Thursday, January 27, 2011

The MSL & Medicare

People are discussing entitlements. So, I thought I'd chime in on the Medical Savings and Loan and Entitlements.

Employer based insurance is dependent on Medicare.

Employer based insurance attempts to fund health care in a pay-as-you go manner. An actuary will calculate the expected medical costs for a group for a year. The actuary adds a hefty profit then charges a premium to employers based on this calculation.

The idea is that people will pay for their health care from their income.

Employer based insurance has the obviously flaw that, when people stop having income, they have no way to pay the pay as you go premium.

Employer based insurance is 100% dependent on there being a big government entitlement to catch people at retirement. If not for the entitlement, workers would notice that their health plan leaves them destitute and rise up against both their employer and insurer.

Historically, health insurance developed in conjunction with entitlements because health insurance is dependent on government entitlements.

Pay as you go insurance was developed by progressive businessmen in concert with progressive politicians. People never would have accepted insurance if not for the entitlements.

The converse is not true. Medicare is not dependent on insurance. The government can easily flank and roll up an insurance system without making that big of an impact on the lives of the people.

People's lives might actually improve because they would feel less obliged to a given employer ... feeling obliged to the state.

Socialist progressives have always seen insurance as a step in the progression from a free society to a socialist.

Conservatives are idiots for thinking insurance is a market oriented approach to health care. Insurance is an anti-market creation of the progressives. Insurance is dependent on big government. Without Medicare and government entitlements, pay-go insurance would implode because workers stop having income when they retire.

While insurance is dependent on entitlements, the Medical Savings and Loan is neutral on the issue. The goal of the Medical Savings and Loan is to help individuals self-fund their health care. The existence of entitlements reduces the amount of money that people need to save for health care.

In a world where medicare exists, members of the medical savings and loan would not need to save as much as one where it did not exist.

In a case where medicare becomes financially insolvent, the medical savings and loan provides a structured mechanism for gradually switching from a pay go back to a savings funded insurance system.

The mathematics of this is really interesting. The MS&L treats Medicare as a supplement to health care. The system I created has signalling mechanisms. If Medicare is insolvent, the MS&L would trigger signals that would tell people that they needed to save more for retirement.

The signalling mechanisms of the MS&L is a different post.

This post is about insurance. I've mentioned in previous posts that insurance is dependent on government regulation to present health care as a regular product for actuarial calculations. With insurance, every medical expense is a legal claim against a pool of money.

Health insurance is totally dependent on the government. If a product is totally dependent on the government, is it a free market solution?

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