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Posted by Sir Four at 5:13pm Sep 1 '09
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The ideal way to handle this situation is to spread the cost evenly across the entire population, then guarantee to treat those who become ill. And to do so as efficiently as possible.

Does anyone really think the patchwork nature of our health insurance system, the profit motives at odds with providing care, the selective selling, and the incredible bureaucratic redundancy offers the optimal solution to this problem?

I can distill this down to a real simple example:

A race of little green men (LGM) are pretty healthy, except every year five out of every thousand of them are diagnosed with a disease that costs 300,000 LGM$ to treat--a figure very few LGM can afford on their own. Furthermore, this disease can strike anyone and there is no guarantee it won't be you some day.

Assume a population of one million LGM. Each year, 5,000 will get the disease, resulting in total costs of 1,500,000,000 LGM$. Recall the cost to any individual LGM is a bank-breaker, however if the cost of the disease is spread across the entire population it comes to 1,500 LGM$ per year per LGM. That is very affordable, and guarantees each LGM's treatment will be covered if he is diagnosed with the disease.

If the LGM government runs with overhead costs similar to Medicare, this would add about 3%, so the actual cost per LGM would be around 1,550 LGM$ per year. Not bad.

Of course a private insurance company may one day lobby the LGM government to eliminate this universal system, so it can charge closer to 20% overhead (to account for shareholder dividends, executive salaries, advertising, and underwriting costs you see). But they'll promise to hold down premiums by denying coverage to LGMs who the underwriters think may be near to getting the disease.

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