US Health Insurance Reform and the CBO Scoring: Markets need more Insured Customers for Depth and Health
By David Schane, Oberlin, Ohio – USA, 30 May 2017
I write with concern about the CBO’s recent scoring of the revised AHCA bill that the US House of Representatives passed. While readers may have different views about Obamacare, the CBO’s determination that 23 million fewer Americans would be insured under the House legislation is alarming on a number of levels. I’d like to underline some points that Congress is not making. Having worked in finance, one thing that makes all markets healthy is depth and liquidity (where lots of sellers and buyers meet). For example, imagine going to the grocery story and finding out that the price is more expensive on the second pound of apples you purchase compared to the first. Healthy markets have competitive, tight pricing precisely because there’s depth (even when you buy hundreds of pounds of apples). Similarly, casinos may lose money one night because a customer hits the “jackpot” – but over the millions of dice rolls, casinos know exactly how to price their product and be profitable (as gambling markets are mathematically deep and precise over time).
Health insurance works exactly the same way. While only Providence may know our individual time on Earth, mortality and sickness can be modeled precisely if markets are deep (with many insured customers), and all outcomes (sickness and health) have their proper statistical chance of occurrence. Indeed, casinos forbid “loaded dice” because it changes the distribution of outcomes from the laws of math into something random, which they cannot model.
Moving back to the AHCA, Obamacare, and the CBO scoring, health insurers need more people to participate because they can accurately price mortality and sickness and offset their risk across society, while still making a profit. Insurance models fall apart when healthy people selectively don’t buy insurance feeling they don’t need it – as these healthy people who might well opt out of the marketplace are akin to “loaded dice” (which casinos forbid because they lose money)!
So the AHCA legislation damages health insurance markets and moves America in the wrong direction by covering 23 million fewer Americans. True health care reform should bring in more participants and thereby lower overall costs, which has the simultaneous benefit of showing more compassion and heart in the process.
One final thing to note: just because the AHCA may lower premiums for some individuals does NOT mean those people are getting a good deal! Minimum Obamacare benefits covered preventive care, like universal colon screenings beginning at the age of 50. Not only are these minimum benefits saving many individual’s lives (as colon cancer is easily treatable if detected early), they are saving the American health care system significant money in aggregate (as early treatment is immensely more cost effective to deliver). So beware of false pricing! A smaller premium per month that does not cover preventive care may cost an individual greater overall expense (as individuals who unnecessarily contract a major illness could subsequently be placed in a high risk pool with steep insurance rates). Furthermore, the absence of preventive diagnosis shortens lives, brings families premature sadness – and incurs higher overall healthcare costs to us, the American taxpayer. In sum, we deserve better legislative thinking and more honest communication from Congress so let’s hold our Congressional representatives accountable until they deliver that responsibly.
David Schane, Oberlin, Ohio – USA, 30 May 2017
From the editor: We thank Mr. David Schane for sharing with us his thoughts on US Policy and Global Issues. Having traveled the world and lived in Europe as well, we believe Mr. Schane’s thoughts are vey valuable. They convey both a holistic view and a differentiated perspective. The opinions expressed here are his own and Mr. Takushi and the other contributors do not necessarily agree with the views of Mr. Schane. All contributors to our website express their own independent opinion based on their research. Thus, their articles are not edited by us, Geopolitical Economics.
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