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How Big Data Is Destroying the US Healthcare System
KindMind writes "Robert Cringely writes on the idea that technological advances have changed the health care system, and not for the better. The idea is that companies now rate individuals instead of groups, and so move to a mode of simply avoiding policies that might lose money, instead of the traditional way that insurance costs were spread over a group. From the article: 'Then in the 1990s something happened: the cost of computing came down to the point where it was cost-effective to calculate likely health outcomes on an individual basis. This moved the health insurance business from being based on setting rates to denying coverage. In the U.S. the health insurance business model switched from covering as many people as possible to covering as few people as possible — selling insurance only to healthy people who didn't much need the healthcare system.'"
That will require a government solution. Either laws preventing health insurance companies from turning down coverage on individuals in that manner, or an actual heath care system for all and an end to regular private insurance.
Or we can go full capitalist and just get rid of health insurance, then the cost of heathcare will have no choice but come down because almost no one will be able to afford the service (causing the providers to go out of business).
It's to their credit that we as a culture see them as the gateway to health care, and they have done many, many things to insure that people don't interact directly with providers, but in the end, they are middlemen. Nothing more. They do not provide care. Doctors, nurses, clinics and hospitals do. And, given the current state of things, they have done nothing to control costs.
Big Data isn't destroying the US health system. It's the lack of coverage, for-profit insurance protecting their margins by charging everyone more and more to do less and less, to deny payment (and therefore care) so that people get so sick that they lose their jobs and their coverage, passing on the burden to providers and taxpayers that, by law, can not deny essential care. It's a system that only pays up when absolutely necessary, that does not to help people stay off of the doctor's office.
It's a culture that insists that chronic illness or disability is a moral failing and that it is the fault of the person for merely being ill. It's the insistence that health is a privilege, not a right. It's not some computing trend that insurance companies are using to discriminate. Insurance companies have been doing that forever.
This is not destroying the healthcare system - it is (potentially) destroying the health insurance industry. The two are different things.
The auto insurance industry has had very fine grained data on drivers and their habits for many, many years. That hasn't affected the auto industry at all, and it doesn't seem to have materially affected the auto insurance industry either.
A business that makes money by turning customers away does not lend itself to "free market solutions".
So Obamacare prevents companies from refusing coverage or dropping it when the customer gets sick.
The ability to deny coverage to higher risk individuals has been eliminated with Obamacare, and that's a good thing. If you are filthy rich you cover yourself. If you are poor you are covered by the government. If you were middle class and had some health condition you were screwed if you didn't have employer-based insurance. It didn't take much to be denied - things like macular degeneration or asthma or hyperthyroidism would deny you. One big sickness away from bankruptcy. In the richest country in the world.
Mods, I think this is a parody.
I read TFA and all I got was this lousy cookie
We'd better get used to things being more "personalized," this is what we're moving to.
Various economic (and business) theorists have pointed out that this is part of a general pattern that's well understood: Insurance is based on spreading the cost of unpredictable events over a population, so that the victims of such events aren't bankrupt/homeless/dead/whatever if a disaster hits them. Insurance is basically a gambling game. If an event becomes predictable, insurance no longer works, since only those susceptible to a disaster will want insurance, but the insurance companies will refuse to sell policies to exactly those people.
A classical textbook example is flood insurance. There are many cases where the probability of a disastrous flood event has become predictable. The people and companies in the high-risk area want insurance, but the price is so high that a policy will bankrupt them. Such "insurance" can then only be provided by the government, but in reality, it's more in the nature of planned disaster prevention/recovery than insurance.
Various other theorists studying the medical field have been predicting that this will rapidly happen in medicine, too. Medical insurance made sense when most diseases were poorly understood, and it was impossible to predict with any accuracy who might be susceptible to which medial problems.
But we are getting more knowledgeable about such things. Medical problems are becoming much more predictable in general, and many major medical tests have much better accuracy than a few decades ago. Again, the inevitable result is that insurance companies will get access to the information, and will refuse to sell coverage (or will price it at bankruptcy levels) to people whose tests predict imminent medical problems. Eventually, this will mean all of us. This is how insurance has always worked, and medical insurance is not significantly different.
(Well, except for the fact that we know the exact probability that each of us will eventually have a major medical problem: 100% ;-)
Insurance isn't medical care. it's what insurance always is: a way of spreading the cost around in an unpredictable world. It only helps if the problems are unpredictable, but don't hit everyone. Medical problems are becoming more predictable, so medical insurance is slowly becoming irrelevant and unworkable.
In summary: The real problem here is using "insurance" to pay for health care. We don't need insurance; we need health care. As medical knowledge improves, the insurers will do what they always do: They'll collect premiums until just before you are likely to need something expensive, and then they'll refuse to renew your coverage. That's how their business works, when knowledge becomes available and the results of a gamble can be predicted. The "Free Market" system rewards companies that get good at this, and those that aren't as good go out of business.
Those who do study history are doomed to stand helplessly by while everyone else repeats it.
Think about it from the point of view from the insurance* provider...
If one provider takes on coverage for "suspected losing cases", then they will go out of business, especially if their competitor is always only taking "profitable cases".
Really, doesn't it all boil down to charity and one's lot in life? As a society, it would be nice to provide the basics, such as trauma care, like a few sutures to stop some bleeding, fixing broken bones, toss in some antibiotics, etc. because that is cheap.
However, everybody dies sooner or later. rich or poor.
Basic needs are one thing, but then there are "wants"... if you want to live? too bad, everyone dies. You want transportation? Society says the public bus is good enough. Want a chauffeur driven Mercedes? Earn it. Need an antibiotic? Society says, yeah, hear ya go. Want to extend your life with an expensive procedure? Earn it.
* don't confuse healthcare with insurance.
The fact that a majority of Americans get no-questions-asked health insurance through their employers is exactly the problem and why we can't implement a sane system like the rest of the civilized world. Too many people think it's just fine the way it is.
And it is "just fine", until you decide you want to become self-employed and start your own business. Then all of a sudden, oops, you have a pre-existing condition? Sorry, no insurance for you. Or maybe you get laid off from work and can't find another job for a long time (hello, recession!). Sorry, no insurance for you. Or you're young and the only thing you qualify for is an entry-level job that doesn't offer health insurance as an employee benefit. Sorry, no insurance for you.
People who've worked stereotypical job-with-healthcare-benefits all their life can't fathom what it's like to not be in that position. And most importantly, they don't have a good understanding of how easily they could lose their nice job, along with their health insurance, in an instant and through no fault of their own.
The only reasonable health insurance system is to put absolutely everyone in in the same risk pool from birth until death. Anything else ends in having to tell some people, "Well, better hope you die quickly."
Any successful business man will tell you that there is such a thing as a customer you don't want. Ones that tie up your employees and resources are bad. It's only when you're selling commodities with a fixed price and a high turnover rate (Milk, eggs, oil, beer) that you can take all comers.
At the risk of being modded troll, let me say that that's the trouble with Capitalism. The real world doesn't fit into it's principles and ideas. Health care is too complex and purchased too rarely to make Capitalism a good fit for acquiring it. The classic example is that it's tough to comparison shop on a heart transplant....
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big government playbook step 1. Try to make the story about the messenger instead of the [insert craptastic story here]
No, looking at it from the outside [I'm not in/from the US, and rarely visit], the Republican's seems entirely against it because Obama is for it. They can only win if Obama and the Democrats lose. How it affects the American public is a distant second.
For example, way back, the Democrats tried to start healthcare reform with "Lets start with the proposal John McCain publicly came forward with during his run for the Presidency." Republicans response "No".
They are unable in any way, shape or form of publicly saying ANY aspect of the ACA is good, simply because it was put forward by a Democrat.
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Yep, that's why we should have a single payer system of health care coverage. The hell with the insurance company middle men.
Radical libertarian playbook step 1: Try to make the story about the government.
I know it's parody, but there is a really good point in it:
Yes, in a free market, companies are free to do what they want. (policy and contract wise)
But... if they do what they want, who is doing what should be done? Namely providing health insurance to the ones who need it (which may be anyone here at some point)
And that's the point where the state had to step in, because the insurance companies didn't do what they were supposed to do.
bickerdyke
This is the difference between Insurance and Insurance Companies.
Insurance is a bet between the insurer and the insured that the insured will not need to cash in. By setting appropriate odds, the insured pays less for benefits than if he/she covered them directly and the insurer makes a profit.
This scheme can be extended in 2 ways. First, the insurer can take some of the premiums and invest them, insuring more profit, since the invested money helps reduce the amount of reserve cash that has to be held in order to meet obligations.
The second way to extend this is to broaden the pool. Take lots of people. It's possible to compute over a statistical population how many people will cash in and set rates, reserves, and investments accordingly. This is what actuaries are for. You also deepen this pool by extending it through time, since the claims rates for many insurable conditions vary with age.
That was the original idea. Insurance companies were early and enthusiastic adopters of computer technology since computers helped with the bookkeeping of the large pools of insured people as well as being able to assist with actuarial computations.
More recently, however, 2 things have distorted that plan. One the one hand, advances in technology have skewed the original actuarial computations. Car crashes are more survivable, cancer isn't a guaranteed death sentence, and so forth. You have people paying in longer, but the expense of the payouts has also risen, and the likelihood that multiple payout events later in an otherwise curtailed life will occur likewise.
The other distortion has been that really cheap computing has led to the development of sophisticated data mining. This, in turn has led to the processes of "cherry picking" (favoring those who will pay in but not make a claim) and "lemon dropping" (dropping the policies of people most likely to prove unprofitable). All of which makes the process more efficient.
The problem is, this efficiency is gained at the expense of one of the primary benefits originally accorded to organized insurance. The pools become shallower and narrower. The insurance companies get more profit, but the outliers in the insured base pay for it. The more likely you are to truly need insurance, the less likely you'll get it. If not from outright denial, simply because in order to support these extra profits, you'll pay a higher premium rate. If you can afford it at all.
"Inelastic demand."
A "free market" (supposedly) works by normalizing prices to the point where profit is maximized and no higher.
In the case of "healthcare," the good for sale is "not dying", so a moment's consideration should be all it takes to realize why it is entirely a sellers' market.