will pay for all our surgeries and
> medicine..."

The government might pay for your health care, but they can't reincarnate you
if you die. So there's still a _reasonable_ incentive to stay fit.

There's some UK TV show where the government (I think) is paying for fat
people to get stomach staples. Preventative medicine can save money in the
long run, and public health systems are often more willing to do it (since the
guys in charge care about the next election, and not just the next quarter).

------
jacoblyles
I don't buy it. I get health insurance between jobs because I know American
health care is very expensive. I know if I tear a knee ligament playing
ultimate frisbee it could force me into bankruptcy. So I pay someone slightly
more than the expected cost of sports injuries in a man my age to insure
against that risk. The regulators force me to insure against a bunch of other
risks too that I don't need. But other than that meddling, it's a pretty
classical insurance market.

The real problem with American health care is just that it is very expensive
compared to the rest of the world. We get better health outcomes on the high-
end stuff in exchange (our cancer survival is tops), but overall health
outcomes aren't great.

~~~
kevingadd
There's a lot more wrong with American health care than prices. I know a lot
of people who simply can't get insurance in the US at any price because of how
the market works - and some of them are in great health and have been forever.
It's actually quite close to raganwald's 'flood plain' example, where the
insurers will outright refuse or quote impossible rates.

And, as it happens, I can't buy insurance on the free market anymore either.
I've never been hospitalized or needed surgery or been injured, so I used to
get pretty affordable insurance and have no problem paying out of pocket. Then
I saw a therapist and that was enough for every insurer I've contacted since
to blanket refuse to insure me at any rate. According to the state agencies
that regulate this stuff, that's how the system is supposed to work.

Now, you could say that this is how an insurance market should work - maybe
the reason people like me can't buy insurance at any price on the free market
is because it's not possible to turn a profit by insuring us, statistically,
even if individually we are incredibly healthy and pay a ton. I can buy that
explanation. But do you think it's morally right for people to be unable to
access basic preventative care at reasonable cost, and be unable to afford
emergency care, just because statistically 5-10% of the people in their group
are expensive?

I think it's also worth considering the counter-example: group health in the
US is comparatively quite sane. If your employer has a reasonable group health
plan, you can count on having basic coverage, even if a pre-existing condition
gets excluded for a bit when you first enter the plan. The employer's overall
cost for the group might go up, but that's about it. A friend of mine found
out that his company's rate for group health was nearly $2000/mo - apparently
they had lots of high risk employees - but my past employer's group health
rate, in comparison, was around $400/mo for good coverage.

~~~
jacoblyles
When I see a market behaving insane, I want to know what market incentives and
government regulations are distorting it. In your case, the knowledge that you
saw a specialist would make a logical underwriter raise the price, but you
should be able to get insurance at some price.

The big regulation that I know of is the tax treatment that makes it much
cheaper for insurance to be purchased through employers. This has prevented a
robust individual insurance market from developing - it would be very costly
for the insurance companies to build out this service for a small percent of
the market.

The other major regulations that increase cost and reduce choice are required
coverage regulations. There is always some heartstring pulling to get
treatment X included in the required bundle.

------
dougk16
Insurance doesn't work, period...for anything. It's gambling in reverse, and
the house always wins, especially in the last few decades when they can crunch
so much data and know the price points with great precision. What's worse is
that insurance companies are becoming even more monolithically inefficient
than government agencies while still racking in obscene amounts of cash,
without having to do anything more than bombard you with horrible
advertisements featuring talking geckos.

The fact that some insurances are required by law (in the US at least)
disturbs me deeply.

------
tmoertel
What worthwhile benefit does society receive for underwriting the cost of
rebuilding property in flood plains?

I mean, if you build a house where it's likely to be destroyed, it obviously
benefits _you_ to make your inland neighbors pay for your house, should it be
destroyed. But how does it benefit your inland neighbors? What do they get
that is worth the cost of underwriting your risky behavior?

~~~
raganwald
As I noted above, after the 1957 Hurricane in Toronto, the city appropriated
the floodplains. There was no benefit to rebuilding when people could easily
be relocated.

The trouble with Winnipeg is that it's an entire city. It's an economic engine
that was built on a river at the time when river commerce was vital. Moving
the entire city is infeasible at this point in time, so the givernment assumes
some of the flood risk and mitigates some of it with civic projects.

------
geoka9
I wonder if the insurance payments (~$65 per month) is enough to cover the
ongoing healthcare costs even when everybody has to pay up.

I mean, if it was as simple as charging everybody 65 bucks, you'd think the US
wouldn't have the problem where many people can't afford to pay for medical
care.

------
AndrewKemendo
I am missing the part where I am morally impelled to subsidize poor decision
making. This applies specifically to the flood plain example - though there
are some corollaries to health care; eg. people eat bad food and smoke etc...
which leads to increased costs.

The post states that flood plain knowledge is high - and the data is easily
available. So why should I help someone if they are knowingly taking a risk?
The point of taking a risk after a risk-benefit assessment is that there is a
payoff that would be greater with the risk than without it. If you shift the
cost of the risk away from the principal agent, then there is no impetus to
optimize your decision.

So again, why should I absorb your risk if significant and verifiable
information is available?

------
jacoblyles
There's not a lot of meat here. If you really want to dive into the details of
the regulations, costs, and incentives of the US health market you can do so
elsewhere. But this is just an eloquent expansion upon a particular political
talking point. You won't learn much besides raganwald's political leanings.

I buy arguments that health insurance breaks down for the very old and the
very sick. But otherwise there is no theoretical reason for believing you
can't insure health risk. However, there are seven decades of bad regulation
which complicates the matter in the US.

------
andrewljohnson
Did you get the joke from the West Wing, or from the place the West Wing got
it from, which I don't know?

~~~
raganwald
I strongly suspect that this joke predates not only the TV show, but also the
construction of the West Wing.

------
spenrose
Really nice piece. Thank you.

