Alternate Assumption: People are helpful when they have an incentive to be helpful.
We hear this all the time. Government is compassionate and caring. Business is heartless and cruel. This assumption was a cornerstone of the argument for nationalizing healthcare. Health insurance companies have a reputation, deserved or not, for denying benefits. I have seen countless stories in the newspaper about a very ill person whose insurance company denies a needed operation or medication. If only government ran healthcare, it would be much more compassionate.
Before we even look at government, let’s look at a different type of insurance. My city of St. Louis was hit by a major hailstorm a few years ago and my roof was damaged. Within two days my insurance company had an adjuster at our house. The adjuster was based out of Dallas. After the hailstorm, the insurance company flew in adjusters from all over the country to quickly handle the huge influx of claims. The insurance company could not have been nicer to work with and they quickly paid the claim. I heard similar stories from friends and neighbors who had different insurance companies.
Should we assume from this that people who work for property insurance companies are nicer than people who work for health insurance companies, or is there another factor here? Property insurance is an extremely competitive business. There are many different companies. Everybody chooses his or her own insurance. The insurance company’s reputation for being easy to work with and prompt in paying claims is a key factor in the sale. If a property insurance company gets a bad reputation, their sales plummet. The property insurance companies have a very strong incentive to be fast and fair in paying claims.
Contrast this with health insurance. Due to regulations, there are very few health insurance companies to choose from in a state. Moreover, most people don’t choose their own health insurance. Their employer chooses the health insurance. You can’t change your health insurance without changing your job. The employer wants a benefits package that on paper is at least comparable to health insurance offered by other employers. If the benefits package appears inadequate, the user might lose values employees or might have to pay additional salary to compensate. For a given benefits package, the employer is then looking for the insurer who can provide it for the cheapest cost.
Nowhere in this sales equation is there a factor for how promptly, fairly, and courteously the insurance company handles claims. If a health insurance company is especially generous in handling claims, it may raise their cost basis which would make them less competitive and therefore hurt their business. Property insurance companies have the incentive to be helpful and health insurance companies have the incentive to not be helpful.
The Veteran’s Administration is a current example of where government runs healthcare. It is known for providing poor healthcare. In a recent scandal, veterans died as they were on a months long waiting list for care.
My belief is that neither government nor business is inherently good or bad. All organizations are composed of people, both good and bad. Most of us are good when it comes with family and friends we care about. When we deal with strangers, while there are a few Mother Theresa’s in the world, but most of us try to be polite. On occasion we are more than polite, but on an every day basis, we don’t go out of our way to help people if there is no advantage to us in helping them. While we may wish that everybody was a whole lot nicer, this is the way that people are, and we are not going to change human nature.
So, for example, if we want to make health insurance more responsive, would it be better to make the health insurance industry more competitive and more like the property insurance industry, or would it be better to make it less competitive and more like the Veteran’s Administration?
If government was inherently more helpful, then everybody would have loved living in the Communist countries where government did everything. The Berlin wall would have been built to keep the West Berliners from heading east.
Businesses have people. Governments have people. With people you get more of what you reward and less of what you punish. This applies to helpfulness. It applies to everything.