Health Insurance

Health care policy has long been centered on insurance, specifically getting more people insured, and insured for more things. As we’ve seen, the uninsured are alternately cast as sympathetic figures in need of help or as “free riders” selfishly raising prices for the rest of us.

But what if we’ve been focusing on the wrong thing? What if insurance as we know it is the problem?

During the 1970s a nonpartisan, nonprofit research organization, the RAND Corp., conducted a groundbreaking study centered on health insurance and its effects on people’s actual health. To this day it is still the largest health care study ever conducted, and its findings are fascinating to say the least.

What RAND did was group people by the type of insurance they had and how much of their own health care they had to pay for themselves, and then went back after five years and checked on their health. What it found was that people who paid for their own health care spent 30 percent less money, and were just as healthy as those who got their health care free.

Think about that. Our government policy push to insure more people and have more things covered by insurance won’t actually make us healthier. Perhaps more damaging, it will likely make everything more expensive as well.

In 1960 the direct consumer, you and I, paid basically half of our own health care costs. Today that number has dropped all the way down to 12 percent. So who does pay for it? Private insurance increased its share from 21 percent to 32 percent, but government saw the biggest increase, going from 24 percent all the way to 48 percent. The government pays for half of all health care in this country, and someone other than you and me pays for 80 percent of it. Considering the RAND study findings, what do you suppose happened to health care prices over that same time period? Yep, they rose exponentially. In 1960 the average person spent an inflation-adjusted $1,082 a year on health care. In 2009 that had soared to $8,218. At median wages, what used to cost two weeks to pay for now takes two months. And this all occurred at the same time that prices for other household items have plummeted. Washers and dryers, televisions, music players – their quality has greatly improved while their cost to the average American has declined. Which is what always happens in a free market.

We’ve had great increases in health care technology over the last 40 years, but it’s gotten vastly more expensive. Why have other household goods gotten better and cheaper while health care has gotten costlier? Because you don’t use insurance to buy an iPod. Because there aren’t any government price controls on Whirlpool. Via the free market, more households have a dishwasher, at a lower price, than ever before. We can increase health care access, with better technology, and at lower prices. And do so without a costly, cumbersome federal regulation. In fact, it is precisely these federal disruptions of the health care market that prevent us from accomplishing that goal.

Dig Deeper:

Study: The Health Insurance Experiment 

Study: The Effect of Health Insurance Coverage on the Use of Medical Services

Article: The Cost of Health Care: 1958 vs 2012

Article: Oregon Study: Medicaid ‘Had No Significant Effect’ On Health Outcomes vs. Being Uninsured