Heeeeeeere's Obamacare!

[sunmaster14]

Define "a lot of people", please.

I strongly suspect that your idea of "a lot" and my idea of "a lot" are very, very different.

Millions of people. Perhaps the top 10%. You're talking about a deductible which is less than the annual premium. If you can afford the annual premium without subsidy, then you can probably afford to pay a deductible which exceeds that in a one-off emergency situation.

Perhaps you don't think it is a big deal, but millions of people are being forced to buy more insurance than they want or need.

 

[jimbob]

"Probably" is the crux. There is no risk pooling that way, which is what insurance is. Which is why insurance is the way most people pay for health spending.

Indeed. It is a very spiky distribution - and only the very richest would have the resources to pay for treatment following an accident like Christopher Reeve's.


But Emily's Cat probably has a better handle on the odds and costs.

 

[xjx388]

This whole problem can be fixed by allowing the sale of catastrophic health plans with deductibles of X where X can be any amount (X may even be a multi-year deductible, to cover any issues with timing). Those who wish to buy such a plan, must demonstrate that they have the financial resources to cover X. Perhaps collateral worth more than X could be posted and maintained in the form of bonds or stock.

This is more of what I was going for. Let me buy a catastrophic plan -although I don't think there need to be restrictions on who can buy them. I can buy that cat plan and save the difference. I will most likely never need that cat plan but it's there if I do.

This has been my problem with ACA from day 1. Why can't I buy the insurance I want to buy?

 

[Emily's Cat]

Millions of people. Perhaps the top 10%. You're talking about a deductible which is less than the annual premium. If you can afford the annual premium without subsidy, then you can probably afford to pay a deductible which exceeds that in a one-off emergency situation.

Perhaps you don't think it is a big deal, but millions of people are being forced to buy more insurance than they want or need.

Just for clarity, the deductible isn't the hitching point for insurance - it's the out of pocket maximum. That's the maximum amount that the policyholder is liable for.

Whether the premium exceeds the deductible or not is irrelevant. If the premium exceeds the OOP, then there's no incentive to buy the product .

 

[Francesca R]

Indeed. It is a very spiky distribution

I wouldn't be surprised if it was a power law ("fractal") since lots of naturally occurring ones are.

 

[Emily's Cat]

Indeed. It is a very spiky distribution - and only the very richest would have the resources to pay for treatment following an accident like Christopher Reeve's.


But Emily's Cat probably has a better handle on the odds and costs.

*References handy cumulative probability distribution*

Give or take (due to variations by year for outlier claims, as well as variations by age, gender, and region)... About half a percent of people in any given year have total allowable claims exceeding $60K. On average, insurers negotiate a discount of about 40% off of billed prices... so that means the actual incurred cost is about $110K.

I don't think many people could afford to drop $110K for a major accident.

So let's drop the bar... let's say you think $20,000 of personal money is something that "a lot" of people can afford to shell out in the event of things going terribly wrong. That's an average allowable cost of $12K (after the negotiated discount of the insurer). At $12K... it looks like about 5.5% of people hit that amount.

So do you think that 5% of people can afford to drop $20K in one year for medical services, without seriously untoward affects on their quality of life?

How about $10K? That's not far from the OOP specified by ACA, once the discount is taken into consideration - it's about $6K with the discount, and ACA specifies an individual OOP of no more than $6350. That puts you at 12% of people.

So... 12% of people in any given year will incur medical cost commensurate with the OOP specified by ACA. Expecting someone to have $6350 in their bank account, untouched for any other reason, is probably already asking a lot.

 

[Francesca R]

Ooh that looks power law ish. Do I win anything?

 

[daenku32]

Obamacare was sold as a way to control health care costs. Jonathan Gruber as much as admitted this, even bragged about it, in one of his many infamous videos. He claimed that because 85% of Americans were relatively satisfied with their health insurance, making sacrifices to increase access to insurance for the remaining 15%, as a standalone, was not politically feasible.

You know I was a political junky back in '09-'10 when the bills debated and finally passed, so I don't need Gruber to tell me what it was. It had multiple components, including cost control. Part of the funding for the bill comes in the form of cost control of existing programs (Medicaid for example). It has provisions regarding cost savings in the medical field through incentives for doctors, increased preventive care, etc. You may disagree with their effectiveness, but it absolutely had these features put in for the explicit purpose of cost control.

Just to put a further point on it. Our family was part of the 85% that were 'relatively satisfied'. But we are MORE satisfied now that our plans have added benefits in them. Including the security of not having to worry about a hospital visit ending with a bankruptcy. A large majority of the features of the law were already in effect when the exchanges for the individual market opened up last year. But it appears that a lot of people just don't understand that.

 

[jimbob]

I wouldn't be surprised if it was a power law ("fractal") since lots of naturally occurring ones are.

I did wonder whether to suggest that...

*References handy cumulative probability distribution*

Give or take (due to variations by year for outlier claims, as well as variations by age, gender, and region)... About half a percent of people in any given year have total allowable claims exceeding $60K. On average, insurers negotiate a discount of about 40% off of billed prices... so that means the actual incurred cost is about $110K.

I don't think many people could afford to drop $110K for a major accident.

So let's drop the bar... let's say you think $20,000 of personal money is something that "a lot" of people can afford to shell out in the event of things going terribly wrong. That's an average allowable cost of $12K (after the negotiated discount of the insurer). At $12K... it looks like about 5.5% of people hit that amount.

So do you think that 5% of people can afford to drop $20K in one year for medical services, without seriously untoward affects on their quality of life?

How about $10K? That's not far from the OOP specified by ACA, once the discount is taken into consideration - it's about $6K with the discount, and ACA specifies an individual OOP of no more than $6350. That puts you at 12% of people.

So... 12% of people in any given year will incur medical cost commensurate with the OOP specified by ACA. Expecting someone to have $6350 in their bank account, untouched for any other reason, is probably already asking a lot.

Thank you. It is far nicer to have real data to support one's case.

Looking at this US census data (PDF)

If I am reading this correctly, Figure 1 on page 12, suggests that the net median worth in 2011 for the second quintile had roughly halved compared to 2000 (from $14319 to $7263). I *think* this would be the 30th centile (median of the second quintile)

So assuming the wealth hasn't changed that much since 2011 (which might be unreasonable), this $6350 is 87% of the total net worth of 30% of households.

And of course, which you have alluded to, the net worth also includes assets that are not easily realised. A car that someone needs for work, for example.

 

[daenku32]

Millions of people. Perhaps the top 10%. You're talking about a deductible which is less than the annual premium. If you can afford the annual premium without subsidy, then you can probably afford to pay a deductible which exceeds that in a one-off emergency situation.

Perhaps you don't think it is a big deal, but millions of people are being forced to buy more insurance than they want or need.

I have a heard a lot more critics of the law complain that the Bronze plan deductible is too HIGH, not that it is too LOW.

If you think you are asked to buy too much insurance, do you have a problem with the list of "Essential health benefits" of an insurance plan, or is it just the out-of-pocket dollar figures?

 

[jimbob]

Millions of people. Perhaps the top 10%. You're talking about a deductible which is less than the annual premium. If you can afford the annual premium without subsidy, then you can probably afford to pay a deductible which exceeds that in a one-off emergency situation.

Perhaps you don't think it is a big deal, but millions of people are being forced to buy more insurance than they want or need.

I'd guess that the admin required to verify that they really could afford to cover the treatment out of pocket would add significantly to the cost of the insurance for everyone and also people's circumstances change over the year - meaning that their reserves might go, and they end up being freeloaders.

 

[sunmaster14]

Just for clarity, the deductible isn't the hitching point for insurance - it's the out of pocket maximum. That's the maximum amount that the policyholder is liable for.

Whether the premium exceeds the deductible or not is irrelevant. If the premium exceeds the OOP, then there's no incentive to buy the product .

Well, the whole copayment stuff is an added complication which doesn't exist for other insurance. I think if we had true catastrophic insurance, you'd probably see that go away. My point, though, is that if you can afford an annual premium of $15K per year, then you're probably not going to be bankrupted by a $15K one-off hit.

 

[sunmaster14]

*References handy cumulative probability distribution*

Give or take (due to variations by year for outlier claims, as well as variations by age, gender, and region)... About half a percent of people in any given year have total allowable claims exceeding $60K. On average, insurers negotiate a discount of about 40% off of billed prices... so that means the actual incurred cost is about $110K.

I don't think many people could afford to drop $110K for a major accident.

So let's drop the bar... let's say you think $20,000 of personal money is something that "a lot" of people can afford to shell out in the event of things going terribly wrong. That's an average allowable cost of $12K (after the negotiated discount of the insurer). At $12K... it looks like about 5.5% of people hit that amount.

So do you think that 5% of people can afford to drop $20K in one year for medical services, without seriously untoward affects on their quality of life?

How about $10K? That's not far from the OOP specified by ACA, once the discount is taken into consideration - it's about $6K with the discount, and ACA specifies an individual OOP of no more than $6350. That puts you at 12% of people.

So... 12% of people in any given year will incur medical cost commensurate with the OOP specified by ACA. Expecting someone to have $6350 in their bank account, untouched for any other reason, is probably already asking a lot.

Hey, if you think I'm going to let you use the completely arbitrary and ridiculous retail prices for health care in this analysis, you've got another guess coming. Even now, nobody with insurance is paying retail prices while they're under the deductible. Furthermore, under Sunmaster14Care, providers would have Everyday Low Prices. Every day would be like the day after Christmas. Hmmm, maybe that didn't come out quite right.

 

[sunmaster14]

I have a heard a lot more critics of the law complain that the Bronze plan deductible is too HIGH, not that it is too LOW.

Well, that's a problem of unrealistic expectations. Obamacare supporters led people to believe that once they had insurance, they were on easy street. Of course, to bring down the price tag and make it seem like the cost of insurance didn't jump up enormously due to Obamacare (which it did for the average person who already had insurance), they had to make the plans a lot less attractive (hence the high deductibles, large copayments, narrowed networks).

If you think you are asked to buy too much insurance, do you have a problem with the list of "Essential health benefits" of an insurance plan, or is it just the out-of-pocket dollar figures?

Yes, I have a problem with the "essential" health benefits too. That's just creating a complicated cross-subsidy, which is also subject to lobbying by various provider groups who want their services to be considered essential. It's a recipe for inefficiency and abuse.

 

[sunmaster14]

I'd guess that the admin required to verify that they really could afford to cover the treatment out of pocket would add significantly to the cost of the insurance for everyone and also people's circumstances change over the year - meaning that their reserves might go, and they end up being freeloaders.

You post collateral at your insurer in an interest bearing account in the amount of the deductible. What's so hard about that?

 

[Emily's Cat]

Ooh that looks power law ish. Do I win anything?

We usually approximate it with a lognormal distribution. In reality, it's a compound distribution. The Frequency dist is pretty close to lognormal, but the cost per event is messy and not well approximated by anything IIRC. We use an experience-based discrete distribution because it's simply too imperfect a fit for any defined continuous distribution.

 

[Emily's Cat]

Well, the whole copayment stuff is an added complication which doesn't exist for other insurance. I think if we had true catastrophic insurance, you'd probably see that go away.

Copays and coinsurance are part of the OOP. The OOP includes the deductible and all cost sharing.

No, cost sharing of that nature doesn't exist for other types of insurance... but the frequency distribution for other types of insurance are significantly different. The likelihood of making a car insurance claim in any given year is very low; the likelihood of making a medical insurance claim is pretty high in comparison. Additionally, other types of insurance suffer from significantly less induced utilization for services than medical does. There's moral hazard in all insurance, but not induced utilization - that's pretty unique to medical insurance. With very high deductible catastrophic insurance... you *might* see that go away, but you don't need to go to very high deductible catastrophic to get that. There are several Bronze "cliff" plans out there already. You pay the deductible, then nothing else. There's no other cost sharing.

My point, though, is that if you can afford an annual premium of $15K per year, then you're probably not going to be bankrupted by a $15K one-off hit.

I don't think this is a fair assumption. A one-off hit is a significant cash-flow risk, that really isn't there when you're spreading out the cost over time. Why do you think people mortgage houses and get loans for cars? IT's because their cash flow can absorb a moderate recurring payment, but can't absorb a one-time hit. Even if it ends up costing them more in the long run because of interest, it's more manageable broken up into installments. That's what premium is, essentially - it's the installment plan for medical care, where the medical care is adjusted for the contingent nature of the events.

 

[Emily's Cat]

You post collateral at your insurer in an interest bearing account in the amount of the deductible. What's so hard about that?

Insurers don't want to manage accounts like that. It's a PITA. We won't take just any collateral - just cash. Better yet, dump that cash into your HSA account, and manage it your own self!

 

[Francesca R]

We usually approximate it with a lognormal distribution. In reality, it's a compound distribution. The Frequency dist is pretty close to lognormal, but the cost per event is messy and not well approximated by anything IIRC. We use an experience-based discrete distribution because it's simply too imperfect a fit for any defined continuous distribution.

Well you only gave me three points (which is pretty much none!) and the upper limit on health care costs--even in the free USA--is bounded by letting people die at some level.

But I get the scale-invariant signature of a power law. The bottom chart--where I have not forced a non-zero origin--don't look a whole lot normal to me. That's an obese tail.

(cumulative probability scale should be 100% - [value], my bad)

https://www.flickr.com/gp/francesca_rizzi/61593M

https://www.flickr.com/gp/francesca_rizzi/073430

 

[Trakar]

Insurers don't want to manage accounts like that. It's a PITA. We won't take just any collateral - just cash. Better yet, dump that cash into your HSA account, and manage it your own self!

The point is that the choice of personal management of health costs that many seem to claim to want, is only truly viable for a small minority of the population, and would generally cost much more, up-front, than almost all private (or public) health insurance options. So, other than adding an additional layer of muddlement into the ACA along with a provision that any additional administration costs would be paid by the individuals choosing this option (in the form of an annual fee) it should be possible to add the option of self-insurance back into the ACA framework. The real question becomes, would this then mute the objections of those who claim that the primary objection they have to the ACA is the lack of choice to not have to purchase a private insurance policy?

Of course, they already have this option, they just have to be willing to pay the annual fee (used to offset some of costs of people using ER as primary care) for not purchasing such coverage, and OOP for all needed healthcare. To be honest, if I were young, single and generally healthy, without high-risk hobbies/career, this is most likely the choice I would make, at least until I was married raising children and/or more stable in my career.