But Mr. Will

This past Sunday (March 7, 2010) This Week on ABC featured a round table on Health Care Reform. Among the participants: George Will and Robert Reich. Mr. Will support competition which, in general, I consider a good tool but not the only one in the tool box.

In the course of the discussion Mr. Reich agreed that competition was fine provided there is reasonable regulation to prevent a "race to the bottom" in low quality coverage at low cost. Mr Will countered that it is clear to everyone that insurance can be sold nationwide (e.g. Geico and Allstate), and that we are all not so dumb that we cannot make good decisions without being overprotected by government.

This is a vast oversimplification. Health Insurance is not at all comparable to car or home insurance. Your insurer does not maintain, repair or clean your car or home unless something has truly happened to it. In that sense Health Insurance is a misnomer. We are really talking about Health Service Contracts.

In that case we have two issues:
First, how can such contracts be presented with sufficient clarity and transparency to permit a consumer, an average consumer, to make a reasonable decision?

Second, if the insurance company is not providing the services (drugs, surgery, tests, etc.) but instead are only financial service companies. they are not in a position to control costs. In fact, a health insurer is in the position where high costs are advantageous. To the insurer, higher costs mean a large amount to be "financed" and the opportunity to earn a profit on a larger sum.

It will be difficult to control health insurance costs because they are "downstream" from the real costs. And, this adds another "layer" of distribution between the consumer (us) and the doctors and clinics that provide service.

This leads one to the hypothesis that the way to reduce health care costs is to remove the health insurance companies altogether (including public ones). In that case consumer will have to purchase medical care direct from providers. This eliminates the profit and overheads of insurance companies. However, there is an issue of quality assurance and a public health need to be sure that people don't elect for too little care.

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