08 August 2013

A Quantity of Health [update]

More than a year ago, I made the point that even the 1% will need Obamacare, in due course. As most regular reader knows, quants earn their livings in various ways. In the private, for profit, world that usually means coercing the naive' into spending money on widgets they wouldn't have done save for the exercise of the quants' magic. All those ads and "suggested" products are mined from user data. The term usually applied to this endeavor is "market segmentation". When used to entice an RC Cola buyer to also buy Moon Pies, no harm done (well, to the extent that later diabetes can be disavowed).

Anyway, as in the prior essay, buying insurance (health or auto or home) isn't the same as buying that box of Twinkies or an iPhone. You're not buying a "thing" to consume. Well, so long as you're not a Right Wingnut with a warped sense of consumption. Buying insurance is paying into a pool of shared risk. The more who share in the risk, the lower the cost to all. Well, if profit isn't involved. What corporations do: socialize cost and privatize profit. Left to their own devices, they'll remove (through price arbitrage) all but the most profitable. In the prior piece, I expounded on the likelihood that health care, beyond the simplest 19th century doctoring, would cost too much even for the 1%. Just too few "consumers" to spread the fixed cost.

In the case of property/casualty insurance, we've seen the result here in the Northeast US. The insurers (including FEMA, which runs the national flood insurance program) are raising rates, and re-defining storm zones, so much that much of the coastline is too expensive to insure. What's really annoying is that the issue wasn't an issue when it was Red States that got all that implicit support from the rest of the country. But let a once-in-a-century (or two) storm happen in Blue State territory, and all hell breaks loose. "We can't afford all those freeloaders." In due time, all those Red State House members will see to it that their constituents aren't priced out. They do control the House, you know. Whether the Blue State residents get equal treatment? Doubt it.
One effect seems to be clear: Many people around the country may be considering walking away from their insurance, calling into question the premise of the legislation, which was to make the flood insurance program financially sustainable.

(Nailed it!!)
On Tuesday, the House passed a $50.7 billion relief package for Sandy. This time, 180 representatives voted against it -- 179 Republicans, one Democrat -- 56 of whom had voted for the similarly sized Katrina bill.

Now, consider that the analog for health insurance is: you die.

Well, now the mainstream press has delved into the issue, and one has come up with an historical example.
Younger and healthier workers canceled their P.P.O. plans, enrolling in cheaper H.M.O. options or dropping Harvard insurance altogether. Left with a sicker patient base, the P.P.O. raised its premiums further, which prompted the next layer of relatively healthy customers to leave.

And so on. In 1997, Blue Cross/Blue Shield withdrew its P.P.O. from the market, making it a victim of what economists call the death spiral of adverse selection.

Just what the Right Wingnuts want: kill off the sick and damaged, leaving the rich and healthy with cheap insurance. The only problem with the plan is that, in due time, first the 1% will be found to be too sick and damaged and thence the .1%. In due time only Bezos and the Koch brothers will be able to afford the insurance. One might speculate that for those, insurance per se wouldn't even exist. They'll just buy up a personal physician and hospital. Kind of like the 17th century. And all will be well.

The fact is: insurance is socialism. That the USofA is mostly for-profit now (it was not always so, by any means), turns insurance into Twinkies. With all that implies. Kill off the poor and sick and damaged. Don't wait, times a wasting. The Chinese indentured labor makes our iPhones anyway; who needs any more poor Americans?

My, my. Don't believe what I say, believe what I do. Now, the folks who did the study are described in the reporting as "...the Commonwealth Fund, which strongly supports healthcare reform...", but still how would you go about finding left wing Republicans? The closest cadre I can think of: Fairfax County Virginia, home of all those public trough lapping good-for-nothings. In any event, the study found that with respect to the 26 years of age provision,
They found that by last March, 63 percent of young adults identifying as Republicans had enrolled in a parent's health plan in the last 12 months, compared to 45 percent of those who considered themselves Democrats. About 26 percent of the 1,800 adults surveyed said they were Republicans, 28 percent said they were Democrats and the rest either said they were independent, some other party, or did not say.

And the gut shot (if you're a Right Wingnut, anyway):
"There is a stereotype that young adults believe they are 'invincible' and don't want or need health insurance," said Collins. "This survey shows that is a myth -- typical uninsured young adult is from a low- or middle-income family and works a low-wage job. In general, young adults value health insurance but cannot afford it."

"Enrollment rates of working young adults in their own employer-sponsored plans average nearly 70 percent, with cost being a principal factor cited among those who do not enroll," the report reads.

In other words, yet again, insurance is shared risk. Broaden the pool, and one lowers the individual burden. Segment the pool into ever smaller and homogeneous pieces with prices assigned based on historical risk in each sub-pool, and you drive out the "less desireables" through the simple expedient of increasing the burden on those least able to bear same. And this works fine for a while, particularly in non-health products. And has a certain righteous appeal to the Social Darwinist cabal. But with the advances in health care coming almost exclusively with (increasingly expensive) treatments, not (inexpensive) preventions (the original HMO approach didn't really work), even the 1% won't be able to carry the fixed cost burden. The problem is that when your pool shrinks too small, and your ability to sequester more of the GDP wanes, even you won't be able to afford an MRI. Or some such.

No comments: