Chapter 8: The logic of insurance
Health care costs scarce resources. The mode of payment influences the quantity that changes hands and the price that is agreed. It also has an impact on the extent of sharing and redistribution in society. The mode of payment is a topic in ‘who’ and not just in ‘what’. Effective demand is social interaction. It is not just the differential calculus of demand and supply. Effective demand always takes the lead. Money makes the market go round. True in all exchanges, the proposition is doubly true in the market for health. The reason is that the market for health is very frequently not single but twinned. The final market is care: patients pay doctors to make them well. The intermediate market is protection: a third party is prepaid to share the cost. This chapter examines the contribution of the insuring agency to the market for care. Its theme is communism for sale. Communism is ‘to each according to his needs’. Communism for sale is ‘to each according to his needs provided he has bought full-cover reimbursement in advance’. Capitalism is an economic system which sells full-cover communism at a price. Rationing by price becomes secondary, marginal and even irrelevant. What takes its place is allocation by qualified experts. So long as the doctors certify that the wants are needs, the third party will settle the bills. Although it is the market economy it resembles the free National Health Service.
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