Saturday, May 1, 2010

The deadweight loss of insurance, public or private

At a recent social gathering, a doctor friend who has been in private practice for almost 15 years revealed something that caused one physician to nearly choke on her drink, another to gasp in disbelief and the rest of us to stop what we were doing and gawk as if he had committed some grave social faux pas.

“I love what I do,” he announced to all of us. “I really love being a doctor.”

His wife, suddenly aware of the silence that fell upon the room, inched closer to her husband. “He really does,” she said nodding to confirm what some of the rest of us couldn’t quite believe. ...

More frequently, doctors’ conversations about work reflect a sense of disenchantment, frustration and even anger — not toward patient care or doctoring per se, but toward the increasingly intrusive role of insurance companies and government agencies. ...

Last year, a study published in the health policy journal Health Affairs found that physicians in private practice on average spent nearly three weeks in time and $68,000 in staffing per year dealing with the particular administrative constraints of third-party payers.
--Pauline Chen, NYT, on the soul-sucking burden of insurance paperwork. HT: Alex Tsai

Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We’ve become so used to health insurance that we don’t realize how absurd that is. We can’t imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they’re financed the same way we finance fixing a car after a wreck—through an insurance claim. ...

Insurance is probably the most complex, costly, and distortional method of financing any activity; that’s why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you’ve paid your share. An expensive and wasteful absurdity, no?

Is this really a big problem for our health-care system? Well, for every two doctors in the U.S., there is now one health-insurance employee—more than 470,000 in total. In 2006, it cost almost $500 per person just to administer health insurance. Much of this enormous cost would simply disappear if we paid routine and predictable health-care expenditures the way we pay for everything else—by ourselves.
--David Goldhill, Atlantic Monthly, on the inefficiency of low-deductible insurance

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