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» Hatrack River Forum » Active Forums » Books, Films, Food and Culture » Examining the Insurance Model for Health Care

   
Author Topic: Examining the Insurance Model for Health Care
Alcon
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So the more I read about Health Care, the more I get the feeling that the Insurance Model for health care simply cannot work.

The reason is that health care is so expensive in general and specifically health care for certain disastrous, but highly likely diseases - such as cancer.

I've been trying to do some research in order illuminate the point, and convince myself one way or the other once and for all - however - trying to find numbers on the average cost of cancer treatment - or health care in general - seems to be near impossible.

I did, however, find numbers of the probability of getting cancer. According to Cancer.org the average probability of getting cancer some time in your lifetime is around 40%. One in two to one in three people will get cancer in their lifetimes. And as we live longer this will only increase. The specific article I found that number in is here.

So roughly 1/3 to 1/2 of us will get cancer at some point in our lives.

I've found numbers on the average cost of Cancer treatment to range from $5000 (per month? Per year? It doesn't say...) to a million or more for the whole course of treatment.

The most reasonable ones I've found suggest that the average cost for a whole course of cancer treatment is somewhere between $40,000 and $60,000. For example here's a study that found the average cost of Bladder Cancer care to be $65,000.

The analysis I wish to perform is exactly how high premiums need to be in order for an insurance company to recoup its losses and still do its duty in cover your eventual cancer.

For example lets take the average of those two more reasonable numbers: $50,000 for treatment of cancer. And lets assume this cancer occurs near the end of your working life. After you've been working - and paying insurance premiums for 40 years.

Assuming one premium a month: 12 months x 40 years = 480 payments.

$50,000/480 payments = 100$ a month

That's reasonable... Now if we take the high end of those numbers - the million - lets see what that does.

$1,000,000/480 payments = $2083 /month

The only people who are likely to be able to afford that for forty years are trust fund babies. Personally, right now I have a decent job for just out of college and that would be over half my income.

Of course this is extraordinarily simplified. And I have no idea how common that million cost is. Or whether that $50,000 is, in fact, anywhere near to the real average cost of care.

I want to try and get an idea of exactly what it costs to provide what I would consider good health insurance (IE, actually covering you when you get sick) and see if it's actually possible for the insurance companies to do it while making a profit and charging reasonable premiums.

Of course - to do that analysis I would need accurate numbers.

So, oh intelligent and google-masters of Hatrack, want to help me try and do this research and analysis? This is solely for our own education on the issue - to determine whether an Insurance based Health Care System is, in fact, viable or whether we would need to find another way.

I know there are tons of issues at play here. Including the fact that different market circumstances or payment model for doctors might bring down the cost of care. But lets just take the current cost of care and see if it's actually possible for the insurance companies to provide the coverage we'd like. Can you help me find the numbers for Cancer? And maybe take a look at other common and costly diseases? Their incidence in the population, the cost of their coverage. Maybe we can get some rough idea of what numbers the insurance companies see. And then we can understand whether reforming the system is truly a matter of just not letting them drop people when they get sick and not letting them exclude people for preexisting conditions - or - if problem is that the whole system fundamentally cannot work as it currently stands. I'll keep looking, what can you guys find?

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King of Men
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You're making a big mistake right away, in forgetting that the people who don't get cancer will pay premiums too. That's a nice factor 2.5 right there.
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Alcon
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I did say that I was extremely simplifying the issue. I just want to see if it's possible to nullify the cost of a single person getting sick. Granted, the whole point of insurance is to pull risk - but I'm willing to bet that the risk of getting sick over a lifetime is practically 1 - it's just which sickness and how expensive. So it becomes more a race for the insurance company to have enough cash on hand to pay for the currently sick people or else figure out how to not pay for them.

I mean 40% of the country is likely to get cancer in their life time the treatment of which is extremely costly. What about other diseases? What does the picture look like when we add them all up? Is there even a pool which can truly buffer the cost?

I know this analysis is extraordinarily simplified. But I just want to see what results from it.

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rivka
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That 40% includes all forms of skin cancer, some of which are cheaply and easily treatable, if caught early.
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Mucus
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Hmmm, you're also missing the calculation for insurance float.

Insurance companies don't just take premiums and sit down on them until you need them, they invest them until claims are paid out. That difference is very substantial and has a large impact when it comes to the profitability of how much to charge for premiums.

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Alcon
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Hmm... Now there's a factor I hadn't even thought about when thinking about what things I was simplifying away.

Hmm... okay, so maybe my approach is over simplified and fundamentally flawed... not to mention the data to perform this examination doesn't really seem accessible to the general public. Is there a way we can look at this to essentially answer the same question?

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King of Men
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I think you're talking about a peer-reviewed econ paper here, not a forum project.
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fugu13
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What data would you like?
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SenojRetep
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Here's a study on lifetime healthcare costs from circa 2000. The primary finding is that total healthcare, including treatments, doctors, drugs, dental, etc., is about $316,000 (year 2000 dollars). Using your 40 years (480 months) of constant cost, this approximates to about $660/month for break even. Which is on the order of what most people pay for health insurance, I believe, give or take their demographic (i.e. younger, healthier probably pay less; older, sicker probably pay more).
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capaxinfiniti
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i think that trying to over simplify the health care debate wont help us come to any significant conclusions or solutions. its a very complex issue and should be treated as such. cancer is only a fraction of the health care coverage a person will need in their life time. but it is an important issue to address.
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