Sunday, June 14, 2009

Clearing the health care nonsense

Washington is wrestling with health care costs yet again. The politicians have failed to get a consensus on how to cut or even hold down the shocking increases in costs we’ve seen with each successive administration for at least the last 20 years.

The best way to solve any problem is to look for and fix the simplest elements first. Not only do you gain momentum, but you also remove clutter and reduce the complexity of the problem.

One simple thing to fix in health care is multilevel pricing that forces people to pay higher prices for the same coverage as an individual than as an employee. The insurance company costs are exactly the same for an individual buying an independent policy as for that same person when insured as a worker for small three-person office or in a large national company.

The idea that the insurance company can spread the costs for that individual over a larger pool of insured is true only if you can forget that the number of people in the pool is an arbitrary fiction of the insurance companies’ accounting department.

Remember that the insurance company decided to put you into their internal accounting group labeled XYZ Company and not one labeled Joe Smith.

The second question is why, when I start a new job, the insurance company can accept my preexisting conditions but either cannot accept me as an insured because of those conditions as an individual or have to charge me a much higher rate?

Again the cost difference is an accounting fiction caused by which internal accounting group the insurance company assigns me to.

Nationalized health care would put ALL insured in a single pool with the same rules and prices spreading the cost across a large enough group to even out. Of course the private insurance companies could do the same thing right now and make a lot more money by insuring a lot more people.

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