Like nearly everyone else, I’ve been following the health insurance debate closely, even though I fear that the ultimate outcome is sure to be depressing for those with a moral conscience.

Health Care Insurance is Not Insurance

One thing that hit me today, though, is that health insurance is really a misnomer, since the intent of the vast majority of health insurance has really nothing to do with insurance.

The point of buying insurance is generally to protect yourself financially from a catastrophic event. But, health insurance is now nearly completely removed from the catastrophic angle, even though part of health insurance is surely still catastrophic in nature. Basically, because medical costs have risen dramatically, one buys health insurance simply so that one can afford essential medical services, that are not even in the least bit catastrophic. So, in reality health insurance is not insurance at all, but a method of financing the purchase of highly expensive (or better yet, highly inflated) medical services. It should really be called Health Financing, instead of health insurance.

When framed in this manner, one can clearly see how absurd the healthcare insurance industry really is. Why are we paying insurance companies up-front to finance basic medical services that we will surely need in the future? Health insurance should only be for catastrophic events. If it was purchased for catastrophic events, then undoubtedly health care insurance costs would drop dramatically. In no other area of finance are consumers or businesses forced to pay exorbitant up-front fees just for the right to get financing. Usually financing costs are equal to 1% of the transaction, if the transaction actually proceeds.

Why Are Health Care Costs Rising? Answer: Finance Disguised as Insurance

How then will one pay for basic medical services if health insurance is only purchased for catastrophic? This is a complicated question, but obviously there can be a much better financing mechanism, as there is for every other high-expense item in society.

More importantly, the financing of basic medical services begs the question of why medical service costs are escalating so rapidly in the first place that we need to finance these costs?

This again is a complex topic, but I’d hazard to say that health care costs are rising precisely because of the ridiculous nature of health insurance. In other words, health care premiums are not rising because health care costs are rising, but health care costs are rising because health care insurance premiums are rising. This may sound crazy, but if you’ve followed financial markets long enough, you’ve surely come to realize that prices are simply a function of the availability of financing. As financing becomes readily available, especially fraudulent financing as typified by certain mortgages and as exemplified by health care “insurance”, the underlying cost of the asset or product being financed ultimately rises dramatically for reasons that are too detailed to get into here. This is a basic law of finance that few will readily admit to, but is evident for all to see. For example, why have stock markets around the world risen 60%+ since March? The answer of course has nothing to do with the corporate earnings outlook, and everything to do with the availability of 0% financing from governments to large banks.

Eliminating the Financing Mechanism from Health Care Insurance Would Cut Costs Immediately

In considering the above, the obvious solution to spiraling health care costs is to immediately force insurance companies to offer only catastrophic insurance. This will eliminate the financing of basic medical services, which would in turn dramatically reduce the costs of basic medical services. This may sound simplistic, but I believe it to be accurate. With diminished financing, healthcare costs for basic services are bound to drop significantly. For those honest individuals who may be hurt by such a price drop, the government could step in to help during the transition.

Is this Solution Realistic? Not in a World Controlled by Finance
Of course, I realize that the solution above is not realistic, simply because our entire government is held hostage by big business and Finance. The sole intent of these parties is to increase prices as quickly and as steeply as possible. Sadly, therefore, any economic solution that attempts to decreases prices and increase affordability is bound to be dead on arrival. Always inflation, never deflation, is the mantra of our government and economic leaders. So a simple prediction can be formulated: As health care insurance companies continue to drink from the fountains of fraudulent finance, health care costs will continue to skyrocket with or without health care reform. Expect a doubling or more of health care premiums in the next decade, even though incomes will basically stay flat.

At some point, health care costs will bankrupt a majority of families in this country since it’s inconceivable to spend such a large percentage of pre-tax income on health care premiums and still have money to pay for other real living expenses. Of course, the bankruptcy of the population is quite beneficial for the government and for big business, since as the mortgage debacle shows, as economic troubles deepen the government redoubles its efforts to hand out free money to big business and big banks.