The devil is in the details! The Fireside Post reports and comments on a broad range of material, including debt, spending, health care, and social justice – usually at a global or macro, level. But the devil really is in the details. Allow me to attempt to crystallize some details into something manageable for most people – be patient and stay with this -one can understand the basic precepts of Actuarial Science. It is important to understand in order to understand the phenomenon of health care financing. We will uses some simple arithmetic to break down some complex issues.
Actuaries use statistics to determine risk. Let me give some simple examples. We take a particular population, say men from age twenty-five to thirty. Then we look at their health care costs. It is easy to do. Insurance companies keep all sorts of information. They know who their clients are and how much money they had to spend on their client’s health care. Actuaries merely take all of the information and try to predict what a person will cost the company to insure. Then the insurance company will know what to charge in premiums.
They just take a population, say 500 men from age 25 to 30, and the total dollars they spent in any given year on those men, let’s say it was $600,000. Divide the dollars by the number of men and you know how much a man in that age group costs, that would be $1,200. Divide by 12 and you know how much these men cost per month; the average man in the age group cost the insurance company $100 per month. The insurance company knows how much money they want to make, let’s say $10 per month per customer. So they charge a premium of $110. That is the essence of the science. It is a fair and equitable process. These 500 men get good health care by sharing the burden – the insurance company is the health care broker – they should get paid for this.
The problem is that the statistics cut two ways. The insurance companies can also determine which doctors cost them $105 per client and which cost them $95 per client. If a doctor kept the cost down then the insurance company makes more money.
Very few people in this world work for just the fun of it – some of us enjoy our work – but we work for a paycheck. Who writes the paycheck for the doctor? The insurance company! If a doctor’s costs for a particular population, the 500 men in the example, is over the projected $100 the insurance company can drop him from their list of providers. The 500 men have to find a new doctor. The doctor loses business and does not get his paycheck. The doctor is acutely aware of this phenomenon while deciding treatment options for you. If he gives you high dollar treatment then he can, and probably will be penalized.
I say ‘probably will’ because the goal of Insurance Executives is not benevolent care of their clients – their goal is to make money.
The end result is that profit drives our present health care system in America. Profit driven health programs are inherently corrupt.
“When I die, I want to die like my grandfather–who died
peacefully in his sleep. Not screaming like all the
passengers in his car.” –Author Unknown