New subject - moral hazard and pre existing conditions

[eisely]

One of the major thrusts of the "reforms" of the health care system being promoted by the administration and the majority party is to compel insurance companies to cover all pre existing conditions. While those of us who currently have insurance should count our blessings, this is one of those reforms that is likely going to make things worse rather than better.

 

Insurance is something one purchases before the event against which you are insuring. For example, we buy car insurance to provide financial protection in case we get into an accident. What would happen if you applied the standard of pre existing conditions to the auto insurance industry? Or the fire insurance industry? Nobody in their right mind would buy insurance, but would wait until the accident occurred and then buy the insurance.

 

This is an example of "moral hazard." A moral hazard is a situation where you encourage or provide an incentive for the kind of behavior you are trying to prevent. Moral hazards are present in many government programs, and forcing health insurance providers to provide coverage of pre existing conditions would create a further moral hazard.

 

One of the real reasons that politicians do these things is to force the cost of their objectives onto others without a direct government expenditure. Providing care for the uninsured is a bona fide problem. Forcing insurance companies to provide coverage for pre existing conditions is an attempt to force the companies, and all the other payers of premiums to those companies, to subsidize care for the imprudent or unlucky.

 

It would make more sense to provide direct government subsidies to folks in these situations than to hide the cost in private insurance programs.

[sherminator505]

Is a woman with an abusive husband imprudent or unlucky? And should the answer to that question affect her ability to get health insurance?(This message has been edited by sherminator505)

[eisely]

I may be dense, but what does that have to do with health insurance?

[AnniePoo]

I guess I fall among the "imprudent or unlucky". While donating blood a few years ago, an improperly trained phlebotomy nurse in a hurry seriously damaged a nerve in my arm. The injury led to serious complications which now result in painful neuropathy in half of my body, and it is likely that I will have this condition the rest of my life. It's a 24/7 condition, and only expensive anticonvulsant medication, frequent neuro appointments, pain clinic visits, etc. keep this condition even remotely in check. I can fortunately still work, albeit not as effectively because of side effects of the meds. (Scouting has become a much-needed positive area of my life).

 

I've worked hard all my life (in my mid-40's) and now I have a significant pre-existing medical condition through absolutely no fault of my own. The fact that this pre-existing condition would not be covered right away by a new insurance company severely limits my prospects for switching to a new job, so in a sense I'm somewhat stuck in the job I have. I need to be insured - my meds alone are expensive, not to mention the frequent doctor visits.

 

Eisely, the tone of your post sure sound like you're suggesting that most people with pre-existing health conditions could have prevented their misfortune. However, this was certainly not the case with me, and there are far too many others who either suffer serious financial misfortune because of non-coverage of their pre-existing condition, or have significant limitations placed on their career options. Have some empathy ---you don't know everyone's story, and you or someone close to you could be in a similar position some day.

[eisely]

It is not that I am without sympathy. I too have some current chronic conditions which would likely not be covered if I were on my own.

 

The point of my post is not that such people are crooks or do not deserve some assistance. My point is that conventional insurance contracts do not cover pre existing conditions for a reason, and forcing insurance companies to do this will result in other premium payers subsidizing the pre existing conditions. My preferred means of helping such folks would be to directly subsidize them in some fashion and let the conventional insurance under writing function.

 

 

[Greaves]

Anniepoo, if you have coverage NOW, then you can have coverage at your next employer. That's what HIPAA did. Insurance companies may no longer set those types of limitations on their customers.

[GernBlansten]

Come on people, its HEALTH insurance, not SICKNESS insurance.

 

But seriously, it isn't like auto insurance or home insurance at all. That is casualty insurance and very competitive. Just ask the lizard. Its privately purchased and not provided by your employer. Healthcare on the other hand isn't a true free market system. Employees have very little say on which healthcare plan their employers offer. You take what you get. Many employees become close to slaves to their companies for fear of losing benefits.

 

Health insurance is really a pre-paid medical plan. You pay so much and get back a service. The insurance company engineers it so they pay out less than you pay in. To do this, they cherry pick their policy holders when they can (pre-existing conditions) and deny any coverage they can for their customers (experimental procedures, non-generic drugs, etc). When they can no longer make that profit, they raise their rates, adjust the deductibles, adjust the coverage. Accountants not doctors, manage your health care.

 

Now counter this with a government run, universal, single payer system. Everyone is covered. The risk pool is huge. The cost of the entire system is spread across the taxpayers. Now the challenge of this system is to balance total costs (benefits) with total revenue (taxes) at a level to provide adequate coverage to the citizens.

 

Which is more moral? WWJD?

[shortridge]

If Geico put the same types of restrictions on buying its insurance privately as Aetna does, car owners would be up in arms. Too many miles? OK, your rates just went up. Car has a loud muffler? Another surcharge. And don't even think about what those replacement sparkplugs mean for your bottom-line costs.

 

Also consider how much you use your auto insurance vs. how much you use your health insurance. One is for catastrophic diasters - an auto accident. The other is for routine wellness. You wouldn't think about calling in a claim for a flat tire. But you'd definitely bill your insurance for a doctor's visit for your kid with the measles.

 

They're not really comparable at all.

[sherminator505]

eisely,

 

In some states, an abusive relationship can be used as a preexisting condition to deny coverage. Does that help you understand my question?

[GernBlansten]

Lets not forget that auto insurance premiums are based on behavior alone. You drive fast, get careless, get drunk, your rates will rise.

 

Health insurance has a behavior component too (smoking, weight), but it is also based on things you can't control. Type 1 diabetes, brain cancer, birth defects, family history of disease. Those will also increase your rates if not disqualify you completely. Just for fun, call up a health insurance company and tell them you are currently uninsured, have high blood pressure and a family history of stroke and see if they offer you a competitive plan to your current employer provided one.

[scoutldr]

I think the fallacy in health insurance, and the reason it costs so much, is that we expect it to cover everything health related. I believe that, like auto or homeowners' insurance, it should only cover "accidents" or catastrophic illness. Does your auto insurance pay for oil changes or new tires? Does your homeowner's policy cover a new roof every 10 years? Of course not. You're expected to save for those things and pay out of pocket. My MIL is on Medicare which she gets for free, even though she never paid into the system (her last paying job was in the 1940's). She is refusing to go to the local Walgreens for a flu shot because it will cost her $25. (and she's not indigent, by any means). So, we have to get her an appointment with her doctor, my wife has to take leave from work and spend half a day getting her to and from...because Medicare will cover the office visit and the cost of the shot. But they don't cover the day of vacation time that my wife will lose. This takes up an appointment that the Dr could use to see a sick person, thus exacerbating the health care crisis. So, by her refusing to pay $25, it's costing the taxpayer about $150 and costing my wife a day's pay. That's economic insanity and it's unsustainable...

[Beavah]

Yah, AnniePoo is da classic case, eh? She's either stuck in a job (often dead-end or advancement-limited, since the most common way to advance these days is to switch employers), or she and her family are saddled with financial disaster if her employer goes under or she gets laid off.

 

That's one of da problems with the current system that needs to be fixed.

 

Eisley has a point, too. If we allow an average young worker to keep their money and not elect any health coverage and then jump in when they're sick, or jump in later in life when they are demographically more likely to be sick, then yeh bankrupt da system.

 

Only way to make it work is if yeh require everyone to pay in and thereby truly distribute the risk without any demographic skimming. Even then, our aging population makes funding anything properly almost impossible.

 

And Gern is right, a core single-payer option or at least government role is likely da most economically efficient way of requiring universal buy-in... in theory.

 

Problem is that it'd be a huge government program, and government programs are like big turds - not only do they often stink, they attract flies. Any mildly unethical pol or business that can afford a lobbyist will try to milk da system for themselves. And like all government programs, it will overpromise and be underfunded.

 

B

[John-in-KC]

OK, B, you jumped in, Sir,

 

WHAT ABOUT TORT REFORM FOR MALPRACTICE???

 

1- Loser pays ... attorneys fees, court costs, witness fees, the whole shooting match.

 

2- Plaintiff must try, cannot settle.

 

3- Obvious malpractices (wrong leg operated on, sponge left in, &c) move to the front of the line for trial.

 

4- Automatic administrative penalty on malpractices of error: Doc/hospital pay the "make whole" surgery and recovery...

 

How will your peers of the ambulance chasing (heck, these days, coffee spilling) variety deal with these kinds of proposed changes???

[GernBlansten]

Ah JKC,

But tort reform must happen at the state level. The only time a case would go to the federal level is if some constitutional issue was being tested. So there's not much the feds can do about tort reform.

[shortridge]

I'd support the gummint program, no matter how bad it smelled. Way too many of my friends right now are facing just that position of financial ruin Beavah describes because somebody else screwed up the companies that employed them, leaving the lowly peons sans income or insurance.

 

Scoutldr - The problem with that idea is that what's catastrophic differs from person to person, depending on their income. What about a series of expensive medical tests to rule out a potentially fatal condition? Well, that's not catastrophic, the insurance companies would say, that's diagnostic. You going to pay full price for that X-ray your kid's pediatrician ordered to make sure that hacking cough isn't something else?

 

And backing away from the model of preventive care that doctors have been pushing for so long - well-child visits, regular checkups, etc. - would lead to far more problems down the road.