It’s not a hedge against expense, it’s a hedge against risk.  Increasing insurance coverage cannot solve for skyrocketing health care costs, and it seems like the majority of the people participating in the conversation misunderstand what insurance is and what insurance does.

Creating a simple insurance plan is trivial.  Let’s say that ten of our close family and friends decide to make an “insurance fund” to cover unexpected medical expenses.  Each of the ten people deposit $100 a month, adding a total of $1,000 each month.  Then, whenever someone has a medical emergency, they can use the entire pot to pay for the emergency.  That’s the entire basis for “insurance”.  The most important lesson of insurance is to realize that the majority of the insured must pay more than they receive in return. 

It’s worth stating again, because the <blink /> tag has gone out of style and it’s the most important lesson that anyone can learn about insurance: the majority of the insured must pay more than they receive in return.  That’s an inarguable, non-negotiable truth of the system.  You can’t spend more money than is in the pot.

Now why would anyone pay more than they receive for medical care?  And how does this protect my family against the skyrocketing costs of health care in the U.S.? The short answers are “peace of mind” and “it doesn’t”.

The reason that people are willing to overpay for medical care by buying insurance is to buy peace of mind that if the odds work out against you, your life won’t be ruined.  The idea is that only 1 in $big_number people have a medical issue that is catastrophic to their fiscal well-being, but anyone could end up being that 1.  So lots of people pay into a system that says, “you probably won’t be the one, but thanks to your payments, if you’re the one, you’re covered.”  That peace of mind is nice, it helps one sleep at night.  Lots of people are willing to overpay for medical care to have that peace of mind.

But how does that protect your family against the skyrocketing costs of health care in the U.S.?  It absolutely doesn’t!  The response to increased health care costs are increased insurance premiums!  That’s because higher health care costs do not change the odds, the risk, of becoming ill.  They only change the expense of the event when it happens.  Therefore, to cover that expense at the same risk, insurance premiums go up to match the new costs.

But, one immediately considers, insurance doesn’t just cover emergencies; health insurance is useful for a wide range of everyday practices, from preventative care to minor check ups.  Really, that’s just a side effect.  When insurance companies arranged for everyone to pay into the pot to protect themselves from the risk of catastrophe, they found that the pot was much bigger than the payouts.  While I’m sure at first it was just a big profit-party, competition soon increased and there were many insurance companies to choose from.  To lure customers in to a particular insurance pool, they offered “benefits” to membership that covered much more than just emergency care.

After considering insurance from this perspective, it should be easy to see why all of the controversial aspects of insurance are a fact of life.  People with pre-existing conditions have a difficult time getting insurance because they already lost the risk game.  They can’t contribute to the insurance pool, they will only drain it.  (And accordingly, these pre-existing condition customers can all get together in their own insurance pool, but it’s going to be very very expensive because the majority must overpay for health care for insurance to work.)  Really, people with pre-existing conditions don’t need health insurance (protection from risk), they need more money for medical bills.

The difficult thing to see, is that all of this health insurance is a big part of why health care costs are rising!  All the little benefits that insurance plans have a distorting effect on our fiscal sensibility.  That’s because we spend our money on insurance premiums, and then we spend other people’s money on the actual health care.  And, of course, we’re all much less frugal and intelligent with spending other people’s money.  It ruins the elasticity of demand for medical care, it encourages unnecessary medical spending, and it increases the health care costs across the board.

So whenever you hear someone say, “Everyone needs health insurance because health care is so expensive these days,” little alarm bells should go off in your head, because you know that insurance can’t help with high costs and that health insurance requires the majority to overpay for health care.  ”Everyone needs health insurance because health care is so expensive these days,” makes as much sense as, “Health care is so expensive these days that everyone should pay extra to make sure they don’t have to pay less.”

This entire focus on health insurance is a sham.  It’s a trick to capture the political capital of Americans that don’t understand insurance.  Whether you’re a liberal or a conservative or any other persuasion, you shouldn’t be allowing “insurance” to be the focus of the debate.  Our health care costs are too high.  Insurance cannot bring down costs (and in fact, makes them worse).  Anyone that has a plan for you to consider to improve the state of health care in our nation should be addressing health care costs, not health care insurance.  Public or private, universal medical insurance is not the answer.

The Story of Stuff by Annie Leonard is certainly worth watching.  It’s entertaining, well produced, and brings up a number of important point worth starting a conversation over with your friends and family.

However, the video is not without it’s downsides.  It’s packed with politically loaded, factually incorrect statements.  For every statement about human welfare and market manipulation that had me nodding my head, another naive or ignorant statement made me wince.  (For instance, in a segment about planned obsolescence, she stupidly describes the CPU as the only part of a computer that improves each year, ignoring all of the other components in the system that improve each year as well.  That’s uneducated misinformation of the same exact kind she rails against from corporations.)

But, on the whole, I think that the video is valuable.  Misinformation aside, it’s certainly true that the materials economy is amok and worth scrutiny.

The big news right now is that the Supreme Court has ruled in the Citizens United v. Federal Election Committee, striking down provisions of the McCain-Feingold act limiting the participation of corporations and unions in political speech.

The majority opinion (a 57 page affair) can be summarized as, “It’s unlawful for the government to block political speech from associations of people.  It may regulate, but it may not silence.”  Which truly is a reasonable, ethical, and ideologically sound position.  The big news isn’t the sensible decision, but the enormous ramifications this could will have on elections in the U.S.  There’s no question that this decision will lead to an enormous magnification of problems our nation faces with a corrupt legislative branch. Congresspersons will practically need to be sponsored like NASCAR drivers to successfully run for office in a marketplace of ideas that names like Coca-Cola and Walmart can participate in.

There’s certainly a point in my life that I would have cheered this decision has a win for freedom of speech.  Campaign finance reforms, like the one that Change Congress proposes, always have a necessary catch that states “qualifying candidates may receive additional funds from the citizenry.”  That catch is always devastating for third party candidates, the kinds of candidates that might be able to accomplish real change, because the Democrats and Republicans write the terms of “qualification” such that only they can qualify.

The typical resort for third party candidates is to gather “patrons” that would give enormous sums of money and underwrite a significant portion of their campaign.  It’s one of the few viable alternatives when you don’t have a nationwide fundraising apparatus.  (Which is what the Democratic Party and Republican Party really are, if you think otherwise you’re kidding yourself.) Limits on election contributions prevent this type of fundraising.

Ethically, there is no question that election contributions are “speech” and restrictions on speech are generally undesirable.

For those three reasons, as someone coming from a third party political background, I previously would have supported any action to remove restrictions to election contributions.  Even when the Change Congress movement first started, I was hesitant to support it due to the “Citizen Funded Elections” legislation that forms the backbone of the movement.  I loved the ideas, the presentations, and the wisdom from Lessig, but I couldn’t convince myself that additional regulation on free speech would solve.

But time passes, opinions mature, and I’ve changed my mind.  I still believe that regulating election contributions is a restriction of free speech, but now I understand why it is necessary.

Corporations and unions are just associations of people!  It’s unethical to suppress free speech just because people have joined together to make themselves heard.  Corporations and unions are just economic representatives, just like legislators are government representatives.

That was certainly my opinion and it’s completely wrong.  It’s easy as a person that values economic freedom to see corporations in the idyllic light that capitalism shines on them: associations of people to accomplish greater things than can be accomplished alone.  But that light is deceptive, and that is not what a corporation is.  A corporation is a mechanism for limiting liability.

There are inherent risks to doing business in a society, and anyone doing business on their own has to consider more than just the fiscal and economic repercussions of their actions.  The social repercussions can be significant motivating factor in an individual’s business decisions.  Even on a small scale, pollution makes your neighbors hate you, unsafe practices can ostracize you from your social circles, bad-deals destroy your reputation. The corporation is a way to allow owners to invest in a company without any of the social risks of participating in society.  If a company that you own a share of pollutes the environment while operating far away from your home, your neighbors won’t associate that action with you.  If a company you own shares in participates in unsafe practices or fraud, you won’t be ostracized from your friends.  In fact, a company can perform socially irresponsible actions, make a fiscal and economic profit, and then just dissolve and let all the shareholders keep the profits before the social ramifications of those actions return.  In the most literal sense, corporations are sociopaths.

Because of the legal construction of the corporation, it is absolutely necessary to regulate the behavior of corporations in ways that are unethical for individuals.  If we the people have chosen to allow an association of people to act without the social repercussions inherent and necessary to maintain a peaceful society, then we the people must be willing to extend regulation to force corporations to internalize social harms into their decision making. It is not only ethical to do so, it is unethical not to do so.

Freedom of speech is a critical part of a functioning society, and political speech is the most important, most essential type of speech to democracy.  How can you limit election contributions and claim to have free elections?

One thing is for certain, freedom of speech is absolutely a critical part of a free society and political speech is arguably the most important form.  (The Supreme Court has supported this position consistently.)  But this argument misses an important difference between “political speech” and “election contributions”, and the difference hinges on this quote from Frédéric Bastiat:

We must remember that law is force[.]

Speaking persuasively to convince your fellow citizens on political topics is fundamentally different from making law.  Law is force.  As such, paying a politician to take office is paying for force.  It shares some important similarities to paying for other services, like hiring a gardener or even like hiring a contract killer.  No one would argue that “political speech is absolute, hiring an assassin to remove someone from office should be protected!”  But at the same time, you can contribute to an election in order to have a person (well, a group of people) imprisoned or to redistribute wealth in your own direction.  Hell, that’s what “pork” is.

So it’s critical that we draw a line somewhere.  While anyone should have the unlimited ability to buy and display a Public Service Announcement about an issue or topic that’s important to them, it is a different thing to contribute to an election or to lobby congress.  One type of political speech persuades people, the other type of political speech buys laws.  Persuading your fellow citizens is not the same as persuading your lawmakers.

Those concepts combined are why I came to agree with the entire platform of Change Congress.  We need Citizen Funded Elections because they sharply limit the influence that large, often literally sociopathic, groups have on the laws of our nation.  Freedom of speech, especially political speech, doesn’t matter if laws are for sale.  This systematic corruption is already the status quo; the recent ruling in Citizens United v. FEC will make it worse.  But, importantly, this ruling does not diminish the effectiveness of the Citizen Funded Elections solution, it just makes it all that much more critical.

Today, thanks to the Change Congress mailing list I watched an amazing video by Lawrence Lessig as he explains why progressives and conservatives alike should be outraged by what has happened in the first year of the Obama administration.  I thought the video was great—no great surprise there, Lessig is a brilliant speaker—and shared it via the Twitter.

My good friend, Danial Porter, replied to my share with:

I’m torn. See, I agree that congress blocks progress, but this go ‘round, I’m pretty happy about the progress that’s being blocked.

This is an opinion that makes sense, and that I personally shared several years ago when I was still politically active.  I had rationalized that Clinton had a pretty good administration, because he was pretty solid with foreign policy and in most of the domestic issues his solutions— that I hated—were blocked.  A president that could do little harm sounded pretty good to me.

But I don’t share that opinion anymore.  It’s a misconception to think that “blocked progress” implies that congress isn’t doing anything.  Congress is still warping and violating the “spirit” of legislation as it passes through the system, it just isn’t doing any of those things that the American people symbolically voted for by electing Obama.  Instead, congress serves themselves, necessarily, by focusing up to 70% of their time in office on fundraising to secure their position and livelihood.

The reason that the Change Congress movement is so critical, is that it addresses a prerequisite problem to the most important political issue to you.  It doesn’t even matter what your most important beliefs or opinions are, if the systematic corruption in congress can’t be stopped, then your most important issue can’t be address properly and no great man or woman—left, right, center, forwards, or backwards—can make a difference.  Obama is failing, but it should be no comfort to conservatives, because your hero is doomed to the same failure.

Dr. Lessig lays out this dependency on fundraising in another brilliant presentation found on the Who We Are page of the Change Congress website.  It takes almost twenty minutes to watch, but will likely be the most politically responsible thing you do this year.  Understanding this issue is more important than voting.

This isn’t a partisan statement that Lessig is making.  The entire Change Congress effort from Lessig is the result of a brilliant constitutional scholar going through the real “school of hard knocks”.  He spent decades of his life working for American culture and the American people by attempting to correct asinine copyright laws.  He failed.  But in failing he recognized a problem that needs corrected first before his passion for a culturally beneficial copyright law can be realized.

Congress must be servants of The People, as the constitution intended, not of special interests.  What’s better for The People is not what’s best for special interests.  That’s what makes them special.  If special interests were what was best for the public, then they would be called public interests, not special ones.  In a congress where campaign funding is the prerequisite for all political power and political success, and nearly all campaign funding comes from special interests, congressmen and congresswomen must serve the special interests first, or they will stop being congresspersons.  This is the system that Lessig has identified as the failure in American democracy, and he’s right.

Conservatives have no reason to be pleased with the ineffectiveness of Obama as the 44th President of the United States.  His failure isn’t one of character, he’s a brilliant constitutional law scholar that has advocated honesty and transparency at every turn.  His failure isn’t one of agenda, he was elected on an agenda that brought a super-majority of his party members to office in congress with him.  His failure isn’t one of initiative, he’s brought to the congress each of his campaign promises and called congress to action.  You don’t have to agree with a political agenda to recognize potential in an administration.  If a brilliant, charismatic, internationally favored, honest president serving at the same time as a super-majority of his own party can’t change anything, there’s no reason to expect any other administration can.

Of course, that shouldn’t be a surprise.  Our founding fathers intended the legislative branch to be the great representative of The People.  The President would do the work, but without enough power to be a king or despot.  The Supreme Court would check the work and the law to insure the rights of The People and The States were maintained, but never enforce or create law themselves.  But the Congress would define the work.  As extension of The People and The States, the Congress would be the greatest influence on the government in these United States as representatives of The People, recognized as the power from which all just government originates.

Congress has failed that vision.  It is not representative of The People, it is representative of influential minorities that can support congressional fundraising in exchange for consideration of special interests.  Individual congresspeople don’t have a choice, to ignore special interests is to ignore fundraising and that means leaving office.

We do not progress.  Each congress, each presidential term, we—at best—slow the apparent decline of our Republic.

And that’s why my good friend Danial’s response of “but this go ‘round, I’m pretty happy about the progress that’s being blocked” is insufficient.  Every presidential administration, approximately 50% plus or minus 7% say the exact same thing.

But I guess as they say, “when in Rome.”