Healthcare Insurance 101: And why Universal Healthcare makes sense

A small introduction to health care insurance.

There has been a lot of talk as to how healthy people should not pay for sick people, or why men should not pay for women’s health.

In 2010, Women paid 25% higher healthcare costs than men.

On the same year, male children paid 3% more than female children

And women who had children spent 70% more than males.

Yes, all of this is true, and one would even be tempted to say: We need to have insurance than only applies to “our needs”.

Let us look at reality.

The risk of getting sick and dying is higher when one just has been born (notice how there is a slighter higher rate at 0 years), and in the later years of one’s life (Basically showing that as people get older they die. Common sense right?).

US death-rate and Age distribution: For Males, and females

At the beginning and end of life, that’s where costs are the highest: The death rates are high, and the populations low.

There is no insurance in the planet that will cost little when you are at the extremes.

High cost areas: Low populations, high mortality.

Let us assume that you don’t have children. Then you can enjoy your healthy years with low insurance because at that time of your life. You will not need more, and most people are lucky the death rates between 5 and 45 years are pretty much the same and low. Your cohort of people is large enough that companies charge you a small fee, because the likelihood of getting sick is small, and even if YOU get sick, there are enough other people paying to cover the expenses.

Why insuring healthy people is cheap: Less likely to be sick, and there are plenty of people paying their premiums.

Now after 45 years of age, your probability of getting sick gets continuously higher. This has nothing to do with lifestyle, or gender, it is simple biology, you are are in the decline and you will get sick invariably.

As people get older, the risk of high expenses increases, this makes the healthcare insurance more expensive because it needs to cover a declining population

Now companies, will charge more, they don’t care if you ran a marathon. Your cohort (the people of your same age) will have a higher likelihood of getting sick and in order to pay for the services your insurance will go up. This is what the current Medicare system does. It removes the “sick and old” from the pool that private insurance companies need to cover. We are effectively subsidizing their business. We pay for those more likely to need the service, and we let insurance companies make money from healthy people.

Which takes us to your golden years. Your risk is going through the roof, and you cohort is dropping like flies. You can always choose to not get insurance and drop death, dying is also a choice, but you see this? We all are going to get there at some point.

We acknowledge that we will need care, at all stages of life, and we use our numbers to reduce costs.

How can we fix this problem? We get everyone under the same risk pool: Individual risk is now spread over a large population, and indeed, you will be paying more to the system when you are healthy, but in exchange you will have coverage when you are old.

It is that simple. We are not just benefiting everyone else, we are also benefiting ourselves.

This is the reason that no matter how you look at it, a single payer system is more cost effective than a private insurance model. This is why single payer will save people a trillion dollars a year over ten years, while helping small businesses reduce costs, people become more productive, and money freed to combat other challenges.

Medicare for all WORKS.

The devil is in the details. There are two versions of Medicare for All, one introduced in the House and another in the Senate. I discuss the implications to private insurance in this article.

Sources:

Death rate in the US by age and gender.

Distribution of ages separated by gender.