What is There to Understanding the Need for Healthcare Insurance?

Paul Krugman on a November Thursday talking insurance.

We have mandatory auto insurance. We have life insurance, unemployment insurance, home owners insurance, travel insurance, etc. Yet for some reason the nation can not get into their head the need for healthcare insurance for all whether it is commercial or government backed.

The person in the back row . . .yeah you . . .you raised your hand first.

The Republican Brain Doesn’t Want to Understand Health Care,

There are almost 150 million dwelling units in America. Most homes have insurance, and most home insurance covers losses due to fire. Yet in a normal year there are fewer than 400,000 home fires. Even if we allow for the fact that some homeowners don’t have insurance and some policies don’t cover fire damage, the vast majority of homeowners are paying for fire coverage that they will never use.

Clearly, this is a massive waste of money, a huge giveaway to the insurance industry.

OK, presumably almost no one believes that. While it’s unlikely that your house will burn down, losing your house to fire would be a crushing financial blow if you are uninsured. So we all pay premiums to protect ourselves against disaster. All Fannie Mae and Freddie Mac loans require home insurance.

Health insurance operates on the same principle. Without health insurance, you are at risk of a catastrophic financial blow if you get sick and require hospitalization. Moreover, even if you don’t require hospitalization, you are more likely to avoid getting regular check-ups and preventative care, thereby making it more likely that you will indeed suffer a health crisis and, possibly, death.

Yet the shutdown drama made it clear, once again, that Republicans, from Donald Trump on down, refuse to understand this basic point. Or if they do and say so publicly, like Marjorie Taylor Greene and say so, they become a pariah within the party. But most prefer to behave like the hapless and probably doomed New York Republican Rep. Mark Lawler, and blame Democrats for having forced the issue into the headlines.

But the fact that Republicans have been misrepresenting how health insurance works since Obamacare was first proposed in 2009 is a testament to their cruelty and intentional ignorance. For example, Trump’s opening salvo against the Democrats demand for continuation of the ACA subsidies blasted “money sucking insurance companies”, claiming that the subsidies should be sent directly to taxpayers so that Americans can “PURCHASE THEIR OWN, MUCH BETTER HEALTHCARE” – that is, demanding that they pay doctors and hospitals out of pocket:

As I explained above, this won’t work for the same reason homeowners need fire insurance: There’s a small risk that you may face extremely high costs, and you need protection in case that happens. In addition, lack of insurance is likely to make you sicker, thus more likely to require higher future health expenses and diminished quality of life.

In any given year, most people face low or modest health care costs, but a small number of people face huge bills. Here’s the distribution of health spending in 2022:

Source

Half the population spent almost nothing on health care, while 5 percent of the population accounted for half of spending, and 1 percent for more than a fifth. Average spending within the top 5 percent was more than $67,000; within the top one percent it was more than $147,000. Furthermore, people who develop severe health problems often find themselves having to lay out large sums for multiple years.

Only the very wealthy — not even the 1 percent, more like the 0.1 percent — can afford to pay high medical costs out of pocket. So modern health care depends on insurance to pay the really big bills. In addition, having health insurance has also shown to make people healthier in general, because they are less likely to forgo regular care.

And even if you resent “money sucking Insurance Companies,” as Trump pretends to, it’s overwhelmingly bad policy to insist that people pay their medical costs directly, for two reasons. First, a large potion of health care costs are incurred by people who need immediate urgent care and therefore can’t go shopping for medical care. In other words, I can’t research my hospital and procedure options while lying on an ambulance gurney, with an IV stuck in my arm. Two, medicine is a complex and technical subject, beyond the grasp of anyone without medical training. So the idea that medical care should be treated like a commercial product to be consumed by medically sophisticated customers is not only silly – it’s dangerous.

So consumer-driven healthcare, which is what Trump is pushing, is an irresponsibly destructive idea, a zombie policy that the Republicans have been touting for 15 years, without ever acknowledging its flaws. Furthermore, in their zeal to undermine Obamacare, Republicans will resurrect the monster that bedeviled so many Americans before it was adopted: insurance companies’ denial of care to those who need it most and the affordability problem.

Obamacare was designed to address the problem of profit-seeking insurance companies, who have strong incentives to identify people who really need health care and then deny them coverage. Before Obamacare, insurers routinely denied coverage to Americans with preexisting medical conditions or charged them prohibitively high premiums. And this aspect of Obamacare is hugely popular: by large majorities, voters say it is important that insurance companies cover pre-existing conditions.

Source

One way to solve the “denial of care based on pre-existing conditions” problem is to bypass profit-making insurance companies and have the government pay medical bills directly, as Medicare and Medicaid do. But if we want to maintain a system of private health insurance, we must regulate insurers to prevent discrimination based on medical history. Yet that alone is not enough. We also have to ensure that relatively healthy people buy health insurance; because if they don’t, only those who are sick or have pre-existing conditions will get insurance, forcing insurers to charge extremely high premiums to cover their costs.

So what’s needed to make a system of private health insurance work is both regulation of insurers and policies to make premiums affordable for healthy people through incentives such as significant tax credits or premium subsidies.

This is basically what Obamacare does. Yet for 15 years Republicans have been promising that, any moment now, they will come up with something better to replace it. Years ago, I might have conceded that this was due to Republican ignorance. But when even Majorie Taylor Greene gets it, I have to chalk this up to inbred cruelty and willful mis-representation. As Jared Bernstein says, Republicans have lost the ability to think about policies that solve actual problems. Now it’s all a display of fealty to Dear Leader.

My guess is that the burgeoning health insurance crisis will hurt the G.O.P. and Trump politically. And the Democrats, who despite their flaws still understand policy, should be relentless in publicizing how Republicans are hell-bent on destroying the health of Americans.