I am amazed that I have heard so little as to why the purely private option no longer works for medical insurance and never will again.  The reason lies in the very logic of capitalism and the market.  While right wingers have made the national debate pretty mindless over health care, as over everything else, I will do my little bit today to add some rationality.

Insurance works on the principle that a certain number of people in a population will need help, that number is predictable, but we have no idea who among the population will be the ones affected.  Therefore we pool our resources to cover everyone’s risk, a few paying less than they will need, most paying more (because they will need nothing) and everyone being safe from the financial impact of that particular disaster.  It is very simple logic, and works for car insurance, home insurance, and many other kinds of insurance.

It does not work for medical insurance.

The reason is simple.  With the growth of scientific knowledge the pools keep getting sliced smaller and smaller.  We can tell who is likely to need insurance the most, and if they are excluded from a pool. We can offer lower competitive rates to those included than can a company that does not exclude those most likely to need help.  Very simple.

We see a version of this issue with auto insurance.  Rates go up as we accumulate points in moving violations because we are more likely to need insurance.  But unlike health insurance, we can alter our behavior so that rates go down.  Or as we get older, rates go down, at least until a certain point.  Here the variability of insurance rates is probably beneficial.  In health insurance it is mostly a disaster.

The result is that some medical insurance that to those statistically needing it least, can be good.  Others are priced out, or can get it only if they have a job that provides it.   As a result in America people keep crappy jobs because of the insurance, avoid starting their own businesses because they do not want to put their families at risk,and at a rapidly rising rate, go into bankruptcy over medical bills: 62 percent of all bankruptcies in 2007 were due to medical debts, around 46 percent in 2001 and only 8 percent in 1981.   The LA Times has a good summary and some heart wrenching examples.  

To make matters even worse, profit-minded insurance companies are
dropping the needy as soon as they can figure out a means to do so.  As Businessweek reported, the author of a recent Harvard based report published in the Journal of American Medicine said:

“For middle-class Americans, health insurance offers little protection.
Most of us have policies with so many loopholes, co-payments, and
deductibles that illness can put you in the poorhouse,” said lead
author Himmelstein. “Unless you’re Warren Buffett, your family is just
one serious illness away from bankruptcy.
“

All the pompous free market talk about the “miracle of the market” is so much blather because those emitting such sounds do not understand WHY a ‘free market’ works in some cases for insurance and not in others.  They treat it like a magickal phrase.  I am reminded of the behavior of members of a cargo cult.

All this assumes the insurance companies are honest.  Now Congressional investigators have discovered they are not.  I am not surprised.  Corporations are designed to act like rational sociopaths, and it is small wonder that human sociopaths have an edge in rising ti the tops, men and women who cheerfully bilk people when they are the most vulnerable, to feather their already overly large beds.

Single payer is far and away the most logical form by which health insurance can be provided because it returns us to insuring the entire pool, all of us.  Anyone who has taken much time to look at how it has been applied elsewhere knows that compared to the American model, by every measure of price, coverage, and overall quality that includes the population as a whole, it has proven superior.