08 September 2009

Does covering preventive care save money?

As many others have demonstrated in some detail, preventive care does not save money in the aggregate. But let's skip the details, and think about it in terms of a simple analogy:

Requiring insurance companies to provide preventive care services would save money only if you don't actually get the services; the same way Netflix makes money only when you don't watch all the movies.

Think about it: on the two movies, unlimited plan you could cycle through six movies a week, 24 movies a month. Your $15 monthly fee would not even cover the postage on that. Netflix does not make money when you watch all the movies your plan "covers." Netflix makes money when you leave the movies laying on the table for a couple of weeks, which is what most of us do. If we all started watching a movie every night, one of three things would have to happen:
  1. The monthly fee would go up.
  2. They would start taking a lot longer to send out movies.
  3. Netflix would go out of business.
That isn't a knock on Netflix - they are a great company, providing a service people value. It's just basic math, and there is no way around it. Companies only make money if they take in more than they put out, and insurance companies and medical facilities are no exception.

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