Isaiah Kriegman / Blog /

Health Insurance and the $460 Light Bulb

EDIT

The subtitle of this post is inaccurate. I failed to distinguish between two things that often go by the same name:

• Health insurance is coverage in case of a emergency incident where you need expensive treatments to save your life. Also sometimes called catastrophic health insurance.
• Healthcare plans are coverage for all kinds of treatments for non-life threatening issues, like needing a nearly checkup or getting physical therapy.

I think healthcare plans are a stupid scam and fewer people should have them. Catastrophic health insureance plans are great, and it’s a shame the Obamacare basically banned most people from enrolling in them in favor getting more people signed up for healthcare plans.

I recently turned old enough to age out of my local pediatrician’s office and have had to shop for a new primary care physician. I’ve only had to deal with the adult world of health insurance without my parents for a few interactions but something I’ve long been suspicious of is hitting me like a ton of bricks: health insurance is a stupid scam and should be abolished.

But wait, how will anyone get taken care of? How will anyone afford healthcare? I can’t afford that! What about my broken leg? Who’s going to pay for my kid’s–HOLD ON. Let me explain how painfully stupid health insurance is with an analogy:

Imagine if homeowner’s insurance worked the way health insurance works:

This means that literally EVERY operation you might want to do on your home is covered by your insurance. So suppose that one day your light bulb goes out. Want to replace it? Easy, all you need to do is head over to your primary care electrician. A journey of a thousand miles begins with a single step.

The role of your primary care electrician is to diagnose your electrical problems and write a prescription. He’s partnered with your homeowner’s insurance network and they trust him to not waste their money (your money is conspicuously not a concern). He’s a very intelligent man who attended an extremely competitive electricians school for four years so he could pursue his dream of being an electrician. For his hard work and competitive edge, he demands hefty fees.

You show him the broken light bulb. He examines it under a magnifying glass and says “Yup, the filament is definitely broken. This kind of electrical injury is common and simple to cure.” He writes you a prescription for a new light bulb and instructs you to screw it into the empty socket when you get home. You say thanks and leave. The whole visit lasted 20 minutes and cost $400, which you won’t find out about until a bill shows up in the mail in a month. You’re asked to pay a $25 copay.

As you head out you tell the receptionist you want the prescription filled out at Lowe’s. You get in your car and turn on the radio. You listen to an NPR story about how smugglers are bringing light bulbs over the Mexican border. They’re the same exact light bulbs, they’re just cheaper in Mexico for some reason. They bring up that progressives in the Senate are pushing for a new HomeCare For All bill. You scratch your head, confused about how politics and economics work.

You get to Lowe’s. You go to the back where they fill prescriptions. A recent graduate of Electric Manufacturing is behind the counter filling your order. She once dreamed of being a hotshot electrician but she found electrical manufacturing more interesting and the course load easier. Given her advanced degree, she demands much higher pay than someone who just stocks shelves.

She hands you a light bulb from behind the counter in nondescript packaging. You don’t have any choice in selecting a light bulb, it just says Lowe’s on the package. You know that the light bulb was manufactured by one of the big Electric Manufacturing companies in Europe. They hold a special patent for making these light bulbs in the US, even though they’re the same as the ones in Mexico and India. You recall that the big EM companies are huge and donate millions of dollars to congressional candidates every year. You feel slightly disgruntled by this and shrug it off.

The light bulb costs $35. You are charged $5 and the rest is charged to your insurance.

You get home and install the light bulb according to your electrician’s instructions. It works properly, and you feel good that you crossed something off your checklist.

Months later, after all the bills have been received and paid, your total expenditure is about $460, and that’s ignoring premiums. You relax, breathe a deep sigh and marvel at the wondrous functions of human society.

Okay, this analogy isn’t perfect. Understanding the human body is more complicated than replacing a light bulb. Maybe replacing a light bulb is more similar to buying ibuprofen, which you don’t need insurance or a doctor for. Still, I think this analogy will feel relatable to many people who have had to navigate the overly complex healthcare system just to get their shoulder checked out.

One thing I find amazing about the health insurance industry swamp is how everyone involved seems to be entirely aware that it’s a giant, dysfunctional racket. Every time I visit a doctor and share my analogy with them I get the same knowing, tired nod in agreement.

Less known are the ways this system is gamed to literally steal money from children and taxpayers, like teachers unions that purposefully bargain for outrageously expensive insurance from themselves. Or consider Obamacare, which basically mandates enrolling in health insurance as a tax. The theory behind Obamacare is simple: if we feed the monster, it will be less hungry. In reality, things got more expensive, mortality may have increased, and millions of at-risk American were given access to dangerous and liberally prescribed opioids.

If you’re feeling especially cynical, you can see similarities between the health insurance monster and the backwards economy of the USSR, where ball bearings were manufactured and sent to refineries where they were melted down to make more ball bearings. Such schemes were designed to ensure full employment. Obamacare seeks full health insurance coverage with the same disregard for personal autonomy and market will.

Like in the USSR, we are faced with a similar challenge in addresing this monster. Even if Russians were melting down steel balls to make more steel balls, they depended on their workplace for their livelihoods, educations, community, retirement plans, etc. Ripping that away from people was a tulmultuous event, and remains one of the main political challenges today in former socialist countries. America faces the same societal inertia when it comes to health insurance: “We’re talking about changing flows of money on just a huge scale… There’s no precedent in American history that compares to this,” said one Princeton sociology professor who studies health insurance.

Despite the pejorative taglines from progressive politicians, the current system is not an example of wild markets run amok. It is the result of numerous interventions into the labor and healthcare markets, all done with the intention of raising wages and making healthcare more “accessible” and affordable. These interventions began after World War II, where employers used benefits to circumvent anti-inflationary wage freezes from the Roosevelt administration.

Ronald Reagan left his impact on the industry too when he signed a bill forcing hospitals to take anyone in for emergency treatment no matter what. The costs were to be eaten by the nebulous health insurance monster, and they are still today. Hospitals across California have been shutting down for decades due to financial strains from serving the uninsured. They go under, get bailed out by taxpayers, or the government mandates that insurers cover it, thus passing the costs onto everyone with inurance. The monster grows, not just in cost but in reliance as a crutch for the government.

Just the same way that a $2 light bulb becomes a $460 light bulb, a simple visit to get your shoulder checked out has become a billion dollar monster of an industry where unions, politicians and faceless bureaucracies reach in to take their cut of the profits and social justice glory, leaving reason behind in the dust like a distant memory.

Fortunately our society still has some slim recollection of that memory. Economist Thomas Sowell’s (born 1930) account is illustrative of the changes to the healthcare industry:

During the first 30 years of my life, I had no health insurance. Neither did a lot of other people, back in those days.

During those 30 years, I had a broken arm, a broken jaw, a badly injured shoulder, and miscellaneous other medical problems. To say that my income was below average during those years would be a euphemism.

How did I manage? The same way everybody else managed: I went to doctors and I paid them directly, instead of paying indirectly through taxes.

This was all before politicians gave us the idea that the things we could not afford individually we could somehow afford collectively through the magic of government.

When my jaw was broken, I was treated in an emergency room and was given a bill for $50 — which was like a king’s ransom to me at the time, 1949. But I paid it off in installments over a period of months.

(He leaves out that during his teen years he was homeless and working in a machine shop).

As I try to wrap my head around premiums, copays, deductibles, choosing a new PCP, etc. all just so I can get some physical therapy for my shoulder, I can’t help but feel furious. Why can’t I just walk into the physical therapy office and pay for their services? Because we’re stuck in the overgrown political machinations of decades of American leadership vying to get full collective health coverage that only a political revolution could topple. Fortunately the system is still the best in the world. Americans have the longest lifespans, the best quality care, and far fewer horrific waiting periods than in Canada. I pray that we don’t head in that direction.