Is Health Insurance Really Insurance? And Does it Matter?
Arnold Kling argues that what we call “health insurance” isn’t really insurance at all.
[Mark] Thoma says, “In general, insurance gives us financial protection from unexpected events — a tree falls on our house, we have a car accident, we become unemployed, we become sick and need health care, and so on.”
But what we call health insurance covers things like new eyeglasses, which is not a rare, catastrophic event. It seems to me that the big market failure in health insurance is that it exists to protect health care suppliers from having to bill patients directly rather than to protect consumers from catastrophic loss. That is, the failure is not in the way risks are managed by insurance companies, but in the very structure of what we call health insurance.
Ezra Klein tacitly agrees but says, basically, So what? “[I]f consumers, as they’ve repeatedly proven, don’t want insurance, but instead want insulation, why shouldn’t we seek to make that work (as it does in a variety of other countries and systems).”
They’re both right, of course. Health insurance, at least the comprehensive type rather than the more no frills HMO variety, isn’t really “insurance” at all but rather a combination of traditional insurance and an all-you-can-eat buffet. If that’s what most people want, then there’s no reason we can’t try to achieve it through our public policy mechanism.
Kling’s point is not irrelevant, however. It’s useful to understand exactly what it is we are talking about when making public policy arguments. Controlling the language of debate helps obfuscate that, which can be good from the standpoint of a given advocacy group but is bad from the standpoint of clarity.