Another Health Insurance Market Failure

I remember during the conversations during Obamacare's construction, one of the more obscure issues was how insurance companies don't have clients for that long, so insurance companies do a poor job of encouraging long-term health (I couldn't find the statistic, but I believe the average person has the same company for somewhere in the area of three or four years).

This seemed to be a reasonable criticism of America's state of health affairs, and I could argue it in the abstract. After all, approaches that achieve long-term health benefits are investments that save money in healthcare coverage down the road, but if the insurance company isn't likely to reap the benefits, why should it make the investment? This is obviously a market failure, because the market could operate more efficiently, but providers (justifiably) are acting in their self-interest (in this sense, public health is arguably a tragedy of the commons our system has manufactured). However, I never had an explanation of how this works in practice.

I've now encountered my example, and it's frustrating experiencing how it works. I recently completed the final physical therapy session my insurance company will allow me to partake in, although my ankle has never fully healed. There's a decent chance that with another month of work I'll be much better off, but my policy doesn't allow for it. The hell of it is, spending some extra money now should pay off in the long-term, as the current state of my ankle leaves me in line for arthritis and other issues down the road.

No one refutes this. My physical therapist is the expert saying it will happen, on a logical level I agree with him based on my limited understanding of how joints work, and the insurance company likely understands. But I'm unlikely, statistically, to be with Blue Cross of New York in 20 years when my ankle becomes a real problem, so there's no rational reason to invest in therapy now. It will be someone else's responsibility at that point. Even if future surgery is way more costly than extra PT sessions this year, someone else will foot the bill.

I get the contra - if my insurance company allowed me unlimited visits, my physical therapist would be inclined to continue scheduling sessions even after they were no long necessary in order to make more money. Some providers would resist this temptation, some would be bad actors, and some would schedule unnecessary visits merely for the sake of erring on the side of caution. So even in a  system that pays for preventative care, there would still be concerns. Answers may be difficult to definitively determine, but our system is undeniably prejudiced against long-term economic decision-making.