Wednesday, February 29, 2012

A Study In Overreaction

And for today’s lesson in overreaction, we turn to the provision in the “Health Care Reform” bill that passed in 2010 regarding “high risk insurance pools” for people who had been turned down for insurance by the health insurance companies. The projected cost per person for this provision was $13,026, and the current projected cost for 2012 is $28,994 per person.

Certainly this is not terribly good news but it doesn’t, I think, call for the total meltdown engaged in by one financial piece that I had the opportunity to peruse.

Here's the truth folks -- if one percent of the population is "high risk", that's 3 million people. If the cost per person is $30,000 a year then we're talking about $90 billion a year. And that's if it's just one percent of the population.

Remember, the original design was for people who (1) were employed, (2) therefore could pay, but (3) had been turned down. When you look at the total panoply of uninsured, about 16% of the population, the odds are that we have at least one percent of the people in this category.

Simply put this is one trillion dollars over ten years, basically. Which we do not have.
Which we cannot raise. Which, incidentally, is almost one quarter of all Medicaid spending in 2010. That's right -- a 25% increase for 1% of the population.

That’s a longer quote than I usually engage in, but since I’m not going to embarrass the writer by linking to the piece, I wanted to bring all of it to you. I think he went a little off the rails there.

He’s talking about “one trillion dollars over ten years,” which is a masterpiece of irrelevancy, since the “high risk pool” provision expires in 2014 and the program only has this year and next year to run. So even if it was $90 billion per year, he’s off by almost an order of magnitude.

But even his “1% of the population” is massive overreaction, because spelled out right there in the article to which he is reacting is the very clear statement that only $600 million was spent in the last 18 months, so getting from $400 million per year to $90 billion per year requires a somewhat staggering leap of imagination.

His train of thought starts with an “if,” followed by an “odds are” and a ten year figure for a two year program, leading to a 25% spending increase for a presumptive 1% of the population. And I thought the sleeping pill study algorithm was flawed.

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