The Therapeutic State: The Myth of Health Insurance
“Health Insurance” is Really a Statist System of Cost-Shifting
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Forty million Americans are said to have no health insurance. Those who do have health insurance are frustrated by having to pay ever-increasing premiums for steadily diminishing medical services. Conventional wisdom tells us that we are facing a “health insurance crisis.”
It is important to recognize that what we call “health insurance” has little to do with health and nothing to do with insurance. We do not face a “health insurance crisis.” We face the consequences of a set of economic and social problems rooted in a futile effort to make the distribution of health care—unlike the distribution of virtually every other good and service in our society—egalitarian.
The typical contractor of homeowner’s insurance is the homeowner. He buys insurance to protect himself from costly loss caused by events outside his control, such as fire, not to defray the recurring expense of maintaining it. The ideal outcome for both the buyer and the seller of home and automobile insurance is for the policyholder to never make use of his policy.
The typical contractor of health insurance is not the insured person but his employer. Neither party is free to negotiate the terms of the policy. The employee cannot bargain for a lower premium in exchange for a high deductible or for choosing to be not covered for alcoholism or schizophrenia. The employer is not free to decline coverage for state-mandated medical services. In New York State, for example, the Women’s Wellness Act mandates group health-insurance plans to cover contraceptives including abortifacients, and the Infertility Coverage Act mandates that they cover infertility treatments, including selective fetal reduction (abortion of multiple fetuses conceived by artificial means).
The economic survival of an insurance company depends in large part on collecting more in premiums than it pays out in claims. To bring about that outcome the insurer employs certain methods, some complicated, some very simple. Although embarrassingly obvious, some of these simple measures need to be mentioned because they are absent from what we mislabel “health insurance.” For example, a person cannot buy a policy to protect himself from a loss caused by his own actions, such as burning down his own home. But so-called health insurance protects the individual from the medical consequences of his own actions, for example, injuring himself by smashing his car while drunk. Not surprisingly, all the participants in the complex scheme we call “health insurance” are unhappy with the result.
In the case of genuine insurance, there is a direct relationship between the dollar value of the protection purchased and its cost to the insured. The premium for a life-insurance policy with a face value of $100,000 is less than for a policy for a multiple of that amount. In health insurance no such relationship exists between premium paid and compensation received. Moreover, the health-insurance company, acting on its own behalf, can write a contract with a “cap” on claims, that is, for the maximum amount it will pay the insured, regardless of the health-care cost he incurs. The insured person, who typically does not act on his own behalf but is “provided” insurance as an important part of his job benefit, has no reciprocal options.
The sole rational purpose of true insurance is to protect the insured from an unanticipated economic loss so large as to jeopardize his economic well-being. No one sells or buys insurance to cover the cost of maintaining his property. Home insurance does not pay for plumbing repairs; automobile insurance does not pay for replacing worn-out windshield wipers. Yet people demand precisely this kind of reimbursement from so-called health insurance.
“Health Insurance”: The Illusion of Equality
If health insurance is not insurance, what is it? It is a modern version of the illusion that all men are equal—or, when ill, ought to be treated as if they were equal. When religion was the dominant ideology, death was (supposed to be) the great equalizer: once they departed the living, prince and pauper were equal. Today, when medicine is the dominant ideology, health care is (supposed to be) the great equalizer: everyone’s life is “infinitely precious” and hence deserves the same protection from disease. Of course, prince and pauper did not receive the same burial services, and rich and poor do not receive the same medical services. But people prefer the illusion of equality to the recognition of inequality.
Actually, the ruled have always longed for “universal health care,” and the rulers have always supplied them with a policy that the masses accepted as such a service. In the Middle Ages, universal health care was called Catholicism. In the twentieth century, it was called Communism. In the 21st century, it is called Universal Health Insurance. What we choose to call “health insurance” is, in fact, a system of cost-shifting masquerading as a system of insurance. We treat a public, statist political system of health care as if it were a system of private health insurance purchased for the purpose of obtaining private medical care.
Everyone knows but no one admits that health insurance is not really insurance. In fact, Americans now view their health insurance as an open-ended entitlement for reimbursement for virtually any expense that may be categorized as “health care,” such as the cost of birth-control pills or Viagra. The cost of these services is covered on the same basis as the cost of medical catastrophes, such as treatment for the consequences of a brain tumor. Such distorted incentives produce the perverted outcomes with which we are all too familiar.
From a public-health point of view, the state of our health is partly, and often largely, in our own hands and is our own responsibility, even if we have a chronic illness, such as arthritis or diabetes. It is an immoral and impractical endeavor to try to reject that responsibility and place the burden for the consequences on others.
Comment by Richard Day on 5 January 2009:
In your comment, you said, “In the case of genuine insurance, there is a direct relationship between the dollar value of the protection purchased and its cost to the insured.”
More and more people are discovering the Health Savings Account type of insurance plans. This is where you pair a high deductible health plan with a savings account for medical expenses.
The beauty of these plans is that they allow the insured to pay for the small things such as doctor visits and medications out of their savings account. Then, the High Deductible Health Plan will cover the catastrophic occurances which require hospitalization.
Comment by Sick and Tired in Massachusetts on 14 February 2009:
I live in Massachusetts and “universal health insurance” or what is often euphemistically called “universal health care” is one of the most invasive and oppressive systems of social control I’ve ever experienced. In order to guarantee compliance, the state of Massachusetts fines those who do not purchase health insurnance policies if the state deems individuals who don’t have insruance can afford it. The state tracks each resident over the course of the year and sends a letter at the end of the year stating how many months out of the year the individual was uninsured. Then, the individual is fined for those months without insurance. The level of surveillance required is truly Orwellian. There is no organized resistance and I suspect, in part, resistance does not occur because the insurance mandate is tied directly to each individual’s state income tax return. We have the tax arm of the government monitoring each individual’s health insurance policies through the direct exchange of information with health insurance providers who turn over every individuals Health Identification Number to the Department of Revenue. This is clearly unconstitutional because health insurance has become another tax that has not been identified as such. No one in the state can contract with an insurance provider without that information being readily available to the DOR. Those who do not comply with the law can find themselves paying fines which can easily exceed $2,000 each year. Where that money goes is not considered residents’ concern. What the state of Massachusetts is doing goes beyond privacy invasion and borders on economic slavery.
Comment by DD on 13 May 2009:
Sick and Tired,
It doesn not border on economic slavery. It is slavery! Actually, everything that the government is doing to us is a crime.
As long as people continue to believe in our \"democrach\", as if it were a God, we will continue to on the path to Fascism.
Comment by tooearly on 24 May 2009:
“From a public-health point of view, the state of our health is partly, and often largely, in our own hands and is our own responsibility, even if we have a chronic illness, such as arthritis or diabetes. It is an immoral and impractical endeavor to try to reject that responsibility and place the burden for the consequences on others.”
Partly, or largely?
Partly no debate. Largely: nonsense. The evidence is abundantly clear that our health is foremost a product of social determinants: ie your zip code is more important than your genes.
Comment by Reality check on 26 August 2009:
I grew up without health insurance because my dad was self employed. We took care of ourselves! We did not expect or desire government assistance! Today’s clinics and ER’s are abused because people are not paying directly for services. HSAs and taking the employer out of the equation would be a start as well as tort reform. People expect the same standard of care, they should expect to pay for the technology! And if they decide against a test due to costs they should not get to sue for having different results (you get what you pay for). So, inequality is to be expected in a free society. But you are free to ask for assistance from community, church, and family, too. I’m a physician who has worked in the military and public health. There is more abuse and less gratitude when people aren’t financially responsible and view it as a “right” .
Comment by Austinaustrian on 26 August 2009:
To tooearly–one should not confuse correlation with causality. Otherwise we might conclude that changing temperatures cause the use of SUVs.
Comment by James Madison Fan on 26 August 2009:
I could agree with this in regard to Obamacare but I pay for my health insurance. It is a service. If Cigna and Kaiser do not like providing this service they are a business and they can get out of the market any time they like.
Mr. Szasz is correct when he says, \"What we choose to call “health insurance” is, in fact, a system of cost-shifting masquerading as a system of insurance.\"
That is the whole purpose of insurance. A large number of people pay into it so that a few people can capitalize on it when it is needed.
It is in the best interest of an insurance company to cover basic treatment so people will go to the doctor before an illness becomes critical. If someone avoids the doctor because he does not want to pay $250.00 and ends up in the ER, hospital, or surgery the company will pay out FAR more money in the long run. Better to treat a cut before it becomes infected with stiches, soap, and a bandage than to pay for a suit of antibiotics, surgery, and amputation later. Preventative maintenance may not be covered by homeowner\’s insurance but so give discounts to premiums if you have security installed or annual termite inspections.
Mr. Szasz is wrong when he says, \"We treat a public, statist political system of health care as if it were a system of private health insurance purchased for the purpose of obtaining private medical care.\"
As long as we are not talking about Nationalized Health Care I fail to see how \"Statist\" applies unless he\’s talking about Medicare. It certainly doesn\’t apply to Cigna and Kaiser. If they weren\’t making scads of money they wouldn\’t be offering the services.
Comment by Skip Shephard on 27 August 2009:
I found the article to be quite enlightening. I also felt the comments were straight forward and hit the nail on the head. One in particular hit home! It now appears that the IRS is supplying Medicare with our tax return information and the government is using our tax returns to determine what we should or should not pay! I just got my letter today. My concern is that the data supplied by the IRS was for 2007 when both myself and my wife were working. We are both retired and make only half of what we made in 2007, yet the government is basing their calculations on the 2007 tax return! This means I have to pay again. This system is not fair and I hope to challenge it.
Comment by Kelli allred on 29 August 2009:
How encouraging it is to read the voice of reason coming from young voters (under40). You havenot lost the vision that our elected officials assume to be a thing of the past. You joint comments are important. Join me and other \"boomers\" in reminding Washington that we areNOT STUPID & we will not be led or dragged into socialized healthcare.
Pingback by The myth of health insurance | LDS Freemen on 17 October 2009:
[...] to explain the myth that is health insurance, is Thomas Szasz writing for the May 2003 issue of The Freeman: [...]