Looking Ahead

LOOKING AHEAD by Wally Dobelis Professionals helping us look at Healthcare Reform Bill (HRB) The one word that I craved to see during the healthcare reform discussions was “actuary,” the mathematical scientist of insurance ,who predicts mortality (or morbidity, in case of healthcare), and structures premium rates, to make sure that the method used by the insurer in sharing of risks among many, the basic principle of insurance, is mathematically sound. Alas, no luck. Insurance as a keystone of social benefit dates back to Adam and Eve, who after being chased out of their highly regulated Paradise into a free-will, everyone-for-himself world, had to defend themselves from animals and fellow men, and chose to pay protection money (e.g. food, skins, their daughters and sons) to the strongest among themselves, who could lead the group (e.g. extended family, tribe, village, country) in defense, or in attack. Fire coverage originated as a Roman fire company protection racket. Some ancient Persians originated gave annual tributes to the leader, buying an actual payback in emergencies (e.g. disasters, weddings). Insurance as we know it came about in London, the commercial center, when ship-owners started to get together at Lloyd’s Coffee House in 1688, in advance of dangerous trading trips, to put money into a common fund, proportional to the dangers of each ship’s route, so as to to pay off the owners of ships lost to pirates and other hazards. It evolved from real home fire insurance, developed after the great London fire of 1666, and the great innovator Benjamin Franklin in Philadelphia adapted the novel idea, and formed our first insurance society. Exclusion of fragile, statistically unpredictable high cost risks – e.g. not insuring wooden houses - came with it, eventually evolving into graduated rates, the principle for which today’s health insurers are getting demonized. The mathematician Elizur Wright of Massachusetts in the 1850s formulated the rules that made for sound and fair life insurance administration - uniform premiums throughout lifetime to accumulate early reserves sufficient to pay for deaths later in life, nonforfeiture values (e.g. payout of cash values for early terminations), reinstatement, loan provisions, all meant to make the socially beneficial life insurance a fair practice, protecting the insureds . Under the terms of the US Constitution, insurance administration was reserved for the states, although the interstate commerce clause was invoked in the 1970s to attempt federalizing it, unsuccessfully. Since Elizur, the actuarial science has become an academic subject, and mathematicians must take post-grad courses and pass exams for years to become actuaries. Now that the healthcare reform bill is passed, I finally got to talk to an old friend, retired FSA (Fellow of the Society of Actuaries), who, talking to this non-anointed non-mathematician, broadly dismissed the HCRB as an unfair choice, deigned to have the working people pay for the non-workers. When pressed, he reluctantly specified selected objections, e.g. documented immigrants’ aged relatives admitted to the US who become welfare recipients in short order, Obama’s unwillingness to adapt tort reform, and the inadequacy of the incomplete premium base to pay for instant claims, when millions of new participants with existing costly impairments enter the system while the healthy young stay away. So, what does the HR Bill actually provide? First, coverage for 32M uninsured Americans by 2019. The expansion begins in 2014, with 95% of eligibles insured, vs. 83% today. and the mandate for everyone to get coverage also begins in 2014 (low-level income people exempted; also note that 7M undocumented immigrants remain uncovered, and cannot buy insurance even in the newly created purchasing pools called exchanges). From 2014 on insurers may not deny coverage or charge more to people with existing health problems (some insurers are already raising premiums across the board to anticipate high claims). Starting 2010, lifetime payment limits and denial of coverage to sick children will cease. The Fed/state Medicaid is expanded to 133% of federal poverty level incomes, just under $40K/yr for a family of four, and new eligibles are to be paid by Fed funds until 2016. Childless adults will be covered starting in 2014. As to prescription drugs, for seniors who have reached $2,830 expense, the “doughnut hole” will be closed, a gain of $250. The cost of HRB, per Congressional Budget Office, will be $940B over 10 years, and the budget will be cut by $138B. Gains will come from a tax on high-cost “Cadillac” plans, with thresholds at $10,200 for individuals and $27,500 (we have lots of them in high-cost NY). The reconciliation package of March 25 scaled back this excise tax to 40% and postponed it to 2018, and imposed a Medicare tax of 3.8% on capital gains and investment income, affecting on couples making $250K plus. Looking for impact statements from other insurance friends, I found equal discretion and wait and see attitudes, except for suggesting that “This is the end of health insurance companies. If you raise premiums in anticipation of new enrollees with pre-existing conditions, you lose existing policyholders; if you don’t raise, you spend the company into bankruptcy. Requiring that 85% of premium income be spent on claims only works with large employers, who do self-administration, the small ones cost more to administer, and individual policyholders are even more costly.” One advisor, quoting the social contract, would accept disabled children and adults as new enrollees, but not people with tobacco, alcohol, drug and overeating-induced disabilities. Note that HRB does not require employers to offer coverage, but they will be fined if the government subsidizes their employee coverage. As for cost savings via HRB, by simplifying medical protocols and eliminating unnecessary referrals, and by curbing drug therapy for social failings such as “loneliness” and ordinary life problems, which are listed under depression therapy codes in the bloated DSM (Diagnostic and Statistical Manual of Mental Disorders), why no mention in the bill’s summary? Further, there’s the hope that HRB can curb the overabuse of hospital emergency rooms – but note that for the 7M not covered undocumented immigrants the ER is the viable health resource. In that context, let’s hope that drug chains and huge retailers will continue building health clinics, and let’sroot for the medical profession to produce physicians and PAs willing to practice there, for our and the undocumenteds’ social benefit. Ultimately, is HRB the forerunner of single source healthcare, the Medicare for all Americans? Let us nor forget that it was invented by Otto von Bismarck the Prussian “Iron Chancellor,” in the 1870s, to curb the growth of Socialism in the newly unified and industrialized Germany, and it spread all throughout civilized Europe. Wally Dobelis thanks newspaper and internet sources and medical and insurance friends.