Re: Which Project for Hanson?

Hal Finney (
Fri, 1 Aug 1997 08:01:13 -0700

Peter C. McCluskey, <>, writes:
> (Hal Finney) writes:
> >(1) and (2) are both interesting and suggest possible ways that the world
> >could improve. However (1) scares me a little. If my HMO also issued my
> >life insurance, it would seem like it was balancing my life vs my death on
> >strict financial grounds. Maybe this makes sense economically, but it
> >gives me a very uncomfortable feeling. "Sorry, we've decided it's cheaper
> >just to pay out your life insurance than to cure you. Have a nice death."
> I find it hard to understand why people would be more afraid of this
> when the life insurance is $100,000 than they are with the current life
> insurance level of $0.
> Most people seem to have some awareness that HMOs are currently making
> this kind of tradeoff.

No, I don't think this kind of tradeoff occurs now with an HMO. If the
HMO was strictly working on the basis of spending the least money, it
would refuse to authorize any medical treatments to anyone. This way it
would have zero expenses and make lots of money from the insurance premiums.

Of course, it can't do this, first because it wouldn't have any customers,
second because it would be a breach of contract, and third because it
would probably be illegal in the regulated medical industry. Instead,
the HMO promises to fund all treatments which are accepted by the medical
profession as justified in terms of extending the life and improving
the health of the patient. When it refuses to authorize a procedure,
it is with the excuse that it is experimental or that it will not help.
It never says that the treatment costs more than the patient's life is
worth. If it does refuse medicine which is valid by the stated rules,
the patient can use various appeal and arbitration procedures to contest
the refusal.

So the current situation with an HMO is very different than it would
be under Robin's proposal. Under that plan in its purest form, the
HMO might very well refuse a helpful medical procedure, if the expense
would be greater than the life insurance payment. The contractual basis
between the HMO and patient is very different. A refusal on the basis
of expense would be completely justified by the HMO. In fact, if the
HMO got into cash flow difficulties, it might even refuse procedures
which would be cost effective, as long as the death of the patient due
to lack of treatment would not occur too soon (borrowing from tomorrow
to pay for today). None of this would be contestable by the patient,
because the contract would allow the HMO to do whatever it wanted with
the money, relying on the life insurance payment to give it incentives
to extend its patients' lives.

I'm not saying this plan is necessarily a bad idea, merely that the
incentives and the nature of the patient-HMO relationship would be very
different than under the current system.