Is Health Insurance Necessary?


Although health insurance is the norm in most industrialized countries, it is not necessary for the health care system to function. The best example is seen in Hong Kong which Americans like to praise as the best place to do business. Their system works due to two big reasons. First, doctors and hospitals compete freely for patients who are not accustomed to buying health insurance. Second, the government provides a safety net by operating an extensive network of public hospitals charging only US$15 per day of stay. It is a wise combination of free market and government intervention which no industrialized countries can beat.

To illustrate, while suffering from lung infection in Hong Kong, my mother paid for her stay in a private hospital nearby for better service. When it became clear she needed a longer stay, she switched to a public hospital to save cost for just a basic service. Like the rest, she did not believe in health insurance due to the safety net provided by the government.

In America, health care is so expensive now because the system has degenerated into the worst of all worlds. People still remember the good old days in the 1950’s when doctors made house calls at affordable prices, and patient-doctor relationship was at its best.

Nowadays, few doctors in the US can afford independent private practice because of the exorbitant cost of malpractice insurance. Most doctors are now wage earners being employed by the hospitals. They don’t compete for clients as in a free market. They refuse to see a patient unless he/she has health insurance.

The big insurance companies have taken over the health care business. People pay monthly premiums to the insurers, who in turn pay the hospitals, doctors, and drug companies for their services and products on behalf of the insured. Being the big middlemen, the insurance companies have erected a wall between the people and the health care providers. As a result, medical prices become a private matter between the insurers and the health care providers. The people who consume health care services are not told about the prices being charged if they are insured. If not, they will get a big shock when the hospital bills them later, which may lead to their bankruptcy. Can you see the danger of buying something without knowing the price? Even if insured, you still need to see the prices because they drive the premiums that you are paying monthly.

The non-transparency of medical prices is the devil that has caused the explosion of health care costs in America (According to a Google search, $4000 average per day of hospital stay, $500 for a cancer pill, and $150 for a doctor visit) In the meantime, the insurance companies, the hospitals, the drug companies, and the doctors are making tremendous profits at the expense of the people, among whom 50 million are uninsured because they cannot afford the high monthly premiums.

The insurance companies continue to raise premiums citing the fast rising health care costs (caused by the price non-transparency) as a reason. In addition, they cherry-pick the healthy people and deny insurance to those considered high risk using all kinds of gimmicks like “preexisting conditions”.

The insurers fail to realize that raising the premiums continuously is causing more and more people to drop out of the insurance market, which will come back to haunt them. Why? The business of insurance only works for a large market where the great majority of healthy people are paying premiums to subsidize the small minority of sick and infirm. When premiums keep on rising, the young and healthy tend to drop out because they think they can take the chance of not getting sick, thus leaving the sick and old in the insurance pool. Facing a declining market, the insurers must raise premiums again and again to stay afloat. This is a vicious circle leading to eventual collapse of both the market and the insurers.

What can be done? In Europe, the governments nationalize the health insurance business to act as a single payer to reign in medical costs. However, it still cannot solve the problem of price non-transparency that leads to high inflation in the first place. In Japan, the government tries to solve this problem by publishing a big manual detailing all acceptable medical costs after periodic negotiations with the health care industry. In Hong Kong, because people are not accustomed to buying health insurance, the government does not have to deal with the insurance devil. Instead, it provides a safety net of public hospitals charging minimal prices.

In America, due to fervent right-wing opposition against government intervention, nationalizing the health insurance business cannot be done. The health care reform act passed in 2010 (now known as Obamacare) can only achieve its limited goal of gradually bringing in the 50 million uninsured through government subsidies. This will shore up and stabilize the insurance market so that the insurers will focus on providing better service rather than raising premiums. The non-transparency in medical prices is still largely unsolved.

All over the world, health care costs continue to climb unless some way is found to enforce price transparency. Health insurance is the devil because it encourages people to pay monthly without letting them know and compare the costs of medical services. This is the root of the health care inflation because it runs counter to what we do every day – find out and compare prices before we buy.

April 2014

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This entry was posted in 21st Century, Economics/Politics, Health Care, Inspiration. Bookmark the permalink.

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