5. Let's now go to the larger pool. Skipping all the steps, it can be shown that the cost per capita is equal to $605. Under a single-payer system, everybody is able to pay their premiums, hence keeping the overhead cost at 10%. In addition, all 11,000 people are able to be treated for cancer (and assumed to be fully recovered).
6. Now, imagine if the actual risk is not 1.1%, but found to be 1.5%. How many more insurance companies will need to increase their premiums and/or let go of people because folks cannot pay (5,000 more people with cancer than the original estimate)? At that level, we need to add societal costs associated with health insurance companies going belly up (or into liquidation), as documented in real life cases here, here, here, and here. Even at 1.5%, the cost per capita for the single-payer system is $907, still below the $1,000 threshold and everyone is still insured!
I understand the example above is somewhat simplistic, but I'm sure everyone gets the point. In the hypothetical example, by including everyone into a single pool, you not only managed the risk by minimizing the payout when your initial estimate is wrong, but you also saved the society $600 million by providing insurance to everybody. On the other hand, this is not to say that having medical insurance will automatically save you from getting sick or injured and being able to fully recuperate, but it will at least give you a better chance of survival andimproved health than being without anycoverage (see footnote 2). Let's not forget that the latest estimate about the number of annual deaths attributed to uninsured people in the U.S. stands at 45,000, which costs the American society in excess of $160 billion (per year) or 4 times the entire budget the U.S. Department of Transportation devotes to the transportation network.
To conclude, implementing a system that is based on private medical insurances (with smaller pools) is still possible. Many other industrialized countries have a dual private/public health care system. In France, their citizens have access to both, but when a catastrophic event occurs, such as being struck by cancer or becoming paralyzed, the public system automatically kicks in. This was the system I proposed for the U.S. in a previous post. In Holland, on the other hand, health care insurance is provided via private companies. However, the federal government fixes the premiums for the entire country and spreads the risk by subsidizing companies for high risk patients. Hence, the companies compete against each other based on the services they can provide for the same cost. I believe the Swiss and German systems work in a similar manner or very close.
Given the current political climate, we can already forget about having a health care system that covers everyone, especially when many so people erroneously believe that it will increase direct, indirect or societal costs. I invite the readers to read my post on out-of-pocket health care costs that also counters this view.
Footnotes:
1 This explains why my car insurance premium is more expensive where I currently live than when I was living in Montreal. In Quebec, motor vehicle insurance associated with occupant injuries is managed by the government, a system similar to the Universal health care. There, private insurance companies cover for vehicle theft and damages as well as third party losses. Interestingly, I had to buy extra insurance in case someone who does not carry one hits me after I moved to the U.S. I was told at the time that many drivers in this part of the world don't have car insurance, even though it is mandatory (similar to everywhere else). I'm wondering why?
2 Canada's Health System Compared with Health Systems of Other Industrial Democracies by Dr. Marilyn Bowman from SFU:
In the specific comparisons with US health status, the data show that across virtually all the major indicators of health, Canadians are considerably better off. In a 1997 international comparison by The Economist Intelligence Unit, Canada ranked 4th in general health among 27 developed countries, compared to 13th for the US. Canadians have better physical and mental health than Americans (Kessler, Frank et al. 1997), and in particular, poor Canadians have better health than poor Americans (Ross, Wolfson et al. 2000).
Significantly, in Canada mortality is not correlated with income inequalities as it is in the U.S. (Wolfson, Kaplan et al. 1999), and cancer survival rates are correlated with income in the U.S. but not in Canada (Gorey, Holowary et al. 1997). The better health of Canadians relates to the significant national Canada's Health System Compared with Health Systems of Other Industrial Democracies difference: the use of taxes for universal health care, which has been in effect since 1970.
Some readers may be interested in the very well-written OS article:
Market competition is not going to fix US health care
Thanks to Rat4Cat for his input.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
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