This is my first blog on blogger.com. Forgive me if I go astray.
In PAF340 this morning, Andrea Mayo worked to produce an example very quickly to a student's request for elaboration on the concept of Kaldor-Hicks Criterion. Wikipedia sums up the concept nicely like this,
...is a measure of economic efficiency that captures some of the intuitive appeal of Pareto efficiency, but has less stringent criteria and is hence applicable to more circumstances. Under Kaldor–Hicks efficiency, an outcome is considered more efficient if a Pareto optimal outcome can be reached by arranging sufficient compensation from those that are made better off to those that are made worse off so that all would end up no worse off than before.
Okay, maybe that's not that nice a summary, but Ms. Mayo's was. She did a great job and I was thus inspired to raise my hand and ask her if she could use the same concept to explain what is happening with Obama's Healthcare Reform. Who is being made "worse off" by the plan, and who, exactly, benefits? Our professor didn't skip a beat. She let me know that with the shortness on time in the classroom, she would instead use the material to write up her next blog. I am looking forward to reviewing it.
All those years that I spent working for insurance companies, I learned well the way that people were denied coverage. I understood clearly how important it was for the insurer to maintain profitability and a margin that is protected for the sake of claim reimbursements. How can insurers remain profitable if they are only allowed to rate based on age? I saw policy waivers on insureds who rode motorcycles and rode sky balloons on a regular basis. No benefits would be provided should an insured be injured while engaged in such activities. If an insured lied about their involvement in high-risk behaviors and then became injured within 18 months of policy issue, then the insurance company had the right to cancel or rescind the policy and refund the customer all of his/her money instead of paying claim damages. Would insurers have to drop such riders in Obama's Reform? After all, if a motorcycle rider got injured and had $180,000 worth of medical claims and the insurance company has the right to rescind due to misrepresentation on the application, who gets stuck with the $180,000 bill? That's what the whole reform is about. Huge expenditures for medical care by persons who have no money to pay coupled with a system that has no right to refuse care does really create need for change but how?
I understand that if all the people who do not need coverage because they are healthy, low-risk individuals are forced to pay into the system a monthly premium, they may actually benefit. Maybe they will start to use the coverage to see physicians more frequently when little things go wrong. Many seemingly healthy people ignore little symptoms only to find out later that they waited too long to seek care. Perhaps the overall health of the nation will increase and the need for more expensive treatments for more greatly progressed illnesses will diminish. Perhaps the burden for the insurers will become too great and suddenly Aetna, United Healthcare, Cigna, and Blue Cross Blue Shield will need to be bailed out like other regulated industries have recently. Perhaps once the insurance companies become less profitable, the services they offer become poorer in quality. I see the potential for so many problems with the little bit I know about Obama's Healthcare Reform.
We had discussion already in PAF340 about the health care reform, and I know that we will have more at a later time. I recall Rome asking, "...but who will pay the trillions of dollars?" I recall our professor saying we'll get to that discussion in due time. Good things come to those who wait. I have much to learn, and am so glad to have a finely tuned analytic leader to turn to for greater understanding.
