Anti-Capitalist Sentiment (with some morality)

[CoccoBill]

Do customers not also want what is most cost-effective?

With insurance, why would they? The point isn't that they'll want a less cost-effective treatment over a more cost-effective one, they'll want every test imaginable, whether they're even relevant or remotely helpful, since if you don't prescribe them, I'll find someone who does.

[wufwugy]

With insurance, why would they? The point isn't that they'll want a less cost-effective treatment over a more cost-effective one, they'll want every test imaginable, whether they're even relevant or remotely helpful, since if you don't prescribe them, I'll find someone who does.

You're right. It's a big problem in second-party and third-party payment systems.

Insurance is a second-party payment system. Government is a third party payment system. First-party is what we want, third-party is the least efficient.

It is likely that most health insurance would go by the wayside without government involvement. Most of the healthcare system naturally works well as a first-party payment system, but government policies have basically made it where the only viable kinds are second and third party payments.

[Jack Sawyer]

You're right. It's a big problem in second-party and third-party payment systems.

Insurance is a second-party payment system. Government is a third party payment system. First-party is what we want, third-party is the least efficient.

So what is first-party? Out of pocket payment for treatment?

[wufwugy]

So what is first-party? Out of pocket payment for treatment?

When the person paying is the person buying and using. Like if you buy a sandwich with your money at the store that you eat.

Second-party is when the person paying is the person buying but not the person using. Like if you buy a gift with your money for some guy at work's birthday.

Third-party is when the person paying is neither the person buying nor the person using the product. Like when the government taxes a guy in Nebraska to buy food stamps for a guy in West Virginia.

Quality and efficiency deteriorate with each step away from first-party payment. Regarding insurance, it functions efficiently as a catastrophic measure. Our current healthcare market is nothing of the sort, and costs are outrageous because of it. I believe it is due to some specific government policies (like how tax breaks for employer health insurance are creating a whole market of health insurance where there would likely otherwise be upfront prices and first-party payments instead).

[Jack Sawyer]

When the person paying is the person buying and using. Like if you buy a sandwich with your money at the store that you eat.

Sure. Now, buying in bulk should not bring down costs? I assume that if you buy 10 sandwiches, you may get at least 1 free. Or some free OJ.

Quality and efficiency deteriorate with each step away from first-party payment. Regarding insurance, it functions efficiently as a catastrophic measure. Our current healthcare market is nothing of the sort, and costs are outrageous because of it. I believe it is due to some specific government policies (like how tax breaks for employer health insurance are creating a whole market of health insurance where there would likely otherwise be upfront prices and first-party payments instead).

We are buying insurance against something that hasn't happened yet. By buying in bulk, ergo 1 entity buying all of the insurance, it *should* bring down the price paid. Like buying 10 sandwiches and getting 1 free, Or some free OJ.

Sidenote: these first party purchases obviously already exist, like when Cristiano Ronaldo buys insurance for his legs, or Kim Kardashian buys insurance for her ass. Those that need it, can get it as per usual

[wufwugy]

Sure. Now, buying in bulk should not bring down costs? I assume that if you buy 10 sandwiches, you may get at least 1 free. Or some free OJ.

Yes. The reason why is called "economies of scale."* Interesting to note, economies of scale is one of the couple elements that make up monopolistic attributes that arise naturally.

We are buying insurance against something that hasn't happened yet. By buying in bulk, ergo 1 entity buying all of the insurance, it *should* bring down the price paid. Like buying 10 sandwiches and getting 1 free, Or some free OJ.

It does bring the price down in this one regard. Depending on how it is done, unintended consequences can arise that increase the price by net. When you have insurance you DO want to be a part of a large, varied pool. But that doesn't mean that you want insurance for everything. Regarding healthcare, insurance works very well for catastrophic but not as well for routine or boutique care. The rapid growth in costs of healthcare is in part because government policies are making them cover more than what they should.

Singapore is a good example of avoiding the pitfalls that every western country has undergone regarding government intervention into healthcare. Their system is mostly oriented around catastrophic covered by insurance and most everything else from first-party payment systems (types of health savings accounts).**

Sidenote: these first party purchases obviously already exist, like when Cristiano Ronaldo buys insurance for his legs, or Kim Kardashian buys insurance for her ass. Those that need it, can get it as per usual

Those are not first party since the insurance company would pay for the care. I'm not sure which of second or third party payments Ronaldo/Kardashian paying the premiums to the insurance companies constitutes.

To understand how to know this isn't first party payment, consider this: if Ronaldo has a deductible of $0 and pays his premium every month, it doesn't matter to him what the cost of the procedures the insurance company covers are. They can be $100 or $10000, doesn't matter. BUT if he pays for all he consumes out of pocket, all of a sudden he cares what the price tag is. Ronaldo and the insurance company each have different asymmetries of information regarding what is best for Ronaldo (and best for the insurance company). Sometimes the insurance company (second or third party payment) can have efficiency advantages and sometimes Ronaldo (first party payment) can. In general, as we have seen play out in the real world, the net effect of moving away from first-party payment is an efficiency loss.


*Essentially, growth in efficiency as scale increases.

**There are politicians in the US who want to convert to a similar type of system (like Rand Paul), but their bills never gain traction in large part because the media misuses statistics and scaremongers.