Tuesday, October 13, 2009

Can your kids purchase life insurance policies on you after you are dead ???

I got into this argument with some friends on Facebook about a month ago.

Imagine you're in this group of about a dozen families who are all afraid that their houses will burn down. So each family puts about 2% of their income into a pool every year, and this fund will cover the cost of a new home for anyone whose house burns down.

Sure enough, every now and then someone's house burns and the group fund has to cover it. By carefully adjusting the rate that everyone has to pay, the fund winds up with 3.5% more than it pays out. (That's the profit margin for the Health Insurance industry, BTW.)

Next, imagine that a newcomer wants into your group. He's heard good reports about the low cost, and how quickly the funds were applied after each household disaster.

There's only one catch: This guy's house has already burned down.
Would you vote for the group to build him a new house? Especially if he crosses his heart, hopes to die, stick a finger in your eye, and promises to start paying money into the fund one day?

(Hint for Democrats: you're going to be giving him a house for nothing. Another hint: I'm not interested in what you ought to do in this situation, I'm interested in what you're going to do. People's houses burn every day, and you don't buy them a new one. I don't think you would let him into the group.)

Ok, enough of that hypothetical nonsense.

If the current Baucus Healthcare Bill passes, will any young person in this great land of ours be dumb enough to pay for health insurance?

Well, yeah. But they will be scarce. This is the Powerline blog explaining why:

....in the current version of the Baucus bill, there is no requirement to buy health insurance at all until after 2013, and by 2017 the penalty for failing to buy health insurance still amounts to only about 15% of the cost of the insurance.
Now, think about it: if you know that you don't have to buy health insurance when you are young and healthy, but if you should get sick, or just get older, you can apply for health insurance at any time and it will be illegal for the insurance company to turn you down, what would you do?
Obviously, you would defer buying insurance unless and until you get sick.
This means that the pool of those who are insured will be lower quality, and the cost therefore higher for everyone who buys insurance.

It is as though you could wait until you die, and then your heirs can buy life insurance on you.

As the great Thomas Sowell has stated a thousand times, in a thousand different ways: Government policies and programs should not be judged by their stated intentions, but by the incentives they create.

In this case they're creating GREAT incentives for younger people to go without insurance.

Our current government is beyond parody. They don't want healthcare for everyone, they want control. They want power.
Many of the people at the top have never even had to profitably run a Blockbuster Video night shift.
What could they possibly be thinking ? Where is the mainstream media on this joke?
Is there not a Woodward and Bernstein out there? Where is Jon Stewart on this? Letterman? Leno?

The Baucus Bill word cloud came from here.


Cedric Katesby said...

Speaking as a foreigner, if there's one thing I just don't understand about American politics and that is the endless bruhaha over healthcare.
I watch the news clips.
I hear the heated debates.
Yet, I don't get it. It make no sense to me at all.

Again and again and again, healthcare is a political hot potato that is always making the news in the U.S. I don't mean in the last year or so. This issue has been tossed around for a very, very, long time.

Long ago, in the days before Internet access, I watched an American TV drama. One of the characters was a homeless man.
He told the story of how he lost everything when his wife died of cancer and the medical bills stripped him of everything.

I remember thinking how that story didn't make any sense to me. I couldn't relate to it at all.
Why would anybody lose their house and all their savings just because of medical bills? It wasn't possible. It just didn't happen to real people. Never.

That theme of the crippling cost of medical care or of people being afraid to go to the doctor because of the expense came up quite a few times in the American movies and soap operas that I saw over the years.

Yet Australian TV dramas and soap-operas don't have such themes. It took me quite a while to understand that the medical system that Australian citizens all take for granted has no equal in America.
The cultural and political landscape with regards to heathcare is totally different.

I just don't see why America can't bite the bullet and protect it's people. There are plenty of good, proven models out there that serve their various countries well.
How hard can it be to shop around, pick the best one, steal it and then pretend you thought of it first?
Health care in the U.S.
Health care in Australia
Health care in the U.K.

Toronto Lorne said...

Gotta agree with Cedric here. There is so many good options. Options that are better than yours by miles. But yet, it's such a drama to pick one and adapt it. Everyone knows it would work and save money in the long run so why all the negativism about change? Seems unnatural to me... When talking about life insurance, you shoudl check out my life insurance investment article. Maybe you'll find it interesting :)

Take care, Lorne

Smiley said...

The aspect that you ignore is that everyone in your small community is also paying 2% of their income into their local fire department - so the man who's house was burnt down was partially saved by others.

And to suggest that nobody helps the person whose house burns down (or needs help with a large medical payment) is delusional, because community members do end up donating money to these causes. Ever heard of a medical charity or foundation? And it's inherent that the more organizations required to "privately" help these people that administration costs will add up.

And to rebut your very title, plenty of times when people die, the survivors ask for donations in lieu of flowers - either for the survivors (typically the children) or for a charitable foundation.

Tim Lebsack said...

Tomorrow I will be visiting the Bureau of Daydreams warehouse to pick up my allotment of Cuban cigars and American beer along with my massage. Would anyone like to buy my electricity ration?

Browncoat Libertarian said...

Allen - Was it you that posted the "Capturing Wild Pigs" analogy? I now think of said analogy every time I hear someone from a country with government run healthcare chime in.

It gets me to wondering if they are the captive animals that have just gotten used to the "fences" placed around them, or are we?

I'd like to plop an American into their healthcare system for several years to get a true measurement of just how great/not so great these foreign healthcare systems really are. I hear too many conflicting accounts and never know if what I'm hearing are just tales fed through the propaganda machine.

I do know one thing: here in the US, if our VA/Medicare/Medicaid government run systems are any indication, we are in for a heap of trouble if univeral healthcare is adopted here.

Dr Ralph said...

Browncoat - I've forsworn being argumentative over here but I can say that my oldest son, now 23, has been living in Toronto for the last two and a half years and has found Canadian healthcare to be first rate.

One night while out with friends, he slipped on some ice, fell and hit his head and knocked himself out. His friends took him to the emergency room where he was given tests and thoroughly checked out. No bill when they discharged him.

I realize some people who hang around here see that last line as *the* problem, but I don't. Just my 2 cents. I'll now fade into the background again.

The Whited Sepulchre said...

All of these systems used by other countries are interesting concepts.
Unfortunately, they have nothing to do with the abortion currently being considered.
Our particular miscarriage will be a Christmas Tree of goodies for every conceivable constituency. It will preserve the worst aspects of the insurance industry, the negatives of a V.A. hospital, and the waste associated with Medicaid and Medicare.
Read the blurb quoted above....when we try to do something for everybody, the cures are worse than the disease. The insurance pools will eventually contain no one but those who are already sick, or too dense to avoid paying premiums in a system that allows you to sign on after the fact.


That was a link to a post on Harper's site. Go here:


I was afraid that we had either offended you, or had you seriously considering converting to The Light Side Of The Force....

Are you SURE that no one had to pay #1 son's bill when they discharged him? The doctors, nurses, people who mop the floor, etc., all work for free?

Cedric Katesby said...

All of these systems used by other countries are interesting concepts.

Allen, purely out of curiosity, let me put you on the spot for a moment.

Suppose, just suppose, you had to shop around for a new country.
Everybody in America has, due to your unnatural obsession with collecting Vanilla Ice memorabilia, unanimously voted to rip up your passport and ship you and your loved ones out of your own country.
You may never return.

You are bundled unceromoniously on to a plane, given a check equal to your total net worth and told to pick a foreign destination, pronto!

Fortunately, due to the fact that you have many friends in high places, all of the world's industrialized democratic nations freely offer you a new life, new nationality and whatever kind of career opportunity you want.

Nothing can, of course, replace your homeland but you resolve to make the best of it and head for horizons new.

While you are spoilt for choice, you are not swayed by beautiful beaches or local language considerations or even the flavour of the local beers.

All else being equal, your number one over-riding concern is to choose a country that offers you a healthcare system that meets the needs of you and your family and, because you are a nice guy, those of your new-found fellow citizens: seniors, veterans, the disabled, young families etc.
A national heathcare system that, though perhaps not perfect and obviously not the one you grew up with, is probably the best all round system.

What nation would you pick and why?

TarrantLibertyGuy said...
This comment has been removed by the author.
TarrantLibertyGuy said...

A few things... Last night I went to an event where we had some political candidates starting their racing engines early. One candidate, forget his name, but he calls himself "The Conservative for Congress", talked in the most elementary terms about the healthcare bill.

He repeatedly said 'Our healthcare program is the BEST IN THE WORLD'... Oh really? Actually, I think the quality of care is top rate. No, if, ands or buts... However, we pay the highest amount of our GNP on Healthcare.

Is this quality/cost tradeoff worth it? Not at all. Our system, although a good chunk of if is paid privately...has been designed by regulators (that is, lobbyists representing powerful insurance and healthcare delivery systems) to be expensive. The other 'chunk' of our national health bill is paid out of massive bureaucracies. Not exactly effecient and effective either.

Examples? One thing: health insurance can't be sold across state lines limits competition. Thereby raising costs. Insane regulations like HIPAA (for one), originally designed to protect AIDS patients from having their private info publicly disclosed, has evolved into a multi-billion drag on our healthcare expense.

We have regulated ourselves into the highest cost of healthcare on earth - and then many political pundits calling it the 'Free Market'.

Re: Charity Care. My nephew had to have facial reconstruction surgery and went to the Shriner's Childrens Hospital. Best quality of care - and unlike TAXPAYER FUNDED CARE, like what the Doc called 'free' - but top care and literally no $ out of his parent's pocket other than donations from his family. WELL worth it... and the donations were optional, BTW.

If a dollar for dollar tax deduction was allowed for doctors and facilities donating their time and care to the indigent/"uninsure-able", there would be the opposite of what we see in some 'healthcare rationed' countries: Lines of doctors waiting to see patients!! ;-)

If this was about protecting the uninsured vs. not controlling healthcare and reducing the options of everyone, then based on the costs of the plan (apparently acceptable to those willing to sign off), divided by the number of uninsured would give them way more than enough than to just cut them a check (voucher) that could be used to buy an insurance plan that is offered to our US Postal Workers through Blue Cross/Blue Shield. For some reason, this doesn't seem to be an option.

Dr Ralph said...

I misspoke (a common habit): no "out of pocket expenses" rather than free. Still...

I agree, the current monstrosity emerging out of the legislature is not about healthcare reform, it's about insurance reform. As long as it's about the insurance companies, we're screwed.

Do the people providing the care deserve to be paid? Of course! Some insurance company executive? I don't know that I see the value.

The Canadians and Australians (and others) seem to do fine with their systems. Are you suggesting we here in the US are not capable of running a system as competently?

But that's just me. I don't expect agreement.

No...you haven't offended me. I knew the job was dangerous when I took it.

Unfortunately these days I feel like when I get involved in a debate I end up generating more heat than light. No one ends up much the better for all that effort, at least from my point of view.

Check your stats -- I'm constantly lurking. I just don't join the fray as often.

The Whited Sepulchre said...

I'd probably say (based on my own travel experience) China.

The system for the average person is socialized, and therefore sucks. The wife of a friend of mine waited for DAYS to see her doctor for regular checkups during her pregnancy.

However, if you have money, you can get almost anything done there for a fraction of the U.S. cost. If you can afford to go outside the regulated system, the price, and the waiting time drops rapidly.

Glad to have you back.
I agree with you on one issue - they're going to try to "reform" insurance, instead of shutting it down. They are going to screw it up in ways that we mere mortals can't possibly imagine.

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