The current political season has had a good bit of discussion of health insurance and whether everyone should have it and, if so, how that should be accomplished.
But what kind of health insurance are we talking about? There is a point at which insurance covers so much that it ceases, for practical purposes, to be insurance and instead simply becomes a prepaid service.
Why is that significant?
Because any service–whether it’s insurance or otherwise–costs more money on average than you’re going to get out of it. Otherwise the people offering the service wouldn’t be able to stay in business. They have to make money, right?
But here’s the difference: If you have an insurance service that covers only a few things, which happen rarely to people but which are costly if they do–what you might call major medical insurance–then the overall cost of healthcare isn’t impacted that much.
But if you have health coverage benefits cover every single doctor visit and every single medical service (or just about) then the cost of health care will be driven up because the insurance companies need to make money, on average, per medical transaction, and they’re now covering a vastly larger number of medical transactions.
And that’s not to count all the additional costs put into the system by doctors having to keep a larger staff devoted to filing insurance claims for every medical transaction the doctor participates in.
At some point, the system stops resembling insurance as it historically has been understood and becomes just a comprehensive prepaid service–and a comprehensively more expensive one.