I rarely interacted with insurance when I was young / in my early 20s, because I didn't exactly have it. I understood why it was important and desired: You can't afford healthcare otherwise!
... But that did not make much sense.
The maths say that, on average, things should be more affordable if you don't have insurance. The idea of insurance is you pay more than the sum of the risk-cost product. That is to say, if there's a p% chance you will be injured in a way that costs X$ to treat, you pay p * X * C, where C is some number greater than 1, representing the value the insurance company gets.
If you don't pay for insurance, that's great, but that cost X might be too great to bear. So, insurance makes sense.
But if you can't pay p * X * C for insurance, you should still be able to afford the things everyone on insurance gets, like checkups, exams, bloodwork, etc. That is, when p is near 1, then p * X * C ~= X. That is, the cost of care with insurance should be about the same as the cost of care without insurance.
The math was obviously a simplification, but it was a model that made a lot of sense to describe how insurance should work.
I grew up, and learned things about the world, and realized:
-
Insurance does a lot of work to know
pfor any given person very well, -
But it costs a lot of money to learn things, so that adds another invisible factor which drives the costs up (i.e. a bigger
C), but most importantly -
Insurance companies are structured in a way that incentivizes both hospitals and the insurance company to raise the price of
X.
Even the most ardent capitalist should realize this is a bad structure to have in a free-market. If the free market decided the cost of a baby aspirin is $0.50, but you get charged $350 for that by a hospital, there's a market inefficiency there!
The large X exists because it's assumed the bill is going to insurance, which will spend money to say "nuh uh", so that the hospital will say "okay what about $200". Real people will spend hours of their time doing that banal bullshit -- an abject waste of our precious resources -- just to maintain a barrier that does not need to exist.
How are there so many people out there who ardently believe capitalism is the best economic model, and want to see it flourish, and they aren't willing to target the cancer inside it?
Could it be they personally profit off this self-strangling economy and so are incentivized to look away when economic output is swirling down the drain? Don't they want a better capitalism? It's frustrating that this is pretty simple economic ground between anarcho-communists and the huge capitalists, and even then it doesn't matter at all.
The reason I say "math is important" is because... I was on the capitalist-track chamber-of-commerce defense-contractor path, but having math to understand the world provided a nice hole for the "for profit healthcare is evil" facts to fill. My math model made sense when I accounted for greedy CEOs.
TLDR: Insurance should work by costing a little bit more than the expected costs of service itself. But it doesn't work that way because for-profit healthcare is incentivized to artificially raise costs of service. If we taught math better, I think more people would be radicalized earlier on actually.
flabberghaster wrote
Even simpler from that, my understanding of it was: Insurance is a risk pool. Everyone pays a certain amount in to a pot of money, and then if they need money from it they get to take a little bit to pay for what they need. That way everyone pays a little bit, and then usually most people don't need it because most people don't get badly injured or very sick very often, so there's supposed to be enough money when someone does.
but wait, if you think about it, if there's just one person paying in to that pot of money, it's not likely to have very much in it if a disaster happens. If there's two people paying in to it, it should have a bit more in it, so what if you and everyone in your household paid in to one? That's more money in the pool, but what happens if something happens that affects everyone in your house? So what if we get everyone on the block to pay in? That way if any one house on the block is affected, collectively there's enough there to help. But wait what if there's like a flood and the whole block is injured or damaged? So what if we got everyone in the town to pay in? The larger your risk pool and the more people are paying in to it, the more money it has and the more the risk is spread out across the population.
So the logical conclusion is shouldn't everyone pay in to one single risk pool?
No that's socialism.