>It's calculated that under the current system, insurance for an over-65 would be at least $30k annually. And healthcare costs have been rising 5 X as quickly as wages, so that's not the end of it. You and Andy might have no trouble building up an extra mill or two to cover your healthcare needs in retirement, but many others would struggle.
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>The only way to hold down costs is to include as many healthy people as you can in the insurance pool so you can use the surpluses from healthy members to help pay the costs of others. Medicare effectively does this by sharing its costs across most of the community. The insurers don't do this- they risk-shunt, trying to gather healthy customers to themselves and pushing sick or risky people elsewhere. That's the main form of "competition" between insurers, because it allows them to extract surpluses as profit rather than to cover care for people as they age or get sick and need care. So you'd need to legislate to prevent this sort of discrimination and as soon as you do that, you need individual mandate as well so people don't check in and out of insurance to cover healthcare needs as they occur.

Excellent post, JR. That clearly describes the crux of health care cost reform.

IMO President Obama and other reform advocates have not hit this drum hard enough. They have not explained well enough to ordinary employed citizens how out of control the costs are. When we look at our paychecks we see an insurance deduction, and we see it going up, but we don't see the hidden costs or their inevitable >inflation increase. There is a great fear of the unknown and I think that is one of the factors at work here. James Surowiecki (sp.?), a columnist for The New Yorker magazine, had a terrific column about this a few weeks ago. They are still in the "pay up and then we'll open the kimono" school of online journalism so I can't post a link. What he said is by nature we prefer the status quo.

Here is the beginning of the article (Typing, 10 cents/line, M. Beane Prop.):

"There are times when Americans' attitude toward health-care reform seems a bit like St. Augustine's take on chastity: Give is to us, Lord, but not yet. In theory, the public overwhelmingly supports reform -- earlier this year, polls showed big majorities in favor of fundamental change. But, when it comes to actually making fundamental change, people go all wobbly. Just about half of all Americans now disapprove of the way the Obama Administration is handling health care.

"In part, of course, this is because of the non-stop demonization of the Obama plan. But the public's skittishness about overhauling the system also reflects something else: the deep-seated psychological biases that make people resistant to change. Most of us, for instance, are prey to the so-called 'endowment effect': the mere fact that you own something leads you to overvalue it.

....

"What this suggests about health care is that, if people have insurance, most will value it highly, no matter how flawed the current system."

Excellent piece. Surowiecki's columns generally are. One of the things I like about him, oddly enough, is he does not share a liberal bias with some of his colleagues. More of an engineer's approach.