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Health Care Banks

President Obama said:

Our reform will prohibit insurance companies from denying coverage because of your medical history. Nor will they be allowed to drop your coverage if you get sick. They will not be able to water down your coverage when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or in a lifetime. And we will place a limit on how much you can be charged for out-of-pocket expenses. No one in America should go broke because they get sick.



It seems that the President does not understand what insurance is. Insurance is, at its core, essentially gambling. The insured gamble that they will need more money at some point than they will have given the insurance company. The insurers gamble that the insured will never need the money back.

It is no different than going to a casino in Vegas and playing every month, hoping to eventually hit the jackpot. The casinos naturally attempt to minimize their losses by throwing out cheats, card counters, and dice throwers. Since a person actually wants to hit the jackpot in Vegas, no one seriously complains about it. They'll pump quarters all day into a machine that only pays out 10% of the time. They'll throw dice that will fall in the casino's favor 70% of the time. If they're really smart, they'll sit down at the Black Jack table and hope that a little skill and 50/50 odds will give them a shot to win.

Like the casinos, an insurance company does everything it can to reduce the risk that it will have to pay out. Thus, the insurance company is not going to cover someone who has an increased likelihood of getting sick. The insurance company is going to tier their plans to maximize the intake while minimizing the payout.

It seems that President Obama is looking for an alternative for insurance that does not involve gambling. He is looking for a place where people can pay in small amounts and then get a large lump sum back later, possibly with a little extra return on the investment. He is looking for a place where they can be advanced a sizable amount of money and then make payments on it afterwards.

Fortunately for the President, such a place does exist. It is called a "bank." A bank allows people to specify each individual payment they will make to it. The bank will then hold that money for them, and in exchange for the free use of that money, pay them an additional percentage on top of what they have deposited. The same bank then uses some of the money given to it to advance money to people who need it, and then ask for that money back afterwards in what is called a "loan."

Therefore, if the President wants to eliminate the gambling part of health care, he should take one of the banks the US government bought with the TARP money and turn it into a health care bank. Then all of these issues with premiums and pre-existing conditions will vanish, and the long national nightmare of health care reform will be over.

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