NCPA - National Center for Policy Analysis

It's Time to Rethink Health Insurance

January 8, 2014

Americans need to rethink the way they look at health insurance, say George P. Shultz, Scott W. Atlas and John F. Cogan, senior fellows at Stanford University's Hoover Institution.

Insurance is supposed to be about protecting against risk. In the health care realm, that means unexpected health expenses that would otherwise be a financial hardship. But over the last 10 years, Americans have begun to view health insurance as a mechanism that pays for all types of medical care, even the most routine expenses.

No one would consider using car insurance to purchase gasoline, nor would people use their homeowner's insurance to paint their house. Health insurance, however, is viewed differently, and it is what has led to our rising health care costs. Because patients who have insurance do not view themselves as the one paying for those services, they employ a "more-is-better" approach and often use services that are costly and of no actual benefit to the patient.

Increasing the number of high-deductible health plans with health savings accounts would be a big step toward reducing costs while insuring against catastrophic expenses.

  • High deductible policies are much less expensive, and those insured under such plans are more able to see the hidden costs of medical care (which, in turn, decreases expenses).
  • Health savings accounts are tax-advantaged, so money can be set into those accounts tax-free and can be used for medical care down the road.
  • Medicaid could also be modernized through the use of health savings accounts. States could deposit funds into individual health care accounts, which could be used to purchase routine medical care as well as to purchase high-deductible plans.

Before we can reform our health system, people need to stop and recognize what insurance actually is, and what it is not.

Source: George P. Shultz, Scott W. Atlas, and John F. Cogan, "It's Time to Rethink Health Insurance," Los Angeles Times, January 5, 2014.


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