
Lies, Maths, And Health Insurance - winanga
http://tauntermedia.com/2009/07/28/unconscionable-math/
======
jdminhbg
The Monty Hall problem has nothing to do with his statistics, which in any
case are completely dependent on his unsupported assertions, cf.:

"If, as I suspect, rescission is targeted toward the truly bankrupting cases –
the top 1%..."

"But let’s not forget that the very nature of the forms is designed to create
inaccuracies"

Not to mention:

"I tend to think of traditional banking and traditional insurance as mirror
images: when you take out a mortgage, you get a lump sum and make a series of
payments; when you get life insurance, you make a series of payments and get a
lump sum."

Which pretty much sums up the problem with the current health care debate --
almost nobody involved knows the difference between insurance and care.
There's no reason middlish class people need to have things like physicians'
visits and normal prescription drugs filtered through an insurance company or
the government, they're completely affordable and expectable on their own. You
insure unexpected, unaffordable events, like crashing your car, not oil
changes.

~~~
kgrin
That's true, though if you're on the hook for a person's catastrophic care,
you may very well _want_ to give them economic incentives (i.e. cheap/free
doctor's checkups) to invest in preventative care.

Now, this doesn't mean that we ought to _necessarily_ have a big, bad program
(government or private) control everything.

But it does mean that the "insurance is for catastrophes, everything else
should be out-of-pocket" model isn't necessarily as simple and wonderful as it
sounds.

~~~
jdminhbg
That's true if the assumptions behind it are true -- that cheap/free doctor's
checkups result in lower catastrophic care costs. I'm not aware of any study
that shows that they are.

~~~
kgrin
I don't have the studies in front of me, but it generally depends. In the case
of diabetes, for instance, a lifetime of diet monitoring and counseling by a
doctor or nurse is still _way_ cheaper than insulin or amputation.

~~~
jdminhbg
The diabetes example is not one I had thought of, I'll look into it.

What bothers me is that I see a lot of knee-jerk "we'll just make it up on
preventative care" in the debate, without any way of proving how the costs add
up.

Without having looked into it deeper, my question about diabetes would be
whether free/cheap checkups and counseling affect the number of people who
correctly handle their problem.

~~~
kgrin
There's a pretty clear medical consensus (based on tons of data) that diet and
exercise affects the development or progression of diabetes (well, type II).
There's also a wide consensus that professional counseling and monitoring
helps (though I believe it's harder to get really "clean" studies to support
this, since you'd need a control group of people who you monitor closely
enough to get good comparison data without actually talking to them about
what's going on).

The follow-up question, of course, is whether (or how much) the _cost_ of
checkups/counseling affects whether/how much people seek it out, or whether
that behavior is more idiosyncratic (i.e. "some people just don't care about
their health, so even if checkups were free they wouldn't bother").

To be fair, I haven't seen any study that conclusively proves the issue (which
of course doesn't imply that one isn't out there). However, if we're really
going to make the claim that economic incentives don't matter, then we really
need to question a lot of other assumptions as well. I'm pretty comfortable
saying that at least on some level, to some degree, economic incentives have
_some_ impact on people's behavior in seeking care.

In terms of "we'll just make it up on preventative care", I agree, that's not
a panacea. At the same time, a lot of the money that's slated to be spent on
covering the uninsured is still spent today, just in really stupidly
inefficient ways.

For instance, because you generally can't be denied emergency room care,
people without insurance often end up using ERs as primary care. Because ERs
are primarily meant to handle, well, emergencies, the standard of care is
generally more expensive than a clinic or "regular doctor" (this means things
like faster and more expensive tests, drugs, and so forth). Many of those
people simply can't pay, but the hospital treated them anyway (which, just to
be clear, is a GOOD thing - it would be a pretty horrid society where we let
people bleed to death or what have you). Many hospitals would have a hard time
staying open if this went on indefinitely, so the government reimburses them
for this uninsured care.

So, at the end of the day "we the taxpayers" still pay for a good deal of
uninsured care... we just do it via an indirect subsidy to hospitals for
expensive ER care, rather than paying directly for (much cheaper) clinic care,
or something along those lines. As with most things, the less directly we're
tackling the problem, the more inefficiency there is in the system.

It would be foolish to claim that all the costs of a big health care/health
insurance overhaul would be paid for by money already in the system - clearly,
that depends a great deal on the details. But at the same time, it's important
to remember that _some_ of the money _can_ come from within the system: at a
minimum, if we reduce the number of uninsured people, we can reduce payments
to hospitals for uninsured care.

It's not a zero-sum game - electronic medical records and that sort of stuff
aside, there's a lot of honest-to-goodness inefficiency and perverse
incentives in the system, and that's what (a good) reform ought to tackle.

Edit: just to be clear, reimbursements for uninsured care take many forms, and
there's another, more obvious one: higher prices for everybody else. The
salient point is that much of this care is being provided _anyway_ , so why
not do it more efficiently?

------
daeken
It constantly amazes me as to how even the simplest and most shallow of
figures ("It affects less than one-half of one percent of people we cover.")
can lie in a spectacular way. I tend to think of myself as a fairly well-
educated person, but I wouldn't have looked twice at this statement unless I
was given good reason to.

How many people are being manipulated by 'simple' and seemingly pure figures
every day?

~~~
gleb
Then the article "lies" in the same way: "If the top 5% is the absolute
largest population for whom rescission would make sense, the probability of
having your policy cancelled given that you have filed a claim is fully 10%
(0.5% rescission/5.0% of the population)." Let's assume his numbers are
correct. Is 10% high or low? Who knows. What is the probability of the
applicant having lied, given that they have filed that type of claim, and what
is the probability for the rest of their customers?

The whole "evil insurance companies" thing is ridiculous. Companies are amoral
and profit seeking. Insurance companies just take groups (as regulated by
government), provide them level of coverage (as regulated by government),
figure out the actuarial risks (based on factors regulated by government),
spread those risks around members of the group (with a low-risk members
subsidizing the high risk at the level regulated by government) and sell
insurance product designed to maximize their profit within a competitive
marketplace. A similar product to what he is suggesting, that covers pre-
existing conditions already exists in CA as a shall-issue product, it's called
a small group coverage. It's also many times more expensive than individual
insurance.

Should an individual insurance product with transparent pre-existing condition
coverage exist? Absolutely. It's going to be more expensive than today's
individual coverage, and that's why an insurance company could not
successfully sell it against existing competing products in the current
individual marketplace, even if regulators allowed it to. It's up to the
government to set up or to allow insurance companies to setup such a
group/coverage/underwriting-criteria combination. It's also up to the
government to get rid of perverse tax incentives that subsidize group policies
and drive people away from individual policies. Of course, grilling insurance
company executives on TV is so much more fun than actually doing work.

~~~
thras
_The whole "evil insurance companies" thing is ridiculous. Companies are
amoral and profit seeking._

Wrong. Industries have distinct cultures, usually formed through self-
selection due to the sort of people who choose careers in them. Compare police
officers and firemen, for example. Similar sorts of work, but wildly different
cultures due to self-selection effects.

Now, what sort of culture do insurance companies have? I think that there's
good evidence that it's a sick and cancerous one.

Otherwise, good point about the necessity of government intervention in this
market.

~~~
mnemonicsloth
_Now, what sort of culture do insurance companies have? I think that there's
good evidence that it's a sick and cancerous one._

If you have evidence to support this claim, provide it. It might be
interesting.

If you don't, you're just resorting to name-calling so you can win a boring
argument about politics. We don't like that sort of thing here.

<http://ycombinator.com/newsguidelines.html>

~~~
timr
_"If you have evidence to support this claim, provide it. It might be
interesting. If you don't, you're just resorting to name-calling so you can
win a boring argument about politics. We don't like that sort of thing here."_

I think the opinion of the parent falls under the heading of "arguments that
do not require citation, because any educated citizen should be familiar with
their content". Here's what I found in _two seconds_ of Googling:

<http://articles.latimes.com/2006/sep/17/business/fi-revoke17>

[http://select.nytimes.com/2006/09/22/opinion/22krugman.html?...](http://select.nytimes.com/2006/09/22/opinion/22krugman.html?_r=1)

<http://www.sickofbluecross.com/consumer_stories/>

and here's a great podcst from last weekend on insurance companies and their
rescission practices that I just happened to hear while making dinner (third
story in; right around the 30 minute mark):

<http://thislife.org/Radio_Episode.aspx?episode=386>

...and that's just a taste of the information that's out there, available to
anyone with even a passing inclination to look for it. Maybe the decisions
documented in these articles don't constitute "evil", but I wouldn't
characterize the them as "amoral", either. At the least, there's a strong
argument to be made that the profit-seeking motive of American health
insurance companies has gotten out of balance with its duty to protect the
insured, and requires further regulation.

------
zader
The article assumes that any cancellations must be unjust, and then uses math
to show that there are more cancellations than one might suspect. But if the
cancellations aren't unjust in the first place, then the article is all smoke
and no fire.

News flash - If you include fraudulent information on your insurance
application, your insurance company may cancel your coverage when you need it
most. Of course, if you filled out your application in good faith and they try
to cancel it for frivolous reasons, you can sue them in court.

What exactly is the problem here?

Most of the urgency in his article comes from comparing fraudulent insurance
applications to game show contestants and underage gamblers. Using these kinds
of analogies obscures the more fundamental fact that insurance companies can
only legally cancel your policy when you have supplied demonstrably fraudulent
information.

That hardly seems like a scandal, or anything that warrants additional
government regulation in what is already an incredibly heavily regulated
industry.

