Thursday, March 5, 2009

Our Negative Sum System

Kevin Drum on something really bad about the health care system:
the system massively overcharges you if you're uninsured, and they do it just because they can. If you're uninsured, you've got no leverage, no alternatives, no nothing. So you get screwed. It's like the shopkeepers who charge twenty bucks for a pair of flashlight batteries after hurricanes. Maybe it's the free market at work, but if so, that's all the worse for the free market.
As far as I can tell, it's even worse than the hurricane battery people. I can see how the opportunity to charge $20 for batteries at least generates good incentives. If I'm running the battery store after the hurricane, I'll make lots of money, and that possibility will give me incentives to make sure I have plenty of batteries on hand when people might come to suddenly need batteries.

What beneficial activity is incentivized by insurance companies using their bargaining power to push costs onto the uninsured? I can't see anything comparable here. This looks like a zero-sum game. And then when you consider that the uninsured are likely to be poorer and factor in the diminishing marginal utility of money, it's a negative sum game.

1 comment:

Anonymous said...

This is really more an unintended-consequences thing. Insurers get "discounts" on healthcare based on their size and bargaining power, but because insurers wanting discounts are so much of the market the "discounts" really just represent market rates for care. The only way that they can seem like discounts though is if they actually get charged to someone, so the tiny shred of market without bargaining power get reamed. So costs aren't really being pushed on the uninsured -- it's just a deadweight loss.