03/18/2010 05:12 am ET Updated May 25, 2011

It's Time To Bet On Health Insurance Reform

By now you know that "health care reform" is a misnomer. It should be called "health insurance reform." Chalk up the missed opportunity to the Democrat's pluralist mode, but a little message discipline might have gone a long way here.

What's the message? Insurance companies are corporatized casinos. It's still gambling. Actuaries perform the same function as bookies: discover how to get more money out of you than you can get out of them. In theory, this is fine if the bets are being placed in a neutral arena. Health care is not neutral.

Moral hazard is a term used in insurance circles. It refers to a tendency among the insured party to engage in risky behavior or seek expensive services because the insurer will absorb the financial consequences.

The theory says that a person with good health insurance is more likely to go shopping for cures of things that do not actually ail them. It is the reason insurance companies require a co-pay, the theory being any out-of-pocket expense will reduce the desire to spend money that rightly belongs in the insurer's risk pool. These companies make a lot of money knowing how to maintain the size of that pool so that it's always bigger than their exposure to risk, even if it means slippery strategies of questionable origins and changeable rules.

All's fair in the realm of corporate rapacity when betting on the odds of a sixteen-year-old boy crashing a car or on how likely it is for a house to catch fire. Insurance companies work a bunch of angles, crunching crime statistics, school performance numbers, tax revenues, and many other factors to figure out how to place the odds on the myriad eventualities that the replacement cost for, say, a house and its contents can be attached. There may be some legal mumbo jumbo designed to increase the vig, but it is all measurable. Also, if your insurance company tries to wiggle out of paying for a ding in your car, it is not the end of the world. There is time to fight back.

There is no time to fight back when an insurance company refuses to pay for a new cancer treatment. Moral hazard comes into play here. It is against the law for a third party to take out a fire insurance policy on your home, because arson would become a real risk. The fine print of an insurance policy is an institutionalized form of moral hazard in reverse. It's the price of doing business in America, and it's something we've learned to accept with regard to the property we choose to protect with insurance. It is not morally defensible when the issue is a human life, and that's the point we've lost sight of in the health care reform debate.

If folks get a little doctor-happy when they know someone else is paying, insurance companies might tend to get a little miserly. Both are expressions of moral hazard, and no one is to blame. The very nature of the health insurance industry is antithetical to its stated reason for being: helping people stay well and to get better.

Only a sick society allows its institutions to bet on the lives of human beings. It's the stuff of ancient Rome. The chances of a person surviving a particular form of cancer are known, but they should not predicate whether or not you receive the best care. In the same way you can't bet on your enemy's house being burnt to the ground, insurance companies should not be able to bet on human life. This is a moral issue.

Rep. Alan Grayson said the health care situation in America is like the Holocaust. Is it true? Are millions being passively allowed to die because it costs to much to care for them and/or bilked unfairly of hard-earned wages. Of course they are. We have become our own most willing executioners by tacitly opting into the current paradigm of the health insurance industry in America.

Where is the million-person march to protest the nation's insurers huddled over the furnace of financially ecstatic schadenfreude?

Senator Orrin Hatch has said the public option is a Trojan Horse for a single-payer system where the government picks up the tab for your health care. Single-payer health care has always been the true Democrat position. The pubic option has always been the centrist compromise. By leading with the compromise, this "Yes We Can" era has once again snatched victory from the jaws of defeat.

Will we get a public option? Yes we will. Should we ask for more? It would help Obama, and ourselves, if we did.

First published by Air America.