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Monday, October 5, 2009

Car Insurance vs. Health Insurance

I noticed another evil fnord in the health insurance debate. "The State forces people to buy car insurance. Therefore, the State should force people to buy health insurance."

In a really free market, whoever owned the roads would demand that drivers have insurance. If there's an accident, you need to make sure that the injured party gets restitution.

In this context, State-mandated car insurance makes sense. However, car insurance businesses are licensed by the State. There's artificially restricted competition. The net effect of the "mandatory car insurance" law is corporate welfare for car insurance corporations. A group of people can't pool their risk and form an insurance association, unless they're compliant with the State bureaucracy.

Also, car insurance vendors are usually required to charge everyone living in an area the same rate. A car insurance vendor may not:

  1. Charge people based on "# miles driven". If I drive 10k miles/year and you drive 20k miles/year, you're probably twice as likely to get in an accident.
  2. Charge people based on their evaluated driving ability. Drivers are licensed by the State, and not by the insurance salesman. If I'm half as likely to get in an accident as you, based on my driving ability, then the insurance corporation may not charge me less.
The net result is inefficiency and corporate welfare.

The car insurance tax is partially avoidable. I don't have to own a car! Not owning a car is inconvenient, but I can use a taxi or rent a car or get a ride from a friend if I need one.

The health insurance tax would be absolutely unavoidable. Health insurance is mandatory. The IRS would be responsible for making sure everyone has health insurance, and taxing those who are lacking insurance.

There's a law that says "Emergency rooms must treat all patients, even if uninsured!"

If you're poor, you might make the rational economic decision to not purchase health insurance. When/if you get sick, you just go to the emergency room. By law, they are required to treat you. You can't pay your bill, but you just declare bankruptcy. You have no assets, so it costs nothing to declare bankruptcy.

The net effect of the "mandatory emergency room treatment" law is that everyone else pays the cost for uninsured people. Everyone else pay higher prices to offset this cost.

"Repeal the 'mandatory emergency room treatment' law" is not discussed. Instead, everyone will be required to purchase health insurance.

The entire problem is due to previous State restriction of the healthcare market. Forcing people to buy insurance is a type of tax. It's amusing to hear Obama using English language loopholes to say "Mandatory health insurance is not a tax." If you're required by law to purchase something, that's a tax.

A law saying "You must buy X!" is a huge windfall for executives at a corporation that sells X.


Anonymous said...

Here's a comparison of the car repair industry to the "health care" industry. You have my permission to use this in one of your blog entries if you wish:

If the automotive repair industry were like the "health care" industry,

You'd need to take your car to your "primary care mechanic", whom you'd have to pay, to get a referral to a specialist to get anything anything other than routine maintenance done.

You could change your own oil, etc. but oil, brake and radiator fluids, spark plugs, brake pads, etc. would be available by "prescription" only. Such things would also be patented and exorbitantly expensive -- no "generics" until the patent expired.

Mechanic schools would be state-licensed and the supply of mechanics kept artificially low.

Only government-approved mechanical interventions and fluids/devices would be allowed to be used.

Earl Scheib would be arrested and run out of business and paint jobs would cost $100,000.

Under penalty of imprisonment, with few exceptions, only government-approved and licensed mechanics would be allowed to work on cars -- no matter how much knowledge your friend has or what private certifications, you could not get his help -- he could only work on his own car, and even then be limited as to what he could do. Even giving you advice on what the funny sound you car makes means and advising you what to do could land him in jail for "practicing auto mechanics without a license".

Anonymous said...

"Health care" is a paternalistic, authoritarian and communist concept. "Care" carries the semantic implication of custody or ownership as in that cared for not having much or any say in the content of such "care". As its owner, you "care" for your dog (or take care of your car or your child or your incompetent grandmother with Altzheimers) whether or not you "care" about them.

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Young driver insurance said...

Great information, thanks :)

Anonymous said...

US is the only first world country without health care that incude to everyone.
You can not only think in emergency room attention, because if poor family get a complex diagnostic like degenerative CNS disease, they will need a big insurance, if not just go to die...
US will fail in the future, expensive education and health care, two necessary condition for the country future.

blue cross blue shield said...

car insurance is only for those people who have car, but health insurance is for everyone, not all people has a car. poor people having a health insurance is a big help for them to make their health to be healthy

Anonymous said...

One thing about the medical industry is that the usual economic paradigms of supply and demand do not apply.

You don't buy health insurance with the idea, "next time I break my leg"... Or with the idea of using the worst doctor or provider to save money.

When you suddenly have an accident, the demand goes from nothing, to straight up, infinite. So you will pay almost anything to get yourself fixed up. And you want the best. Even if it means going into debt.

So the usual supply and demand curves that apply in most other industries, including car insurance, just don't apply. The insurance and medical industries are very aware of this, I'm sure.

FSK said...

It's also heavily regulated by the government. The State artificially restricts the supply of doctors.

It's wrong to criticize the mental health scam without mentioning that the government restricts the supply of doctors via licensing.

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