The Tom Price Problem
Democrats think I’m going to write about that insider trading accusation, which may or may not have legs, I just don’t know, I don’t have the inside track on that one.
No — my problem with Price, the HHS cabinet head designee by Trump — is more of a mathematical problem. I study the math behind things like insurance pools and something Price is attempting to do – in his Obamacare overhaul, pool splitting, is a huge no-no.
This sounds technical but it’s really common sense. Insurance companies like the availability and/or legality of — separate high risk pools of insured patients — because that in turn allows limitations to all the other general pools, which as an unintended consequence, incentivizes the insurance companies to glean the more costly patients out of the general pools and concentrate them in the high risk pools; where they either receive more government assistance and/or transfer responsibility to a government program completely.
This model will not work. It has been tried right here in the good ole U.S. of A. and the result was predictable. Insurance companies, like all companies, must seek to achieve higher returns via the path with the least resistance/risk and perfecting the algorithm to exclude patients is that easy route once these separate pools are allowed. The more difficult tasks of lowering costs and/or improving treatment outcomes is simply left undone. This is true in all businesses, if you incentivize the owners improperly with a poor business model, you get inefficiencies galore.
If Price wants efficiency, this is not a step in the right direction, more of a lateral sidestep from a system with no cost control, to one that will have almost as little, but wrapped differently.
I understand the political appeal of the Price plan, if this passes, 60% of American workers getting private insurance through their employers will see their premiums immediately go down and their options increase.
And I believe Price beleives the high risk pools collecting the limited-out patients (and other uninsured) WILL cover them adequately.
But I do NOT believe, after putting the total costs of those general pools back together with the high risk pools, that this split pool structure will save any money — it will definitely cost more — and depending upon the final nature of the structure, it will probably be a lot more.
If Price thinks this will work, he’s dead wrong.
I’m not a fan of Obamacare, I predicted it would fail from the start, mainly for the same mathematical reasons, the pool structure was absurd, it also defied the rules of probable behavior — and it therefore did what it HAD TO DO, collapse.
The Price model will not work at lowering health care costs overall, nor will it expand coverage, but it will concentrate the high cost patients out of the general pools into the high risk pools and this will feel good to many American families whose premiums will reflect the leverage change.