A lot of people seem utterly unable to grasp the concept of insurance. They get sick, and then they demand that the government pay for their health insurance . . . insurance they themselves had not bothered to purchase ahead of time.

Insurance is something you buy to hedge against bad turns of fortune. Once you are sick, it's too late to buy insurance. That's why insurance companies have clauses about pre-existing conditions. If a person starts feeling bad (but hasn't checked with a doctor), it's already too late to buy insurance. Buying it and not telling one's insurance company about a possible ailment is preciously close to fraud.

Ideally, everyone would pay for their own health care assitance out of his or her savings. But some ailments are rare enough that buying insurance makes sense. They would be too expensive to save for, so making the insurance bet makes sense to the person. The insurance company, looking at the actuarial risk of a pool of would-be insurers, makes the contrary bet. An exchange is made. Two parties with precisely opposite evaluations make a contract. It's a sensible policy, a great industry, a good deal for both insurer and insured.

Alas, the modern era in capitalism can almost be defined by attempts to turn these insurance contracts into social contracts. Interventions by regulation are extremely common these days. The gambit is usually to take away from an insurance contract inherent features of that contract; Prohibit or regulate away stipulations about existing medical conditions, for instance. When governments do that, insurance companies face drains on their resources. Some of them can raise insurance rates to cover costs, since all the competition in their industry face the same regulations; the cost is shifted to insurance consumers in general. To some extent.

You might think that this is the same as taxation and subsidy, only simpler. But you'd be wrong. Markets work by distributing information. Each transaction, rate, profit and loss tells participants something. But by turning insurance into an alternative to social contract provision of a good, one corrupts the resiliency of the industry. One corrupts the information.

The other weird aspect of modern medical insurance is the proliferation of full medical coverage, a bizarre concept in insurance, really. Why? Because it makes no sense to insure for check-ups and standard care. These are things you expect to spend, and thus should be saved for. But instead of saving for normal care, many people — perhaps most people — demand that their insurance policies take care of such payments.

Why? Only one reason that I can see: We have been taught to expect this from employer-provided health care packages. Because employers have had a tax write-off for health care benefits provided to employees, this has become a popular, alternative way of compensating employees, a way of increasing payments (and thus attracting good workers) while avoiding taxation. Employers and employees both have incentives, under this system, to stuff insurance packets with items that aren't insurance, but qualify as direct benefits, instead.

It turns medicine into an entitlement. And thus a tax policy (started under wage and price controls during World War II) has corrupted the medical care industry, the insurance industry, and, frankly, the ethos of individual responsibility in America.

We are now a thoroughly corrupt people. Very few individuals, including many libertarians, find themselves capable of thinking their way out of our current mess.

Oddly, the Bush administration now seems game to move Americans slightly in the right direction, through revising tax policy.

I haven't studied the current proposal, outlined (I hear) in this week's State of the Union Address, so I won't comment on it now.

Besides, tonight I have to get some rest. Tomorrow I'm taking my father to town for a medical check-up . . . a check-up paid entirely by tax money. He's treated by the V.A.!