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Jerry Reiss ASA**

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 My Two Cents on the Health Care Debate

By Jerry Reiss

  • Published on Linkedin on June 23, 2017

I started my career as a Health Actuary in the early 70s. The problem with runaway costs began with the introduction of "Usual and Customary" by Blue Cross & Blue Shield. The coverage before that provided a fixed schedule of benefits (see page 6 of treatise). The schedule of benefits controlled costs because the consumer had limited funds and only sought services that could be afforded. Usual and Customary gave ordinary people access to huge sums of money and it is responsible for an explosion of expanded services largely responsible for increased longevity. But it also led to runaway costs. I had been working on the solution to the problem (in the early 70s) which involved identifying and controlling the two drivers of cost: Incidence and Utilization.

Incidence is the rate by which people incur illness in the insured population. Utilization is how often they use the insurance. The solution was remarkably simple. The Affordable Care Act identified what those drivers are and sensible solutions. What was enacted fell far short of what is needed because politics got in the way. We will not be able to solve the problem with only market-based solutions, nor will it be solved without a 100% mandate, nor can it be solved without addressing limiting utilization for end of life care. Without limiting the latter, restricting what kind of profit players can make, and severely eliminating the ability to sue, the rich in their 80s are provided more affordable coverage at the expense of the working poor having less or no access to health care. People of means can always opt out of insurance coverage and get more quality care if they pay for it themselves. Once and for all we must decide as a society whether health care is a right or a privilege. The lobbyists have always turned this question on its head.

Surely, what we have provides the best care in the world, which is why the very rich come here for care. At the heart of this question is not whether we have the best health care system, but what percentage of our population has access to it (as discussed in the Newsweek article, which you can access by the link provided above). This is why we need to pay far more attention to how the World Health Organization rates our health care (ranked 38 overall behind 37th ranked Third World Costa Rica and dead last among western civilizations) than how the Heritage Foundation rates it. Even the Affordable Care Act had it shortcomings providing three levels of coverage based on economic circumstances. Because longevity is correlated with where you live, your level of education, and your economic situation, we must compare what we have against what Europe offers, not based on availability of coverage, but based on access to care and what care most of our citizenry are provided.

Had the studies in the 70s been implemented with the intended solutions, we would have solved the problem with the creation of HMO's. Health Maintenance Organizations were supposed to follow those principles, which were to control costs by keeping people healthy. If people are healthy they do not need expensive procedures nor do they need to use health insurance that often. They did not because instead of operating under the long view, where controlling costs were the main objective, they instead opted to maximize profits each year, which works diametrically opposite to the reason the HMO was created in the first place: controlling costs by keeping people healthy. This was accomplished by encouraging wellness visits by paying 100% upfront coverage.

The sick population doesn't magically disappear when you change the public policy on how costs should be managed. This forces prices up before they can decrease. You start new policy with scores of sick people. Implementing this new policy cannot be done in a pure vacuum, meaning costs go up temporarily before utilization of services and incidence of illnesses decrease, driving costs down. This is the inherent problem in seeking a market-based solution, which involve corporation that have stockholders who don't give a damn about people's health.

Conservative politics sees market -based solutions as a panacea to all the ills of the world. This runs countermand to the way most western countries view these issues. Inasmuch as they have far lower infant mortality, and health care rated far higher than we rate under the World Health Organization, and at a much lower per capita cost, just maybe they are right and we are wrong.