September 10, 2009

"In the United States of America, no one should go broke because they get sick. "

So spake the President.

Mr. President, a word if I may.

Getting sick is a negative economic event, like your stock plunging or your bank going under or losing your job. When you get sick, you have two choices: expend money or suffer (and perhaps eventually die). People choose to spend money because people generally don't like to die. If someone's money is more important to them, they can go ahead and go blind from a progressive disease, or die knowing that they left more money to their children. Of course, this seems odd to most of us: what's money for if not to keep us alive?

The point is that it's in the nature of getting sick that one expends money to get well again. That's why one has money in the first place, after all.

What's more, because of those pesky laws of thermodynamics and a thing called entropy, we're all going to eventually get sick and die. Nothing lasts forever: not even the universe. Energy (in our case money) has to be expended to maintain systems in a particular form. So there's always going to be a need for money to keep from getting sick.

But if there's a theoretically limitless call for moneys to keep from getting sick and dying -- there isn't a limitless supply of money. Thus, if there is always going to be a need for money to keep from getting sick, there will always be the chance that from a particular bout of illness one will run out of money: one will go broke, and it doesn't matter what country one is in.

Now, naturally there are ebbs and flows to the expenditures, just as there is a limit to the generation of wealth. Some very smart people in Europe created the notion of insurance to "even out" the bumps in the expenditure graphs and distribute the risk (in our case, of getting really sick all at once) of "going broke" among a bunch of people.

But what gets distributed in insurance programs is not cost, but rather risk. If people lived forever, their withdrawals from the insurance pool would ultimately reach the limit of their payments (less costs of administration, for nothing is free). But people don't live forever (because eventually the rising costs of fighting off a hostile universe and not getting sick cause people to go broke) so it seems like what we're spreading is costs, and that seeming makes otherwise reasonably intelligent people like you, Mr. President, mistakenly think that health insurance is really just about making sure that costs are spread around so "nobody goes broke". But that's not insurance: that's (and I don't mean this pejoratively) communism, specifically the "to each according to his need" part.

Go back to insurance for a moment: insurance is a contractual promise of indemnity against an unrealized risk. We have pre-existing condition exclusions in health policies because indemnifying against those expenses isn't something unknown or contingent -- it's an absolute known expenditure. You want to take away those exclusions, but if someone with a condition that will without a doubt cost $1,000,000 a year to treat walks into the insurance office, what is the insurer supposed to do? Sign up the insured so that the insurer buys a known million dollar liability in return for $40,000 in premiums?

Who would do something like that?

The answer, of course, is that the government would do something like that, because the government isn't spending its own money. It's immune from the sort of free market discipline that causes most economic entities to seek some form of efficiency. It is thus "free" to assume liabilities in return for payments that are smaller than the liabilities assumed.

But communism doesn't work as an economic model, precisely because government isn't forced to seek efficiencies (and also because the centralization of economic power causes tremendous rent-seeking and corruption).

"In the United States of America, no one should go broke because they get sick. "

But if no one is to go broke from getting sick, then someone else is going to need to pay for it. And if that someone else is the government, then either the government will go broke keeping everyone alive and healthy no matter the cost, or -- far, far more likely -- someone in the government will have to decide when a particular medical reimbursement is no longer worth the expense.

But you just told us last night, Mr. President, that:

Some of people's concerns have grown out of bogus claims spread by those whose only agenda is to kill reform at any cost. The best example is the claim, made not just by radio and cable talk show hosts, but prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Such a charge would be laughable if it weren't so cynical and irresponsible. It is a lie, plain and simple.

So if no one in the government is going to decide when to stop spending money on keeping people alive, then someone will go broke in the United States of America: the government will go broke because every last one of its citizens, in accordance with the laws of entropy, will eventually get sick. And unless more and more energy (money) is expended to keep them alive and health, they will eventually die.

Because you're not risk-spreading with your grandiose health care proposals... you're trying to cost-spread, and that's a very different, very intractable little economic beast, particularly when the costs are potentially limitless.

Posted by at September 10, 2009 06:33 PM | TrackBack

Comments  (We reserve the right to edit and/or delete any comments. If your comment is blocked or won't post, e-mail us and we'll post it for you.)

"if someone with a condition that will without a doubt cost $1,000,000 a year to treat walks into the insurance office, what is the insurer supposed to do? Sign up the insured so that the insurer buys a known million dollar liability in return for $40,000 in premiums?"

So what's your solution to this problem: sorry, guy/gal, you're not a sound economic investment, the free market tells me I should just let you suffer and/or die.

Do you not see how that attitude makes you seem like a heartless bastard?

Posted by: JohnnyX at September 11, 2009 11:43 AM

"Do you not see how that attitude makes you seem like a heartless bastard?"

The operative word, of course, being seem, because to some people, it does seem heartless not to confiscate someone else's hard-earned money to pay for charity to some third party.

It isn't, but it could seem that way if you don't think it through.

Posted by: Imparfait at September 11, 2009 12:01 PM

So, Imparfait, your point of view is that anyone who needs medical care but may not have the means to pay for it should not receive it, point blank?

I suppose hospitals should start checking insurance cards and credit reports before they accept trauma patients. I mean, honestly who gives a crap if somebody got smashed in an accident on the interstate and is on the verge of bleeding to death. No way my hard earned money should pay for that bozo, they should've just not crashed in the first place.

You guys really astound me with this crap. I can only fathom what you would do if the tables were turned and YOU were the one desperately needing help but having no means of providing it for yourself.

Posted by: JohnnyX at September 11, 2009 03:32 PM

Been there. Done that. Decided I liked earning a living better.

Thanks.

Posted by: Imparfait at September 11, 2009 05:00 PM

Speaking for myself, I am a heartless bastard.

My take on the Obama Health Care Scam is that it makes as much sense to require that the productive working segment of Americans should be forced to pay for others' medical care than that we should be required to buy everyone a house because no one should have to go broke paying for housing.

Posted by: Rhymes With Right at September 11, 2009 07:46 PM

"You guys really astound me with this crap. I can only fathom what you would do if the tables were turned and YOU were the one desperately needing help but having no means of providing it for yourself"

I can't seem to find anywhere in the constitution where it says that the government shall PROVIDE for the general welfare.


Posted by: h. at September 11, 2009 08:05 PM

Johnny X,

Back in 1990, when I was 7 months pregnant with my first child, my husband got laid off. I had quit my teaching job because I was due in December and planned to stay home with the baby. We had no means of income, except the $700/month unemployment insurance, which only lasted 6 months. Our house payment was $975. We had to pay our COBRA payments because our insurance was a necessity with the baby coming. That was $735 a month. My husband looked for work every day. But we were still unemployed when the baby came. He had complications and was in NICU for 3 days, and I was injured during the delivery and had to be in the hospital an extra 2 days myself. We didn't pay a dime for his delivery. Had we CHOSEN to let the insurance go, we would have been in debt close to $13,000 for his delivery.

My husband got re-employed just as the unemployment check was running out. How did we survive those six awful months? Family. Friends. Credit cards. The government check didn't really 'help' much at all. I remember the kindness of our family and friends far more than the inadequate unemployment check.

That's how self-reliant people survive when they 'desperately need help'. They turn to those closest to them, not the government.

Posted by: Lily Putian at September 13, 2009 12:04 PM

Well said.

Posted by: h. at September 14, 2009 11:51 AM