Unbiased Analysis of Today's Healthcare Issues

Visions for the Future of the U.S. Health Care System

Written By: Jason Shafrin - Jun• 15•09
Ideas for health reform from the Society of Actuaries.
  • How to save money: Don’t make doctors get a bachelor’s degree.
  • Do we have too much medical care?  “…35 to  45 percent of prescriptions may have no effect on the disease for which they are prescribed and that as little as 10 percent of diseases are significantly influenced by modern treatment.”
  • Dennis Berry supports a more free market approach with first dollar coverage only for the very poor.  There would be mandatory “stop-loss insurance at different deductible levels depending on income.”
  • Eliminating adverse selection:  “In both the individual and group market arena, we must do away with underwriting based on claim history  and medical conditions.
    In both the individual and group market arena, we must do away with underwriting based on claim history 
    and medical conditions.”
  • Is a two-tiered system the way to go?

And finally Niccolo Macchiavelli states why changes is difficult.

  • “There is nothing more difficult to carry out nor more doubtful of success nor more dangerous to manage than to introduce a new system of things; for the introducer has as his enemies all those who benefit from the old system, and lukewarm defenders in all those who would benefit from the new system.”

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One Comment

  1. Jerry Tsai says:

    Hi Jason,

    Sorry to suggest work for you, but I was wondering whether you were aware of any work that assesses whether we spend more money because of adverse selection in the health insurance market than we would if everyone were covered.

    As an example, and these numbers are strictly generated for this example, let’s say the residents of California are 60% covered by large company plans (with strongly negotiated rates), 20% are covered individual plans (price-taking rates), and 20% are uninsured. Can one show (or has one shown) that, collectively, the premiums paid by all the residents of California is in sum total greater than what would be paid if all the residents were insured?

    The reason adverse selection comes so strongly to mind is because I am in the individual market, and the premiums appear priced much higher than actuarial risk AND adverse selection would explain. Frankly, because of individuals’ lack of purchasing power, they are easily targeted by health plans for price gouging. The premiums are so high that only the wealthiest individuals can afford them. And this doesn’t even get into how much people with PECs probably have to pay.

    It strikes me that I just might be paying twice as much as I might have to if EVERYONE were covered and adverse selection therefore impossible. Moreover, instead of insurers spending tons of money to discourage adverse selection or to ameliorate the detrimental financial effects of adverse selection, they then instead could use the same money for programs of health improvement, possibly lowering future per-capita costs.

    If someone could show those who are deciding that we, collectively as a state or as a nation, pay LESS than we are paying today even covering the currently uninsured due to insurance providers no longer having to guard against adverse selection, I think that would be a powerful argument for an individual mandate (and, in turn, universal coverage). Even if the amount would be greater by a small amount (percentage-wise), there are externalities that could make it well worth it (e.g., people no longer having to save more to avoid health-related bankruptcies, peace of mind, insurance providers incented to take care of their populations instead of incented to simply cherry-pick, etc.)

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