Healthcare Forum, Part 2: Where Universal Coverage Can Never Work

To understand why universal coverage won't work for a certain segment of healthcare delivery, consider a fictional extension to your auto insurance policy. You are given the option of buying "gasoline insurance". Instead of paying for what you buy when you go to a gas station, you will pay a premium at the beginning of each week. In return for buying into the program, you can put up to $36 of gasoline into your car per week at any participating gas stations (after paying a $1 deductible).

The flaw in this system is obvious. If everybody puts their full allotment of gas into their cars each week, everyone will end up paying more than 35 dollars for 35 dollars' worth of gas; everyone will have to pay for the cost of their gas plus the administrative costs of running the gas insurance program. Savings under this program are only possible if a large number of people consistently use less than their allotment of gas, but people who consistently use less than their allotment are unlikely to stay in the program.

The point is that insurance doesn't work as a way for paying for something that is frequently used. I don't think that that is too controversial a starting point...

Now, move to an example closer to healthcare. Consider dental insurance. Do you believe that everyone should visit their dentist twice a year for a cleaning? If so, for the same reason that it makes no sense to pay for gasoline through insurance, it makes no sense to pay for routine dental care through insurance. If everybody goes for their twice-a-year cleanings, paying for those cleanings through insurance offers no advantage over paying the dentist directly. Everybody's dental premium could be dropped by the cost of two cleanings, people could use the premium savings to to pay for their cleanings, and everything would stay about the same (except of course for the insurance companies, who would lose out).

The dental example is very relevant; many current healthcare proposals involve using preventative medicine and regular check-ups to catch problems early when they are easier to correct. And if we are talking about regular, recurring care, just like with dental cleanings, it makes more sense to pay the provider directly (maybe with the help of a health-savings account) rather than through an insurance program. If preventative medicine is to be an important part of the public healthcare system, the design of that system must assume that everyone uses their full allotment for wellness care and check-ups and, therefore, that paying providers directly will be as effective and as efficient as paying them through insurance.

I still don't think I've said anything too controversial. However...

What about the person that can't afford the costs regular dental cleanings or wellness check-ups? Doesn't the government have a responsibility to provide for them somehow? Isn't that the real purpose of universal health coverage?

Certainly if you believe that preventative medicine is an important part of the healthcare system, providing for regular care for the poor is a concern, but it is not a question of how to offer universal healthcare insurance, but a question of how to offer healthcare subsidies. The difference, you ask? In an insurance system, everybody who is covered pays into the system. In a subsidized system, only some pay into the system based on their "ability to pay"; people towards the upper end of the of the ability-to-pay scale pay for both their own care and for the care of the people with less ability-to-pay, while people at lower end of the scale pay for only a fraction (down to 0%) of their own care. (Michael Kinsley discusses some of the differences between insurance and subsidies in this Slate magazine article).

But the fact that some people need subsidies to pay for regular, recurring careis not a reason to put everyone into a uniform, government-run universal system for delivering it. There is no medically justifiable reason to force people to spend their healthcare dollars in a certain way just because they are also the ones who are covering the costs of subsidies for others. If there are private insurance plans, or HSA's, or direct fee-for-service plans that are preferable to the government plan (and experience shows us that there almost certainly will be better plans than the government plan -- unless the government creates regulations to make them impossible) then why shouldn't people be free to choose those other options for themselves?

Some people will provide an ideological answer to this question. They believe that everyone should be in the same system to make everything fair, or to remove a stigma of receiving subsidized payments, or because they believe that government programs are inherently superior to private ones. These are all terrible rationales for using universal health insurance to provide subsidies for wellness care. Once the designers of the healthcare system make anything other than delivering the best possible care using existing resources their top priority, it is unlikely that the system will deliver the best possible care.

If people are serious about providing regular wellness and early-intervention medicine to as many people as possible, it cannot rationally be done through a "universal" insurance system. This is the realm where health-savings accounts will be most effective. The insurance system should be reserved for accidents and illnesses and major costs that are truly unforeseeable.