The bipartisan solution to Obamacare

There are plenty of problems, so where & what are the solutions?

A recent OpEd on describes some of the problems with the Affordable Care Act (ACA)…

The problem

To summarize…

  1. Sampling error:
    With healthy people holding-out, the skew toward unhealthy starts a deathspiral for ACA exchanges, wherein an unhealthy pool of policyholders increases claims payouts > increases the cost of coverage > encourages relatively healthier policyholders to drop coverage > decreases the healthiness of the pool > repeat.
  2. Fail:
    With rising losses for private sector carriers and rising subsidies for the government, Obamacare’s days are numbered.

The solution

In the current regime, that alchemy is government subsidies, which were scheduled to slowly scale-down — although it appears they might need to actually scale-up due to the aforementioned deathspiral.

I know what you’re thinking

Haunted by the cautionary tale of synthetic CDOs and the housing crisis, opponents to this solution will balk at the financialization of healthcare. But, the insurance industry is already stuffed with financial assets—from OTC derivatives to bespoke reinsurance contracts. Standardizing these assets and clearing them through exchanges will shore-up the system. I could do a whole other column on this.

“Perfection is achieved not when there is nothing more to add, but when there is nothing left to take away...” 👉

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