Public option for healthcare

[TheGame]

Originally Posted by Bond

So, if one already possesses private health insurance, and wants nothing to do with a public option, is it moral to require that that person pay for the public option through mandated taxation?

That depends on if they're satisfied with the state of their insurance. Unfortunately, this is a democracy, so the majority of the people will have a say in what tax dollars should be spent for and what it shouldn't. By people elecing Obama president they have voted for healthcare reform, by people allowing democrats to have so many seats in the house and senate they have voted for healthcare reform, and polls have shown that most people are for a public option for healthcare.

I don't want to pay for a lot of programs that I will never use, but I dont' disagree with the process that got things to this point. I believe that healthcare is a right, not a luxury. And like any rights I feel that its moral for it to be protected by the law.

How would it pay for itself if the program simply had more citizens who wish to opt-in?

Because people who opt in would have to pay a set premium to get the insurance.

Statistically speaking, workers in health care management are significantly underpaid compared to management in other fields with similar education levels (MBAs, fields such as financial companies, accounting firms, etc).

Is it not possible that the reason why health care is so expensive is because of excessive government intervention (as the graphs I originally posted eluded to)?

It is very possible. This is why I promote them going about it a different way other then making more adjustments to private healthcare itself. Making a public option sets a standard for them to try and reach, trying to manipulate private insurance directly can yield questionable results, and pin accountability for the failures of a private sector buisness on the government.

Government should support change, not enforce it on a private company.

This is the exact problem with medicare and medicaid, I hope you realize. The assumption with medicare and medicaid is that the government burdens the majority of the cost of the programs, but this is false. Rather, the majority, sixty cents on every dollar, is paid for by hospitals and health systems that must treat medicare and medicaid patients. Do you see that this is one of the reasons why insurance premiums are so high for private paying customers?

I'll be perfectly honest with you, I don't understand this question as you have worded it. Are you asking me if private insurance companies are forced to raise their prices because there are people on medicaid and medicare?

The theory of insurance is to save the end consumer money by pooling together similar risk exposures. This is why insurance companies are picky when choosing customers, otherwise, the theory of insurance collapses as the risk exposures are no longer similar in nature, which would in turn no longer save the end consumer money.

correction

The theory of insurance is to make the most money by pooling together similar risk exposures. This is why insurance companies are picky when choosing customers, otherwise, the theory of insurance collapses as the risk exposures are no longer similar in nature, which would in turn no longer making as much money.

It depends on perception. You feel like they're doing it to save the customers money, I feel like they handle it that way to turn a profit. Both things could be true for some private insurance companies. But before I give a full reply, lets go to the meat of your question:

If the public option were to accept any consumer, with varying risk exposures, the option would not operate in the traditional form of an "insurance company." Therefore, how do you propose that the option operate? How would it be able to pay out the money necessary if too many of the consumers had highly correlated risks, or were prone to have the same risk over and over again?

They could do something that most private healthcare companies don't do these days.. and that's run the company with integrity, and with the health of their customers in mind. The pricing will be reasonable, but not made with profiting in mind. And when someone who is covered actually does get sick, they won't have to worry about the public option going over their health history to find an excuse to drop care.

http://www.youtube.com/watch?v=u-hUVzcOTMo

(I can't watch youtube at work, so I can't say for 100% sure if I linked the right video.)

As for the bottom line costs for the consumers, its very much possible that private insurance companies will be able to pull off comparable prices. There's even a possiility that the public option could turn out to be the expensive option (for the monthly premium anyway). But the point of the option is to not deny people based on the state of their health, and to actually take care of people when they do become sick. Which our current insurance companies do not specialize in.

[Bond]

Originally Posted by TheGame

That depends on if they're satisfied with the state of their insurance. Unfortunately, this is a democracy, so the majority of the people will have a say in what tax dollars should be spent for and what it shouldn't. By people elecing Obama president they have voted for healthcare reform, by people allowing democrats to have so many seats in the house and senate they have voted for healthcare reform, and polls have shown that most people are for a public option for healthcare.

The United States is a republic, not a democracy. In a democracy your majority claim would be correct, not in a republic. See this distinction between republics and democracies:

Republic. That form of government in which the powers of sovereignty are vested in the people and are exercised by the people, either directly, or through representatives chosen by the people, to whome those powers are specially delegated. [NOTE: The word "people" may be either plural or singular. In a republic the group only has advisory powers; the sovereign individual is free to reject the majority group-think. USA/exception: if 100% of a jury convicts, then the individual loses sovereignty and is subject to group-think as in a democracy.]

Democracy. That form of government in which the sovereign power resides in and is exercised by the whole body of free citizens directly or indirectly through a system of representation, as distinguished from a monarchy, aristocracy, or oligarchy. [NOTE: In a pure democracy, 51% beats 49%. In other words, the minority has no rights. The minority only has those privileges granted by the dictatorship of the majority.]

I don't want to pay for a lot of programs that I will never use, but I dont' disagree with the process that got things to this point. I believe that healthcare is a right, not a luxury. And like any rights I feel that its moral for it to be protected by the law.

Healthcare being a right is your personal opinion, although it is currently not defined as a right by law. The question that arises form a belief that healthcare is a right is: where does that right begin and end? If someone is dying of terminal cancer is it their right to receive continuous and costly treatment to prolong their life by only a few months? If someone chooses to live an unhealthy lifestyle and take on extravagant risks, is it their right to receive continuous and costly care?

Because people who opt in would have to pay a set premium to get the insurance.

Correct, but if the plan were to cover all sorts of varying health risk exposures, then the premium would not be able to cover the aggregated expected loss of the risk pool. This is how insurance operates. As I said before, because this law of insurance would not hold in a public option, the option would not operate as an insurance company. Therefore, the option would have to derive money from an alternate source in addition to premiums, ie. taxing those who do not opt-in.

It is very possible. This is why I promote them going about it a different way other then making more adjustments to private healthcare itself. Making a public option sets a standard for them to try and reach, trying to manipulate private insurance directly can yield questionable results, and pin accountability for the failures of a private sector buisness on the government.

Government should support change, not enforce it on a private company.

I don't understand how a public option would be "going about it a different way" than medicare or medicaid, but I will concede this point, as I don't think it is especially pertinent.

I'll be perfectly honest with you, I don't understand this question as you have worded it. Are you asking me if private insurance companies are forced to raise their prices because there are people on medicaid and medicare?

I'm not asking you, I am telling you this is the case. Private health systems must bear the burden of sixty cents on every dollar of medicare and medicaid coverage of health consumers. Because these consumers do not pay anything into the private health system, the health system must raise the premiums on paying members to generate additional revenue. This is a fact. I have worked in a health system and know it to be true.

correction



It depends on perception. You feel like they're doing it to save the customers money, I feel like they handle it that way to turn a profit. Both things could be true for some private insurance companies. But before I give a full reply, lets go to the meat of your question:



They could do something that most private healthcare companies don't do these days.. and that's run the company with integrity, and with the health of their customers in mind. The pricing will be reasonable, but not made with profiting in mind. And when someone who is covered actually does get sick, they won't have to worry about the public option going over their health history to find an excuse to drop care.

http://www.youtube.com/watch?v=u-hUVzcOTMo

(I can't watch youtube at work, so I can't say for 100% sure if I linked the right video.)

As for the bottom line costs for the consumers, its very much possible that private insurance companies will be able to pull off comparable prices. There's even a possiility that the public option could turn out to be the expensive option (for the monthly premium anyway). But the point of the option is to not deny people based on the state of their health, and to actually take care of people when they do become sick. Which our current insurance companies do not specialize in.

As I have stated previously, risk pooling (which insurance is based upon) lowers the average premium of consumers by aggregating similar risk exposures. If insurance companies (risk pooling agents) did not lower said premiums, then no consumer would pay the premium. Rather, they would decide to not pool their risk exposure.

From your last few paragraphs, I am unclear as to how familiar you are with the concept of risk pooling and insurance? It is hard to have a proper discussion on the health insurance industry if you are no familiar with the key tenants that ground its operation.

[TheGame]

Originally Posted by Bond

Republic. That form of government in which the powers of sovereignty are vested in the people and are exercised by the people, either directly, or through representatives chosen by the people, to whome those powers are specially delegated. [NOTE: The word "people" may be either plural or singular. In a republic the group only has advisory powers; the sovereign individual is free to reject the majority group-think. USA/exception: if 100% of a jury convicts, then the individual loses sovereignty and is subject to group-think as in a democracy.]

Democracy. That form of government in which the sovereign power resides in and is exercised by the whole body of free citizens directly or indirectly through a system of representation, as distinguished from a monarchy, aristocracy, or oligarchy. [NOTE: In a pure democracy, 51% beats 49%. In other words, the minority has no rights. The minority only has those privileges granted by the dictatorship of the majority.]

Ok.

Healthcare being a right is your personal opinion, although it is currently not defined as a right by law. The question that arises form a belief that healthcare is a right is: where does that right begin and end? If someone is dying of terminal cancer is it their right to receive continuous and costly treatment to prolong their life by only a few months? If someone chooses to live an unhealthy lifestyle and take on extravagant risks, is it their right to receive continuous and costly care?

In my opinion, yes its their right.

Correct, but if the plan were to cover all sorts of varying health risk exposures, then the premium would not be able to cover the aggregated expected loss of the risk pool. This is how insurance operates. As I said before, because this law of insurance would not hold in a public option, the option would not operate as an insurance company. Therefore, the option would have to derive money from an alternate source in addition to premiums, ie. taxing those who do not opt-in.

That is purely speculation. I agree that tax dollars will be used to help create this program, and I agree that in the long run there is a possibility that it could rely on tax dollars. This is something that I've said both directly and indirectly multiple times before.

I don't understand how a public option would be "going about it a different way" than medicare or medicaid, but I will concede this point, as I don't think it is especially pertinent.

Ok.

I'm not asking you, I am telling you this is the case. Private health systems must bear the burden of sixty cents on every dollar of medicare and medicaid coverage of health consumers. Because these consumers do not pay anything into the private health system, the health system must raise the premiums on paying members to generate additional revenue. This is a fact. I have worked in a health system and know it to be true.

Ok ok, so it was rhetorical question? Understood.

As I have stated previously, risk pooling (which insurance is based upon) lowers the average premium of consumers by aggregating similar risk exposures. If insurance companies (risk pooling agents) did not lower said premiums, then no consumer would pay the premium. Rather, they would decide to not pool their risk exposure.

From your last few paragraphs, I am unclear as to how familiar you are with the concept of risk pooling and insurance? It is hard to have a proper discussion on the health insurance industry if you are no familiar with the key tenants that ground its operation.

I completly understand the concept of risk pooling and insurance. If I directly said something that conflicts with this understanding feel free to point it out directly.

[Bond]

Originally Posted by TheGame

I completly understand the concept of risk pooling and insurance. If I directly said something that conflicts with this understanding feel free to point it out directly.

Well, if you completely understand risk pooling and insurance then you are way ahead of me! I only understand the basics of how insurance companies function. They are quite complex organizations, and they fact that they are one of the most regulated industries in the world makes them even more complex to dissect and understand.

That being said, I believe the concept you are missing is that the public option would simply not be able to function as a normal insurance company. This is not speculation. It is a fact. Here is why:



Just to be clear, this is a graph I made for one of my classes last year, which demonstrates the principle of risk pooling. The specific numbers are not important for this example, but simply the principle.

As you can see, the graph converges at 500, the expected value of this risk pool. As you know, the expected value never changes, but rather the probability of that expected value, and therefore the standard deviation, does change. This graph is an example of effective risk pooling, as the expected value has a high probability, and the standard deviation is rather low (there is a low likelihood of a long tail loss).

This model only functions in this manner if those within the risk pool face similar risk exposures, which is, again, why insurance companies are so picky. If the public option will accept any type of consumer, regardless of precondition, as you say it will, then this model will cease to function properly (unless you can come up with a new way to pool risk).

Therefore, the standard deviation will rapidly increase, and in turn the probability of extreme outcomes will increase. With the probability of those extreme outcomes increased, the chance of the collective risk pool's premium being able to handle the group's losses is severely diminished.

With the assertion that the public option will not be able to operate as a normal insurance company, this now begs the question how will the public option be able to make up the extra capital that is required? I see two options: One. Charge an excessively high premium (higher than what one would find on the private market). Two. Force taxpayers to pay the rest through mandated taxation. Option one would not be politically popular, and would defeat the point of the so-called "public option." Option two would further tax citizens in excess of the required premium of citizens who chose to opt-in. Therefore, the program would cost much more, in the long run, than simply the premiums of those citizens who chose to opt-in.

In conclusion, as long as you are fine with taxpayers, who choose not to opt-in to the system, having to bear the brunt (or a significant portion) of this public option, then I have no further issue. But I do hope you find this to be an extremely disturbing prospect at best.

[TheGame]

I follow the logic of your post from begining to end. I would rather not have a conversation on risk pooling though.. when it was explained to me, and when I was asked to create a very vauge model of it, it had to do with housing insurance and natural disasters. In my opinion that subject is a lot less complicated then health insurance. I will not knock what you said point by point, or even question it because it will lead off onto a tangent that I don't even have time to think about here at work. (And trust me I started to let it go that way, but that resulted in me sitting here a very inturrupted hour)

So I'll just leave it at this, your conclusion is right, it will not operate as a normal insurance company. It will operate as an option people can chose if they don't want to deal with a normal insurance company.

Originally Posted by Bond

With the assertion that the public option will not be able to operate as a normal insurance company, this now begs the question how will the public option be able to make up the extra capital that is required?

Valid question, but the answers to your questions are not the only options. There are ways to cut corners on costs and generate revenue to pay for it besides just raising the price or increasing taxes.

(Before I say the following, I'd like to say keep in mind that we've already established that the public option in theory would cost more to run then a normal private insurance company due to high risk, so I'm only looking at the revenue side of things now.)

For one, the government's goal will not be to turn a profit. At this point its very argueable about how much insurance companies really profit, but from every report I've read from 2008 and 2007 the major insurance companies like Aetna, CIGNA, and United health have all gained a profit in the billions.

The government, unlike private insurance, would not have to use advertising. That's not a huge corner cut, but its a corner. I'm sure the government has other tools at its disposal too. I've read articles before that mentioned the government has a large amount of negotiating leverage with drug companies that can allow for some types of discounts.

I'd also say that the appeal of a legitamate plan with less bureaucracy will give it universal appeal opposed to only being appealing to high risk consumers.

In conclusion, as long as you are fine with taxpayers, who choose not to opt-in to the system, having to bear the brunt (or a significant portion) of this public option, then I have no further issue. But I do hope you find this to be an extremely disturbing prospect at best.

I don't find it to be disturbing, and I'm ready to accept it even if tax payers eventually take the large majority of the tab. As I've expressed before. But I only see that happening if it does not get very popular, or if it manages to only get popular with people private insurance wouldn't touch or kicked off to begin with. I believe that its a well calculated risk.