September 20, 2009

Insurance Industry Expert on Real Costs of Socialized Medicine

This is a great post from The Last Embassy blog.

Some of the more powerful parts below:

Beyond all the other short comings of the Socialized Medicine Scheme discussed previously, attempting to "sell" a Socialized Medicine Scheme based on low-loss-cost -participation by the insured merely makes the Plan Cost much more expensive.

.....Think of it this way, as a sales pitch, having to pay very little out-of-pocket sounds great. However, the less the insured participates in the loss, means the more the insurer participates in the loss. The more loss exposure the insurer is faced with, the higher the premium.

The sales pitch of low out-of-pocket costs, like any "sales pitch", omits the remainder of the story. The remainder of the story is that low out-of-pocket costs translates into very high premium costs.

However, the premium cost story gets much uglier. Low out-of-pocket cost which translates into high initial premium cost becomes a cascading price spiral. Why? The low out-of-pocket costs further translates into over utilization. That is, with very little to be paid out-of-pocket, the insured is more apt to seek services. The more services used means more losses incurredmeaning premiums must rise to cover the increased losses.

The escalating price spiral receives even more fuel due to "forced participation". Consider those individuals forced to participate in the plan, who previously did not want to buy health insurance for any variety of reasons. These new "forced insureds" find the cost a burden. They also see the cost being forced upon them as a cost they need to recoup. The mind set becomes: if I have to pay "x" premium then I'll get "x" amount of services, further creating overutilization which further drives the price spiral.

....The Private Sector has long known that each individual has differing needs. Hence the plan discussed for each Individual Risk is an attempt to meet the Risk's (insured) need. For example, the multi millionaire can self insure, the self employed single carpenter who is 35 years old wants a high deductiblecatastrophe plan, the business with young middle income workers in their family years needs group coverage that includes wellness coverage, and so on.

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