Insurance has followed a similar path, and shares more than a few
similarities with the lottery. The two businesses hire from the same
pool of actuaries and employ them to rig similar “games.”
To
survive, insurance requires the vast majority of people to lose most
of the money they put into it. It’s a gamble that instead of asking
people to imagine the possibility of a jackpot asks them to imagine
something quite the opposite.
That’s why insurance is much more successful than the lottery, causing
U.S. citizens to spend about a
trillion dollars a year on it instead of the relatively modest $
70 billion of
the lottery. In the end, people hate losing things a lot more than they
like getting things.
The economic term that describes this phenomena is called “loss
aversion,” which means people respond disproportionately to gaining $100
versus losing $100.
If a phone company raises its
monthly cost, more people leave than would join if they lowered rates
instead.People just hate losing things once they have them.
This is also why people tend to overvalue their own possessions—a
similar phenomenon titled “the endowment effect.” Ziv Carmon and Dan
Ariely asked owners of NCAA Final Four tournament tickets to predict how
much they could sell their tickets for.
The
predictions averaged 14 times higher than the average hypothetical
buying price.
So while people are much more vulnerable to the rhetoric of insurance
than the lottery, both succeed by convincing us to believe in a
fundamental deception. In the lottery’s case, people are willing to
throw away a few dollars at a time so they can imagine the bliss of
winning.
Because the average lottery user’s day-to-day
stresses and dissatisfactions are generally situated around money, they
believe that obtaining a vast sum of money all at once would solve
most of their problems. But this does not seem to be the case.
Several studies have explored the surprising dissatisfaction of lottery winners.
One study
compared lottery winners with people who became quadriplegic around
the same time, and found that the lottery winners were no happier and
took significantly less pleasure in simple beauties.
A lot
of people are buying tickets just for the chance to imagine a
happiness that does not seem to actually exist.
The lottery doesn’t succeed because people aren’t good at calculating
probabilities; they know they have almost no shot at winning. It
succeeds because it convinces us to believe in an inaccurate equation:
lack of money causes stress, stress drains happiness, therefore more
money will mean more happiness.
A similar
miscalculation takes place with health insurance. The average person
assumes good health equals medical care, and medical care means access
to care, which equals health insurance. Or, in the other direction,
health insurance means access to care, which means good health because
it mitigates the risk of disease and injury.
But this also does not seem to be the case. People with health insurance are
no more likely to be healthy than people without it.
The
vast majority of health is the result of personal lifestyle, genetics,
and environment. Health-care services account for less (possibly much
less) than 10 percent of your actual health.
This means access to health care has very little to do with what we
think it does. The national debate about health care has focused around
what Brent James calls “rescue care,” or the imperative we feel to
save a life no matter the cost.
This is the dramatic
rush to the hospital and end-of-life care.
This sort of care has not actually increased life expectancy for
several years. It is miraculous and wonderful, but it won’t make us live
any longer or any more healthfully.
But, as with the
lottery, Americans continue pouring their money into a system that does
not actually perform.
If, instead of focusing on a few rare cases, we spent our money
improving our lifestyle—buy a better chair, change unhealthy habits, or
(as some studies suggest) even meditating—our overall life expectancy
would dramatically increase.
But instead we continue
to believe a false equation.
In 2014, U.S. lotteries raised more than $70 billion. This number is
astounding because it suggests the average person spends $220 a year on
the lottery. But that’s assuming the price is evenly distributed
across all people. We know children aren’t participating, and in
certain states the lottery is still prohibited. So for those who play,
the average is much higher.
Several studies have also shown that poorer counties spend twice as much
as wealthier counties.
In
North Carolina the poorest counties produced
$400 per person per month. That’s $4,800 a year. If those same people
invested that money in any number of ways, they could have more than a
million dollars by the time they retired.
That’s winning the lottery. So just imagine what could be done with the
much larger amount of money that is now being pre-allocated (before
it’s needed) to a host of medical services.
Over
time, lotteries have had the same basic story line, and health insurance
now fits right in:
"The state legislates a monopoly for itself; establishes a state agency
or public corporation to run the lottery (as opposed to licensing a
private firm in return for a share of the profits); begins operations
with a modest number of relatively simple games; and, due to constant
pressure for additional revenues, progressively expands the lottery in
size and complexity, particularly in the form of adding new games. (
National Gambling Impact Study)"
Insurance has followed a similar path, beginning as “
friendly societies”
and ending in nationalization—Obamacare. The nationalization is
natural and even necessary. In England, early insurance agencies
offered fire insurance, which meant homes were monetarily and
physically protected because the insurance agency also ran the fire
department.
But insurance companies drew criticism when
they refused to put out the fires of homes whose owners had not
previously purchased the insurance. This is an example of market
failure. If the insurance company did put out the fire, then no one
would buy the insurance.
The way to make sure all the
fires are fought is to pay for a fire department through taxes. This
way everyone pays into the insurance and every fire is extinguished.
Today the same thing has happened with hospitals. A lot of people won’t
pay for insurance if they can go to the emergency room and still get
help, help that the hospital is required to give whether they’re paid
for it or not.
So we turn healthcare, like the fire station, into a “
tax”
that stops people from getting a free ride.
There is certainly some utility here, so insurance ought to exist and
it probably ought to be governmentally run, but the chance of you
ending up ahead is about as likely as your house catching fire. A good
health insurance system would be like a good fire station.
You
call them when you need them, but most of the time you get your own
cat out of the tree.
That means low premiums and high deductibles. But that’s probably not
what will happen. If this progresses like any other lottery, we can
expect it to just get bigger, advertising higher and higher “jackpots”
(bigger, all-inclusive packages) because as the government gets involved
in the business it will be under pressure to sell ever-increasing and
ever more inclusive health-care packages.
They’ll be
tempted to insure more and more services, “to invent new games,” and
“additional revenues.”
But if our goal is to encourage actual health improvements, we will
need to devalue insurance, cut down traditional health-care spending,
and create policies that turn people away from doctors and towards
things that have a much larger impact on health. We have to find ways
to, as Dr. David Blumenthal says, “Invest our health-care dollars in
ways that will allow us to live longer while enjoying better health and
greater productivity.”
The biggest lie health
insurance tells us is that it’s a way of mitigating risks. Bad habits,
low exercise, poor hygiene, genetics—those are your largest risks, and
health care has proven to be very ineffective at dealing with those
risks.
If we want to encourage people to live longer,
healthier, and happier lives, the best thing to do is convince them to
eat well, sleep enough, and go to the gym rather than pumping their
money into a system that will only produce yet another ineffective
doctor visit.
But we want to believe doctors can take care of us. It’s sure nice to
imagine, so we commit to buying another ticket tomorrow.
Note Almere-Digest :
hopefully some of Europe's "new" privatized insurance schemes (like that of the Netherlands)j will not be not taking the same route as that of the US Insurance Industry?
Almere-Digeest
For the complete report go to : Why Health Insurance Is Like Playing the lottery
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