We’ve been bombarded by news lately, proclaiming that The
Affordable Health Care Act can only be successful if vast numbers of young
adults join the plans. And news that
many, if not most, young adults have little or no interest in participating has
also made headlines. Further, there are reports that a substantial numbers of young
adults don’t even know about it. But,
who has evaluated the underlying claim cost data? How does one know it is correct?
I, for one, have very serious doubts that young adults are
significantly cheaper to insure.
Here’s why.
1.
As a CFO, I’ve been involved in purchasing
employee health plans, and negotiating the terms and features of those
plans. I frequently asked to see the
data supporting the assertion that health costs were concentrated in the older age
cohort but never did. Insurance
companies and third-party administrators acted like there was rock-solid
support for the claim that younger people have lower medical costs, but never
produced supporting data.
2.
The assertion that fifty percent of total
lifetime medical costs happens in the last year of life is irrelevant. While this widely-circulated claim may indeed
be true, with the average life expectancy of women in the U.S. of 80.8 years
and men of 75.9, that last year of life is very likely to occur long after one
has left the labor force. (Note that
life expectancy is increasing as well).
3.
While older adults in the workforce may indeed have
more chronic ailments than younger, the cost of treatment of many of those ailments
is falling. Using heart disease as an
example, with the development of statin drugs, continually lower-cost methods
of bypass surgery, and the use of stents to improve blood flow, the cost of
treatment of heart disease has declined.
With an increasing number of excellent generic drugs for cholesterol lowering, blood pressure management, etc. the
costs of managing chronic disease is dropping as is the possibility for costly
heart attacks. Even HIV/AIDS, which once
threatened the financial viability of numerous plans, is now largely relegated
to a manageable chronic disease.
4.
Employer health care budgets are rarely busted
by chronic disease management. So-called
“shock claims” which spiral into six and sometimes seven figures, are more
associated with:
a.
Car accidents, particularly with multiple
occupants. One of the most expensive
health care claims I ever saw concerned a family of four involved in a horrific
accident. All required multiple surgeries, extensive time in ICU and long
physical therapy treatment after. The
total cost was well over a million dollars.
The source of that claim was a young family with young children.
b.
Motorcycle wrecks that result in expensive
treatment. While there are certainly
older folks riding bikes these days, they tend to meet at point A for
breakfast, ride as a group to point B for lunch, and return. Younger riders are more likely to be risk
takers. In wrecks between cars or trucks
and a motorcycle, the car usually wins.
c.
The delivery of premature babies. The second largest claim I’m personally
familiar with involved premature twins. The babies were in intensive care and
given special care around the clock for weeks.
Again, having babies is not the turf of fifty year olds.
d.
Finally, I’ll admit that one category of
expensive treatment usually concerns cancer, and that usually occurs with
middle aged or older adults – but certainly isn’t exclusively so. We all know of heartbreaking cases of
children afflicted with this scourge.
Pediatric cancer is both incredibly sad and expensive.
It may be that there is excellent data that indicates that
the cost of many older employees with chronic ailments overwhelms the costs of
a few young employees with more severe medical issues. But I’d like to see the data before I was
confident in the current conclusion.
Assume for a moment that I’m right and adding younger
workers into newly minted exchange plans doesn’t create as much financial
subsidy from young to old as anticipated.
What effect does that have on the economics of the Affordable Health Care
Act?
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