Health Insurance - The Medical Mafia?

One more than one occasion I've stated one of the biggest factors in the rising cost of health care in the US is health insurance. Between the ever increasing paperwork load forced upon hospitals and medical practices and the disconnection between care providers and the actual cost of actually providing care, it's no wonder health care costs have gone up at a rate many times that of inflation.

John Stossel took an in-depth look at health care and its costs and pretty much came to the same conclusion: health care costs so damn much because of health insurance. It would be far cheaper to pay doctors out of pocket for most routine medical care. It would also greatly reduce costs because the paperwork factor would be greatly reduced.

And now another voice has joined the chorus, one that calls health insurance what it is: a protection racket.

Most discussions about the rising cost of health care emphasize the need to get more people insured. The assumption seems to be that insurance – rather than the service delivered by doctor to patient – is the important commodity.

But perhaps the solution to much of what currently plagues us in health care – rising costs and bureaucracy, diminishing levels of service – rests on a radically different approach: fewer people insured.

You don't need to be an economist to understand that any middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.

The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection." But even the Mafia doesn't stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture, but for occasional "cost of doing business" increases. When insurance companies insinuate themselves into the system, their first step is figuring out how to increase the skim by harming the people they are allegedly protecting through reduced service.

Like I said, a protection racket. Except this is a legal protection racket, sanctioned by the state, raking in millions of dollars that never make it to those actually providing service. The health insurance providers are the middlemen and their cut of the pie does nothing but get bigger. It needs to because, like any bureaucracy (and that's really what a health insurance company is), it grows to eat up more and more of the monies collected, with each added bureaucrat working hard to justify their continued employment. The more subordinates they can add beneath them makes them appear that much more vital to the operation. And each additional “vital” employee eats up that much more money that can't be used to pay for the costs of health care.

Of course such a bureaucracy can grow too much and the insurance company starts losing money. This will spur the company to do one of two things: cut operating costs by trimming staff and becoming more efficient, or cut back on coverage provided to customers while at the same time raising the price of that reduced coverage. The smart ones do both at the same time.

I have no problem with health insurance companies making a profit. I really don't. But when they do it by hurting their customers – decreasing the level of service while charging more for it – I have little sympathy for them.

So one way of keeping health care costs in check is to limit health insurance to cover catastrophic care and eliminate it for the more routine medical care. There's no doubt that this move would cause an increase in the unemployment rate. The insurance company bureaucrats and the slew of clerks once need to fill out health insurance claim forms at hospitals and medical practices throughout the land would need to find new jobs. But that's a price I think the people would be willing to bear. It's worth it to break up yet another protection racket.

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