Friday, September 24, 2010

Is Insurance Socialized Medicine?

Insurance was a creation of progressive businesses last century.

The basic idea behind insurance is that a large entity (either big government or a big business) can regulate health care by placing the health care resources for a group into a pool. People would draw from the pool as needed.

EMPHASIS: Insurance exists to regulate care. Insurance has people paying a regular premium to pay for irregular health care expenses.

The culture war battle has been about ownership of the pools. The left says big government should own the pools (communism). The right says that big business should own the pools (capitalism).

I contend that the culture war is a false dichotomy and that the underlying structure of the economy matters more than top level ownership.

Step away from health care for a moment: If we were to privatize the IRS, the new private entity would still be using state coercion to collect taxes. Taxes collected by IRS, Inc. would have the same effects on the market as taxes collected by a government bureau.

It is the underlying structure of the IRS that makes it a tax collection agency. Privatizing the IRS is a cosmetic change that does not change the form.

The Federal Reserve, Fannie Mae, and Freddie Mac have cosmetic private ownership. The cosmetic private ownership does not change the fact that they are governing entities.

I contend that ownership is cosmetic. Tthe primary difference between a free and socialized market has to do with decision making. In a free market, decisions are made by the individual (free will). In a socialized market, decisions are made at a group level (group think).

In a free market, individual own their own resources (property rights) and uses those resources as they see fit. In a socialized market, resources are owned by a group and used for the benefit of the group (collectivization). Decisions are made through political and legal processes.

Returning to the discussion of health care, I look at insurance and see people placing their resources into a collective. There is then a complex legal and political process to determine the care that people will receive from the collective.

The language of insurance gives the game away. When people use insurance, they don't pay a doctor's bill, they file claims.

Insurance turns health care into a legal dance. Rather than negotiating with doctors, patients must place a legal claim against the insurance pool to receive health care benefits.

The claims are settled according to state laws. From the inception of insurance until the passing of Obamacare, settlement of claims has been regulated by the states.

The reason one cannot buy insurance across state lines is that, with insurance, every transaction is a legal claim. The legal jurisdiction is an integral part of the claim. Nevada handles claims differently from California. For insurance to work, the buyer and seller must be in the same jurisdiction.

Allowing people to buy insurance across states lines necessitates the creation of a national jurisdiction for processing insurance claims.

It is absolute bizarre to hear Republicans champion state rights in one sentence and suggest that we be allowed to buy insurance across states line in the next. There is some really bizarre disconnect that prevents people from examining or understanding the nature of insurance.

Allowing people to buy insurance across states lines does as much to undermine state sovereignty as Obamacare!

Republicans also claim that they want to get the lawyers out of medicine through tort reform.

The Republican position is bizarre beyond belief. The tort problems within insurance arise because every single transaction in health care is a legal claim. Tort reform is unlikely to realize great benefits as the totality of the health care is a mixed up complex of legal contracts requiring constant legal vigilance.

When the totality of health care is a legal claim, any stab at tort reform is cosmetic.

Don't you see? It's the form and not just the top level ownership that defines a socialized system.

Employer based insurance is simply a privately owned form of socialized medicine. This scheme attempts to fund the care of an individual through a collective resource. Privately owned socialized systems fail as miserably as government bureaucracy.

The shrill debate on Fox News (where Hannity screeches for private ownership of the collective while Bob Beckel screeches for government ownership of the collective) masks the fact that the fault lies with the absurdity of using a collective to fund the needs of individual.

To conclude, I would like to look again at privately collected taxes: Obamacare does something interesting. Obamacare mandates that everyone buys insurance. The system then defines, in great detail, what will be covered with this mandated insurance.

Under Obamacare, insurance companies behave exactly like privately owned tax collectors. They use the force of the state to collect insurance premiums; they then spend this money as dictated by the state.

Yes, the left/right dichotomy screams that top level ownership is the most important issue in the universe.

But can't people step back long enough that the difference between a free and socialized market is deeper than the shrill debate about the title of the dictator? A free market is one centered on the free will of the individual. A socialized market is one where the resources are collectivized and decisions are made by the group.

The Medical Savings and Loan is a program where people pay their doctors directly from their savings (or in some cases with loans). The contrast between this structure and pooled insurance is more profound than the difference between a privately owned and state owned insurance pool.

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Scott Hinrichs said...

Progressives (regardless of party affiliation) promote a skewed definition of freedom where people are made "free" by being freed from financial and economic concerns. In a progressive utopia, the desire to get ahead of ones neighbor -- greed, as it were -- is squelched by forcing everyone into equal outcomes, or at least certain outcome strata. Productivity and advancement are sacrificed for some centralized definition of social good.

This argument only goes so far with most people in most segments of the economy. Then realities of life render it both unrealistic and unpalatable.

The collectivist concept has achieved a greater foothold in health care because need is, as you note, uneven. Not only is it uneven for an individual throughout his lifetime, it is unevenly dispersed across the population, often in a manner that seems bizarrely unfair. Incursion of the greatest costs often coincides with the least ability to cover those costs. Yet the need can literally be a matter of life and death. It is difficult for most people to adequately prepare to handle such oddly varied demands.

Given this unevenness, the desire to collectivize health care has achieved a greater currency in the minds of most. The idea that each should cover most medical expenses out of his own pocket frankly scares the daylights out of most people. They can't even imagine that such a thing could be possible, except for the very wealthy. And in those cases class warriors successfully stoke the flames of envy to the point that many believe it to be morally acceptable to force "the rich" to pay for benefits that others desire.

Thus, so many are willing to exchange liberty for imagined security that it becomes nearly impossible for others to act outside of that paradigm. While many are willing to rebel against Obamacare, few are willing to rebel against the collectivist health care regime.

y-intercept said...

The amount people spend on health care varies widely by year. When one looks at the total life cycle of an individual, one finds there is less variance than we are led to believe.

Were we to practice preventative medicine, life time variances would drop more.

Insurance looks at claims for a group on a year by year basis. The Medical Savings and Loan views each person as a whole being with transfer of wealth from times of health to times of ill health.

From a social services perspective, the Medical Savings and Loan works better than insurance since it looks at the whole person and not just a single year in their life. With the MS&L, we'd set life time brackets and only intervene in health care when one's life time health care needs falls outside their means to finance care.