Robin Hanson draws a comparison between medical and car insurance. It's a comparison I've made many times myself, but he has a nice spin on it:
With car insurance, you typically first get a neutral expert diagnosis of the damage to your car. Second, you get a check based the estimated cost of a recommended treatment to fix that damage. Finally, you can spend that money as you like; you don’t have to do as much as suggested, or anything, if you feel so inclined.
Medical insurance is usually different. You still get an expert diagnosis, and a recommended treatment. And in Medicare, the resulting cash paid depends only on the diagnosis. But the expert who makes these choices is less neutral – if you the patient approve, it is he or she who is paid to do what they recommend. And if you decline their treatment, or opt for something less expensive, you don’t get the difference in cash. This greatly reduces your incentive to seek the most cost effective treatment, or to skip treatment if none are cost effective.
... it seems to me most folks dislike this idea. I think this is why such med insurance isn’t offered. Why? Some possibilities:
- By explicitly distinguishing cases where no clinical evidence confirms patient complaints, we’d embarrass and insult such “asymptomatic” patients.
- We frame medical insurance as a gift, and it is rude to encourage people to exchange their gifts for cash.
- We think of medical insurance as a way to force people to get more medicine than they’d choose for themselves.
- Doctors are our authorities, and so we look bad if we disrespect them by not following their advice.
- Health is noble, money ignoble; it is immoral to make folks choose between them.
My sense is that #4 and #5 are the key drivers.
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