On the edge of a new age of healthcare financing
by Ian Duncan, University of California – Santa Barbara
When I entered health actuarial work 31 years ago, the absolute cost of health benefits was much lower (although as a percentage of average nominal income the difference is less than is sometimes recognized). Plans reimbursed allowable expenses for eligible members without much interference. Insurers employed claims payers and actuaries; medical directors were involved in underwriting, if at all.
All that has changed with managed care. The managed care revolution was successful in its early days (zero and even negative trends for HMOs in the mid-1990s) but consumers revolted against the limited choice and trend began its rise. At the same time there was an explosion of new, life-extending devices and drugs which added to cost. I think we have learned a few things along the way, including the fact that providing consumers with insurance increases consumption (hardly surprising but overlooked in the scramble for reform). We stand on the edge of a new age of healthcare financing, in which the old insurance model is effectively outlawed (no longer can we underwrite, exclude pre-existing conditions or charge a rate appropriate for the risk). I don’t believe that this model will be any more successful than prior models at containing costs, and will lead inexorably to a complete government run system. The latest Kaiser Family Foundation poll finds that 41% of Americans favor repeal of the ACA; the latest Rasmussen poll finds the split of likely voters between those who favor and those opposed to repeal at 54%-39%. So it appears as though, despite rising costs, the American people reject the ACA as a solution. What do you think?