The Problem With Health Insurance

Earlier today Ron Bailey pointed out a New York Times piece on the problems with the current employer-based insurance system. It's not the only high-profile piece to point out the myriad flaws of the current system: This month's Atlantic features an excellent cover story that similarly details the ways in which today's health insurance market, by insulating individuals from paying for care rather than actually insuring truly catastrophic events, fails to incentivize either quality care or financial responsibility— problems the author argues that the reform proposals now making their way through Congress won't fix.

I don't agree with all of the author's conclusions, but it's a great piece, and well worth the 40 minutes or so it'll take you to read it. One quibble, though, with this bit:

Some experts worry that requiring people to pay directly for routine care would cause some to put off regular checkups. So here's a solution: the government could provide vouchers to all Americans for a free checkup every two years. If everyone participated, the annual cost would be about $30 billion-a small fraction of the government's current spending on care.

I'm not sure this would be necessary. Why? There's reasonably good evidence that when consumers pay for more of their care out of pocket, they actually get more preventive care, not less. According to a recent review of high-quality research into consumer-driven care, which usually pairs catastrophic insurance coverage with an HSA or similar medical-savings account, patients in consumer-driven plans seem to increase demands for preventive care compared with those in traditional insurance plans. 

That's counter-intuitive in some ways, but it also makes sense: People tend to take better care of those things they have to pay for themselves.

Read Reason's health-care archive here.