Health Insurance

A very interesting posting by Richard Posner, who is a justice on the federal 7th Circuit Court of Appeals, and a professor at the University of Chicago. He has largely defined the field of law and economics over the last few decades.

The posting is overall very interesting, but particularly note the following quote:

Third-party payment is a pervasive feature of American medicine. Why anyone should want health insurance other than “major medical”—that is, insurance against catastrophic medical bills—is a great mystery, as is the fact that Medicare subsidizes routine health care of upper-middle-class people. Since disease and injury tend to be unpredictable, health insurance smooths costs over time, which is efficient, but a person could achieve that smoothing simply by saving the money that he now pays in health-insurance premiums and investing it to create a fund out of which to pay future health expenses as they occur.

But we are stuck with third-party payment, and it systematically favors specialists over primary-care physicians, because specialists tend to provide discrete procedures, which are easier for the insurers, whether they are private insurance companies or government, to cost. The care provided by primary-care physicians has, to an extent, an elastic and discretionary quality.

It would be interesting to see how our actuarial science and insurance
students would respond to this.

- Rick