Actuarial Health Care Reform Puzzle

From a European perspective it's hard to understand why the US Health Care Reform creates such a fuzz.

Behind Health Care Reform
At first sight one might think American values were somehow at stake, as UCLA's Dr. Marc Nuwer, a leading expert on national health care reform, stated back in 2008:

• "To heal our ailing health care system, we need to stop thinking like Americans."
  
  
• "Americans prize individual choice and resist limiting care"
  

As one-sixth of Americans are uninsured and especially elderly people are in need of good (insured) health care, one would expect this group to support this new health reform. Think again, the majority of elderly people voted against a guarantee of health insurance for all Americans:


Not a surprise for actuaries of course, because we were already aware of the interesting age-distribution of the uninsured.



Recently, Tyler Cowen, a economics professor at George Mason University additionally stated : Further health care reform doesn’t now seem to promise much to old people, except spending cuts on them. Given their limited time horizons, old people don’t so much value systemwide improvements, which invariably take some while to pay off.

For those of you who are interested in the background and consequences of pay offs regarding limited time horizons, (generation) discount rates and 'Gamma Discounting', the article Caring about the Distant Future: Why It Matters and What It Means from professor Tyler Cowen is a joy to read.

Certainly a 'must read' for actuaries.

Future Health Care Reform

Anyhow, the House of Representatives passed the sweeping health care bill recently.

Puzzle is that this bill has nowhere to go in the Senate, as the stumbling block is that government will have to compete with the private insurers.

The solution to this problem is as simple as can be:

Implement the headlines of the Dutch Health Care Model

Key elements of the new (2006) Dutch Health Insurance Act are:

• All adults are obliged to buy health insurance and can choose any insurer
• Children (under 18 years) are insured for free
• Low income groups receive financial compensation by tax reduction
• All insurers must offer a (governm. def.) policy to anyone who applies
• Basic benefit package is almost comprehensive
• Insurers get compensation for taking on higher risk patients from the risk equalization fund
• Insurers can offer complementary health insurance packages under free market conditions
• Consumers have the right to change insurer at the end of every calendar year if not satisfied or if they change employer
• Insurers have the role of prudent purchasers of health care
  (value for money)
• Providers are encouraged by insurers to deliver high quality care at low costs

In a 2009 Irish (Dublin) Health Actuary Seminar called 'More for less', the Dutch health actuary Enne Osinga explains more of the consequences of this new (2006) Dutch Health Care Model in a presentation called: The Dutch Experience .

I trust the US succeeds in making this important turn around!

Sources:
- Tyler Cowen: Caring about the Distant Future: Why It Matters..
- Economics
- Yahoo
- CNN
- UCLA
- Health Coverage & Uninsured (2009, 2007)
- RIVM Article:Regulated competition behind the dykes?
- Enne Osinga: The Dutch Experience

Health Leadership 2009

The Netherlands win the 2009 Euro Health Consumer Index (EHCI), for the second year in a row.

Nevertheless, Denmark keeps its runner-up position from last year. Besides The Netherlands and Denmark there are other strong performers like Iceland, Austria and Switzerland, leaving the UK in a disappointing 14th position....

Index performance criteria
The EHCI 2009 groups 38 indicators of quality into six categories: Patient rights and information, e-Health, Waiting time for treatment, Outcomes, Range and reach of services provided and Pharmaceuticals.
Each sub-discipline is weighted for importance to provide the overall Index score.

HCP research director, Dr. Arne Bjornberg, states: The Dutch might have found a successful approach that combines competition for funding and provision within a regulated framework.

Effective Health (Actuarial) Principles
In actuarial context, the success of the Dutch health system is based on a few very simple principles:

• Risk Solidarity
• Risk Equalization
• No Risk Selection
• Free choice of Care Providers & Health Insurer
• Transparent ranking of Care Providers on bases of cost & quality
• Worldwide cover

The Dutch Health Care System
An excellent summary of the Dutch Health Care System can be viewed on YouTube:

Health care In the Netherlands


Of course the Dutch system is no panacea, there are also many challenges and disadvantages.

Just to mention some....

• How to control Hospital costs?
• (The Future of Hospitals in the Netherlands in 2015)
• The increasing and partly unpredictable run-off period of hospital and specialist care claims costs (DBCs)
• How to create a 'healthy' and financial balance between basic and additional (private) health insurance
• How to control the spiraling and increasing health costs of longevity and how to (ethically) control the costs in the last years of our life?

Nevertheless, the Dutch system can be an inspiring example for countries like the US and the UK.


Let's conclude with an interesting development. In an 2009 article called A Strategy for Health Care Reform, Michael E. Porter presents the principles for a new health system, based on the idea that the central focus must be on increasing value for patients.

Related downloads/sources:

• Download the Euro Health Consumer Index 2009 report
• Download the Index Matrix
• Cartoons: Seppo.net
  

European Actuarial Academy

The European Actuarial Academy (EAA) was founded on 29 August,2005, by the Actuarial Associations of Germany, Switzerland, Austria and the Netherlands.

These four associations are also the EAA stakeholders. Its foundation was a response to the increased demand from Central and Eastern European countries for Actuary professionalisation.

EAA strives to become the knowledge centre of European Actuary education.

EAA has on offer:

• Actuarial education, including examination
• Permanent education for (certified) actuaries
• Consulting on Actuarial education.

From October 1st to 3rd 2008, there's an EAA Seminar, ‘Pricing in General Insurance’ in St. Petersburg/Russia.

Read more about EAA.

Ageing and the Sustainability of Dutch Public Finances

In a 2006 (but still actual) research called, "Ageing and the Sustainability of Dutch Public Finances", it's stated that the ageing of the population jeopardises the sustainability of public finances in the Netherlands.

The doubling of the ratio between the number of retirees and the number of workers destroys the balance between future public expenditure and tax revenues. Indeed, the increase in expenditure on public pensions and health and long-term care will outweigh the increase in tax revenues.




Budgetary reforms are therefore necessary in order to avoid that future generations will have to raise taxes or economize on public expenditure.

Reforms in the field of social security of the last few years are a step in the right direction, but are insufficient. In particular, the decline of interest rates and the reduced wealth of pension funds have worsened the sustainability of public finances. The effects of reforms on the intergenerational balance are important for the question which further reforms are most attractive.

Longevity risk solved

Holiday news today...

An unknown Dutch actuary (don't quote me !) claims to have found the definitive solution for what's called 'longevity risk'.

Instead of a traditional non-comprehensive actuarial equation, the proof is one of those rare, and sometimes dangerous or wrong, visual proofs in (actuarial) mathematics.



Anyway, have a nice holiday!