An Actuary Looks at The Affordable Care Act

In mathematics there is a little known principle referred to as, “Occams Razor”, which in its simplest form says that given a choice of solutions to a complicated issue, the correct solution is usually the shortest or the simplest one.  Since most people are not mathematically inclined, I prefer to use a different analogy when seeking out a preferential solution to a complicated issue.  I refer to it as the KISS method, which in its simplest form stands for, Keep it Simple Stupid.

I have worked for almost all of my life as an actuary which, believe it or not, gives me a somewhat different perspective on matters of an actuarial nature than most of the politicians and their fresh out-of-college advisor/staff members may have.

When ERISA, “The Employee Retirement Income Security Act”, (the first set of comprehensive laws designed to protect the rights and benefits of the participants of qualified retirement plans) was passed in 1974, there were a number of factions in this country that were lobbying and pressuring Congress to remove its teeth prior to its implementation in 1976, thereby rendering the new law ineffective.  Because of my strong beliefs, I took the time to travel to Washington, DC to appear before a committee of the Department of Labor wherein I gave specific reasons and cited actual case histories why this new law should not be watered down.  I had no idea if my words got through to the committee members but a few years later I heard from an independent source that my presentation did in fact help to save the day for ERISA.

Considering all of the complaints about the ACA that I have heard to date, from insurance officials, employers and individuals, (but not the architects of the ACA) the problems that have emerged so far, appear to be only the ‘tip of the iceberg’.  Maybe they’ll listen to me once more?

Why didn’t I say something before today, you know, like when the page is still blank?  The answer is that I was satisfied with the coverage that I had and I became complacent.  I have no problems with my coverage which consists of Medicare as the ‘primary’ and Blue Cross/Anthem as the ‘secondary’ due to my wife being an ex-employee of the Los Angeles Unified School District.  I saw no reason to rock this boat but if the federal government messes with this combination, the boat may not float.

Nevertheless, a country as large and as important as ours, with all that it implies and proclaims, should not have thirty, forty or fifty million people, or whatever the number is, without medical insurance coverage.  I know, I know, the naysayers claim that most of them are undocumented aliens.  Whatever!  And we do know that almost all of these people without medical insurance coverage can get it, for free no less, by simply showing up at your local emergency room.  But have you ever wondered how come an aspirin costs five dollars when you have a covered medical insurance approved hospital stay?  Something doesn’t add up.

So what do we do in order to get legitimate medical insurance coverage for all of those that don’t have it?  One thing is for certain.  We shouldn’t have to ‘re-invent the wheel’.  What am I talking about?  Remember, we’re using the KISS method.

Actuarially speaking, it is a ‘no-brainer’ that can actually work.  Under the KISS method we shouldn’t have to mess around with or meddle with any individual or any company that is presently covered by medical insurance, particularly if they are content with their present situation.

So how do we do this?

1.   Extend the Medicare age downward so as to include everyone.

2.   Keep in mind that our primary objective is not to upset anyone who presently has insurance but to cover the millions who don’t have any coverage, with some kind of coverage, any coverage, or in this instance, minimum coverage.

3.   Medicare, which is already in place and as it presently exists, can serve as the minimum or universal ‘base’ coverage for the entire country.

4.   There should be some kind of entrance or eligibility period such as citizenship and/or a minimum period of employment like when you become eligible for any employer sponsored plan.  This is not discriminatory and is only fair.

5.   Does Medicare now provide sufficient coverage for everyone who is in need of coverage?

Of course not.  It is intended solely for the ‘base’ coverage, just like Social Security is a ‘base’ for retirement benefits.  Like those who add to their Social Security ‘base’ for their retirement with employer or employee sponsored benefits, so can employers or individuals add to their ‘base’ medical coverage, like they do at the present time with programs sponsored by the ‘Blues’, AARP or other insurers.

6.   Basic Medicare coverage does not include pregnancies, abortions or birth control and so it would be if Medicare is adopted as the ‘base’ coverage for the entire country, thereby doing away with the arguments of those who say they are against the ACA for religious reasons.

7.   Since actual medical procedures and their costs in particular, do vary from one State or geographical area to another, with universal Medicare coverage serving as the ‘base’, all of the supplemental plans and their respective costs can more readily be negotiated and thereby vary according to the actual State or geographical area covered.

8.   In all fairness, there should be a sliding scale for the Medicare ‘base’ coverage premiums, albeit a mild one, that takes into account the greater incidence of new or recurring medical conditions according to age.

9.   These premiums should also vary, to some extent, according to the gross income of the individual – a concept which has previously been brought up.

10.  Medicare will not go bankrupt just because it is made available to all ages.  With the exception of Pediatrician and Obstetrician coverage and those with special or extraordinary medical needs, young people generally do not want to be bothered by having to go to the doctor. Actuarially, it should work.

11.  People who are covered by an existing plan would not have to terminate their coverage or change their physician or go onto an ‘exchange’ that has yet to work.  In fact, with a Medicare ‘base’, the cost of their existing coverage would decrease.

12.  It is anticipated that the IRS would be the watch dog for the ACA.  Big mistake.  Recent events have demonstrated that they are not qualified for such a task nor do they possess the required mentality or sensitivity.  What they should do and what they are best suited for is to monitor, and prosecute to the fullest extent of the law, those who would lie, steal or cheat the system: ie; commit fraud for their own personal gain.  Present estimates put the extent of Medicare fraud from seventy five billion to two hundred and fifty billion per year.  That’s a lot of money that we, as a country, are giving away, tax free for the most part, that the IRS can sink its teeth into and maybe, just maybe, earn its keep  and more importantly, earn the confidence and respect of the public.

There it is, like “Occams Razor”, shorter and definitely more simple.

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