Cathy OāNeil is worried about insurers using data to predict patientsā health outcomes. She writes in Bloomberg View thatĀ āif weāre not careful, pretty soon itāll be almost like thereās no insurance at all.ā
I feel like this reflects kind of a weird view about the purpose of insurance.
Why do I have, say, flood insurance on my house? Letās say thereās a 1% chance that my house gets destroyed in a flood, and my house is worth a million dollars. In a world without insurance, I have to save all the money I possibly can in order to be prepared for this potential cost, and even if I do I still probably wonāt have saved enough and Iāll end up bankrupt or something. With insurance, I can just pay the $10,000 and not worry about it again.
The insurance is necessary because of our uncertainty: no one can predict exactly when and where floods will happen. Itās not about making everyone share the risks of floods. It would be ridiculous to suggest that itās only fair that someone in Iowa pay the same for flood insurance as someone in Florida. The person in Florida should internalize the costs of the extra risks theyāre taking.
And like, if we somehow got better at predicting floods, that would be great, right? Sure, it would make some peopleās insurance more expensive. But it would make othersā cheaper. And it would allow everyone to better account for the cost of floods when thinking about the tradeoffs of different houses.
Substitute cancer or heart disease for floods. What makes that situation different?
I guess one thing people would say is that where you live is your choice, while your health outcomes arenāt. But I donāt think thatās super clear. You can do lots of things (exercise, diet, sleep) to influence your health outcomes. And there are lots of reasons people might be constrained in their choice of where to liveājob opportunities, family members who need caregiving, whatever.
I think that what Cathy O'Neil really wants is socialized medicine. She thinks itās unfair that people with worse health have to pay more for healthcare, and the government should just pay for everyoneās health care out of progressive taxes or whatever. And sure, it is unfair.
But what we have is a healthcare system based on private insurance. And Iām not sure how I feel about trying to make that more like socialized medicine by actively trying as a society to be as bad at making predictions about peopleās health as possible.