People surprised that increasing expenses raises costs

Something has happened that was extremely predictable to anyone with a basic knowledge of economics:

The biggest reason for Obamacare’s rate hikes? Two of its most popular provisions, guaranteed issue and community rating. These are the technical terms for Obamacare’s ban on insurance companies denying coverage or charging people who are sick more.

The McKinsey report found that in Georgia, these mandates added between 44 and 52 percent to premiums. In Ohio, they were responsible for 41 to 50 percent of the hikes — and in Pennsylvania, as much as 62 percent. In Tennessee, guaranteed issue and community rating accounted for between 73 and 76 percent of premium increases.

It’s nice to want to help sick people get better. Unfortunately, there’s no magic wand that will make them healthy again. So we have to choose between various options, and hopefully, we can find one that is low cost while still providing excellent care for all involved. Obamacare, however, is not it. Why? Because it fails miserably in the low-cost area, as do all plans that involve making insurance something other than insurance.

I’ve seen some people piously state that “people aren’t cars, so we shouldn’t treat them as such.” I agree. So instead of forcing insurance to be something that it isn’t, we should separate the terms “health insurance” and “health care” into the two different things that they are. Insurance is about people pooling money together so that you can draw on that pool if something unexpected happens. Health care is a broad term that involves a lot of ongoing work and expense, a lot of which isn’t thought of as necessarily medical in nature.

Why should we separate insurance and regular care? Simple: the big pool of money. If your routine care is always being reimbursed out of that big pool of money, then you don’t care as much about the cost, since it’s not immediately apparent to you if your own out-of-pocket expense isn’t affected. Therefore, there’s an incentive to the health providers (hospitals, doctor’s offices, etc.) to increase the cost to secure a larger reimbursement for themselves.

Instead of reimbursing out of that big pool of money, we should instead pay for routine expenses ourselves. Once you have to pay for something yourself, you naturally want to get the lowest cost possible, and the cumulative effect of a nation of over 300 million people seeking lower cost medical care would be that prices would go down. This could involve something like wellness plans offered for animals, in that you can get a set amount of care and discounts for paying a set monthly fee, but you’re still paying for the cost of the services received.

Will this work for everyone? No, there will be some outliers, and there may be something that has to be done by the government to ensure that those people are taken care of. But for the vast majority of all people, this will reduce costs to something that can be borne by a normal person, and will help reduce costs for those outliers, as well.

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