by Zarquon » Sun 15 Jan 2017, 14:48:46
Here's my two Eurocents on health and insurance:
1) I read an interview (can't find the link) with a Swiss(?) economist who argued that the constantly rising costs of healthcare are due to several factors, some of which are obvious. Medical procedures keep improving, but better tech comes at a cost. Like fracking, if you like. Secondly, an aging population costs more. But what was new to me was that a huge factor is that labor productivity in all areas of the economy keeps improving and thus wages increase - but the healthcare sector can't keep up with industry or other services. You can't heal a broken leg 2% faster every year. You can't treat diabetes 2% more efficiently every year. But if productivity gains in health care constantly lag behind other sectors, prices must rise or doctors and nurses must starve. In a way, computers and robots cause your health insurance cost to rise.
2) The German health insurance system dates back to the late 19th century and was set up as a system of insurance collectives, or non-profits. And their administrative overhead is something like four or five percent of premiums; they pay out an average of 95 cents on the euro. That's difficult to compete with if you need to keep the shareholders happy. So, in the mid-nineties, the conservative German government decided to liberalize the market and allow private health insurance. That would flush billions every year into insurance companies and thus capital markets, which is good for the economy. And as a little welcome present they bought mandatory private insurance for all civil servants.
At first, the market boomed. Private insurers found millions of customers, drawn by low premiums and the promise of being "first-class" patients, because private insurance offered extra services and procedures (which were then routinely performed by doctors and hospitals, often regardless of medical necessity, but that's a different topic). And the customers the insurers were going after were young, healthy wage-earners, for obvious reasons. Anyone over fifty or sixty or with existing health conditions didn't get these sweet deals. They were stuck with the non-profits, raising costs for everyone else.
Fast forward thirty years. Since average health costs of thirty-somethings are almost negligible but begin to rise sharply at over fifty and explode for septuagenarians, you don't really have to be a financial wizard to anticipate rising industry costs in the 2000s and costs exploding after 2010. Which they did. Every intern could have told the companies back then that they would need to build reserves for the days when their early customers turned sixty. Which they didn't, and why would they? Who cares about what happens thirty years later? The only other way to cover these huge costs would have been a constantly growing customer base, but like every other Ponzi scheme, this one had run its course already.
The situation now is that private insurers, bleeding money, reduce services where they can and getting them to pay for an ingrown toe-nail is an uphill fight. Customers try to get out of their contracts and get back into the old non-profit system. Funny thing is, though, that except for one catch-all insurer, the one with the worst health plan, the non-profits are not required to sign up anyone who previously opted out of the system.
It's all a bad hangover.