Thinking About Health Insurance

Last week, the news that only 4,000 Vermonters signed up for Catamount Health made a big splash.  After all, you'd think that people would jump at the opportunity to sign up for low cost health insurance.  Maybe not. 

The state had estimated that 6,000 of the approximately 60,000 uninsured Vermonters would sign up for the state-subsidized part of Catamount Health.  Those numbers themselves are worth looking at.  First, 10% of Vermonters are uninsured.  And the estimate was that 10% of those would  have signed up for the subsidized Catamount Health by now, which is only 1% of the total number of Vermonters.  The take-up rate for the unsubsidized version was even lower.

Why were there so many fewer people signing up than expected?   It turns out the state's estimate were -- let  Susan Besio, the Douglas administration's top person on this, explain:

These are estimates based on estimates.

Translation:  We just guessed.  I don't recall any discussion of the margin of error around those "estimates" being discussed in the media when Catamount Health was being debated.  Maybe the relevant House and Senate committees were told that the administration really had no idea how many people would sign up.  Maybe legislators just voted for the program because it was the "right thing to do."    Basing policy, or voting, on statistics is just so inconvenient.

Why didn't more people sign up?  As VPR's account noted:

About 60,000 people in Vermont lack health insurance. A large number, about 25 percent, are young people.

That would be about 15,000 young people, who are generally healthy.  Which means they don't consume much health care resources.  Which means it's cheap to insure them.   But the state's health insurance rates are not allowed to reflect that fundamental fact.  Instead, we take young, healthy people, who generally have low incomes because they are just starting out their careers, or taking low paid jobs in order to have fun or "find themselves,"  and we force them to pay high health insurance rates which subsidize older, less healthy, middle-age people who are much richer than twenty-somethings. 

Here are some of those darn, pesky statistics:  Nationally, the median income of households headed by someone 15-24 years old is $31,000.  For 25-34 year-olds it's $49,000; 35-44 year olds $60,000.  And 45-54 year-olds, $65,000--more than twice that of twenty-somethings.  In Vermont all of these groups pay the same insurance rates but their use of health care resources differ widely.  For example, aging Vermont baby boomers occupy twice as many hospital beds as twenty-somethings.

If we think of insurance as buying a product that gives us the peace of mind that if there is a catastrophic event, we won't have huge bills, then that product should be priced according to risk.  It's not, in Vermont at least.  What most of us want is not insurance, but insulation from the cost of purchasing any medical care.  As a result, costs escalate since someone else is paying and we (individually) don't bear the cost of that medical service.  Here's a good example of what this means.  Until we confront issues like that, we won't get a handle on ever-rising medical costs, whether they are paid for by private health insurance or by the state.

Comments

[Glenn Eno]

Again, our representatives were in the back room, slapping each other on the back. Another outstanding bipartisan solution to the problems of our times. Someday maybe people will wake up and realize that a bipartisan solution means that everyone gets screwed. Government healthcare, government education, government energy control. The "failed policies of the past" are the continued Robin Hood attempts at monetary control. I fear there are people who actually believe that because we are America we can succeed where other governments failed in socialism. They are already thinking of a slogan borrowed from Kentucky Fried Chicken:
"We do Socialism right"!!