I’ve done a back of the envelope calculation that since I graduated from college, the combination of my employers’ and my contributions to health insurance premiums, assuming a 5% market rate of interest, have a current value of about $197,000. I’ve also estimated that in that time, I’ve spent (on the extremely aggressive side) about $20,000 in total on formal medicine – which includes the birth of our two children, and much of which I have paid out of pocket. But just to keep the numbers conservative, assume that all of these (current value) $20,000 came from the insurance companies – that leaves me with about $175,000 in “unspent premiums.”
Now, please don’t lecture me on how insurance works – it is certainly NOT evidence of me getting screwed if I do not “get my money back” indeed, such thinking is the reason we have a health insurance crisis in this country. My point is different. It is simply that if health insurance operated in any way like actual insurance should work, the notion that we could ever have a crisis that wasn’t self-inflicted would be far-fetched. Here’s why I think this:
If I never contributed another penny to health insurance premiums from this day forward, and we assume a market rate of interest of 5%, this amount would be worth $875,000 by the time I reach age 70. If I also managed to stash away an additional $10,000 more per year from today until that day (my premiums today are well more than this), this number would roughly double to over $1.67 million. This, again, is a very conservative assumption, since I would imagine that my ability to contribute more would go up over time.
Think about this. If all of this money was invested in a “health cost account” I would have over a million and a half dollars to deal with my medical issues from the age of 70 and beyond. This is a million and a half dollars beyond what I would be able to spend out of my own pocket – which indeed is how almost all of my medical expenses work today. I’m nowhere near rich mind you, but neither am I near poor. But the numbers for most middle income Americans would not be dramatically different than the ones I am illustrating for myself. And there are complications – like what if you get cancer at age 30 before you are able to accumulate such savings – we can deal with those issues later on, they do not alter my point very much.
If “health care” is so important, and from the moralizing in the debates I just have to assume it is (after all, I am being told it is so vital that it should be a basic human right, whatever that could possibly mean), then someone please tell me why we don’t see individuals saving like this? Seriously, we could very easily self-insure for almost any conceivable simple and medium-level medical issue. Indeed, many very serious medical issues could be dealt with given the level of savings I am talking about here. We would really only need to purchase insurance to cover possible medical expenses well beyond the hundreds of thousands of dollars of cost. And I am making this claim even assuming the current cartelized, socialized, poorly incentivized medical system does not change. Is health care (even at the margin) more important than having the latest smart-phone with 4G service? What about an extra vacation? Is it more important than having a house that is 400 square foot bigger? Is it more important than having that extra half-bath? From people’s rhetoric it would seem to be, but from people’s actions it would seem not.
If, from the time we were born, we lived in a culture where it was understood that we were responsible for taking care of our own medical needs, we couldn’t possibly be in the situation we are in now. We all know we need to feed ourselves once our parents stop doing it, and we are in no great crisis in feeding ourselves. Same for housing. Indeed, we have too much of each of those. And for folks that do have trouble, it is a rather straightforward thing to supplement their incomes to be able to afford the basics. My point that if I had been disciplined and understood that I was responsible for my own future medical needs, I would have (the data say I certainly could have) saved for my health care needs in a manner not unlike I pay health insurance premiums today. And if I was worried that something truly horrific would strike me down, or that I wanted all kinds of elaborate things done to me if I did get old and sick, well then I should have been able to purchase inexpensive insurance for that.
Of course, instead, what we do is pay enormous amounts for “insurance” which is really nothing more than enabling other people to treat their medical needs as someone else’s problem. It is insulation, not insurance. Seriously, ask your doctor or dentist about your bill the next time you are there, and before you can say much about it they will quickly be in your ear to comfort you that someone else will be paying the actual bill. So we find ourselves getting angry if we have to pay $50 for an office visit, or $500 for vital drugs, or $2,500 for a simple surgery, and expect those things and more to cost us nothing. And there is certainly little incentive for us to manage our health expenses wisely, or be terrific stewards of our body. Indeed, I have had many times in the past three years where I would loved to have seen a doctor, because I just wasn’t “feeling right.” But I didn’t want to waste anyone’s time or money, and being a stubborn former football player I am sure I was telling myself, “tough it out you wimp.” But I wasn’t saving anyone any money. People like me are the suckers. Totally overinsured given the lifestyle they live – and will probably find themselves having contributed hundreds of thousands of dollars for health “insurance” over their lives, to see that other people could get that creaky knee checked out one more time, or to get their doctors to write them a bogus sick-note so that they could go storm some state capital when some evil governor tries to practice fiscal sanity. It’s insane.
We’ve managed to turn our health insurance sector into something that closely resembles our well functioning social security system. It is certainly not an insurance industry. Readers may find what I am about to say nuts, but I think I would completely support legislation that mandated health savings but that at the same time totally deregulated the medical care and medical insurance system. The mandate would really be a personal health savings account that could not be raided by anyone else for any reason. And yes I can prove with a simple indifference curve that this mandate is inferior to many other programs – but it would be superior to what we have today. And when I say deregulation, I mean it. Insurers should be able to craft all kinds of custom policies. I should be able to get into an insurance pool, for example, comprised of only my fellow 36 year old males (after all, I do this for life-insurance and no one seems to find it objectionable – indeed, after my next term policy expires, the premiums will be so high that I will drop my coverage). I should be able to get medical treatment from whomever I wish – after all, I cannot even get good medical treatment from qualified doctors today, and I have supposedly “great” insurance (I don’t even have a primary care physician). That will never happen of course.
I’m tired of being around people and living in a “society” who have fallen so deeply under the spell of government that it is no longer OK in polite company to utter, much less think, that people should be expected to take care of themselves. If I tried to neaten this post up and present the ideas publicly, I bet my first query would be something like, “yeah, YOU might be able to save money for your health care, but what about everyone else?” Maybe it’s not the spell of government, but it’s something that gets people to think that we are all helpless little lambs, needing a cushion and a caring third-party, to make sure we don’t scrape our knees as we crawl our way through life.
And before folks go accusing me of wanting to let starving, sick, poor people die in the gutter, I do not believe asking people to take responsibility for themselves has much to do with helping those in need. It is those people who claim that these are mutually exclusive who have the problem, not me – just think about what such a view implies about humanity.
Sorry for the post – it is senseless, I’ll do better next time.