Insurance examines the experience of a group over a year. The Medical Savings and Loan analyzes the health and income experience of an individual over a life time.
Insurance might look at a group of 100,000 people and calculate the number of births, deaths, injuries and diseases for a year. An actuary calculates the expected costs of the risk. A speculator will then promise to cover the risk for a premium that is ten percent or so higher than the expected risk.
The Medical Savings and Loan looks at each person as a whole entity, kids are assumed to be part of the experience of parents until they come of legal age.
The model looks at each person's lifetime earnings and compares it to lifetime expenses. Imagine a program that creates a medical expense table for each person. It has the column age, earnings and expenses for every year from coming of age to retirement (or beyond).
When making the graph, one must include the premium employers pay for insurance. The graph below shows the income and health experience of a fictitious person. The columns are Income, Insurance, and Health Expenses
I made up data for a person who graduates and works though a series of jobs with a few good income years and employment gaps. He has two and a half kids along with a few health incidences. He retires at 65, then has a heart attack and dies at age 68.
A Sample Lifetime Health Experience | ||||
|---|---|---|---|---|
| Age | Income | Insurance | Medical Expenses | |
| 18 | $5,000.00 | $200.00 | ||
| 19 | $12,345.00 | $50.00 | ||
| 20 | $8,000.00 | $75.00 | ||
| 21 | $7,000.00 | $1,000.00 | ||
| 22 | $3,000.00 | $0.00 | ||
| 23 | $6,666.00 | $300.00 | ||
| 24 | $14,000.00 | $500.00 | $650.00 | |
| 25 | $7,000.00 | $500.00 | $150.00 | |
| 26 | $33,333.00 | $3,000.00 | $90.00 | |
| 27 | $40,044.00 | $3,000.00 | $7,567.00 | |
| 28 | $42,000.00 | $4,000.00 | $4,438.00 | |
| 29 | $43,000.00 | $5,000.00 | $2,377.00 | |
| 30 | $44,444.00 | $5,000.00 | $5,555.00 | |
| 31 | $45,000.00 | $5,000.00 | $1,234.00 | |
| 32 | $46,000.00 | $5,000.00 | $800.00 | |
| 33 | $44,444.00 | $5,000.00 | $777.00 | |
| 34 | $32,000.00 | $2,500.00 | $800.00 | |
| 35 | $11,000.00 | $0.00 | $1,234.00 | |
| 36 | $52,000.00 | $6,000.00 | $2,000.00 | |
| 37 | $55,000.00 | $6,000.00 | $600.00 | |
| 38 | $56,000.00 | $6,000.00 | $700.00 | |
| 39 | $57,000.00 | $6,000.00 | $500.00 | |
| 40 | $54,000.00 | $6,000.00 | $600.00 | |
| 41 | $56,789.00 | $6,000.00 | $17,777.00 | |
| 42 | $55,555.00 | $6,000.00 | $800.00 | |
| 43 | $62,000.00 | $6,000.00 | $900.00 | |
| 44 | $63,000.00 | $6,000.00 | $500.00 | |
| 45 | $64,000.00 | $6,000.00 | $1,234.00 | |
| 46 | $55,555.00 | $6,000.00 | $500.00 | |
| 47 | $58,000.00 | $6,000.00 | $600.00 | |
| 48 | $52,000.00 | $6,000.00 | $300.00 | |
| 49 | $24,000.00 | $6,500.00 | $300.00 | |
| 50 | $52,000.00 | $6,500.00 | $2,222.00 | |
| 51 | $57,000.00 | $6,500.00 | $800.00 | |
| 52 | $55,555.00 | $6,500.00 | $921.00 | |
| 53 | $47,000.00 | $6,500.00 | $1,234.00 | |
| 54 | $51,000.00 | $6,500.00 | $4,721.00 | |
| 55 | $55,555.00 | $6,500.00 | $400.00 | |
| 56 | $52,000.00 | $6,500.00 | $300.00 | |
| 57 | $50,000.00 | $6,500.00 | $300.00 | |
| 58 | $48,000.00 | $6,500.00 | $2,312.00 | |
| 59 | $47,000.00 | $6,500.00 | $197.00 | |
| 60 | $42,000.00 | $6,500.00 | $1,978.00 | |
| 61 | $38,000.00 | $6,500.00 | $4,444.00 | |
| 62 | $36,000.00 | $6,500.00 | $634.00 | |
| 63 | $34,000.00 | $6,500.00 | $555.00 | |
| 64 | $32,000.00 | $6,500.00 | $300.00 | |
| 65 | $36,000.00 | $6,500.00 | $6,666.00 | |
| 66 | $0.00 | $500.00 | ||
| 67 | $0.00 | $471.00 | ||
| 68 | $0.00 | $84,000.00 | ||
| Total | $1,942,285.00 | $227,000.00 | $167,563.00 | |
I made the table quickly. I assumed the policyholder's insurance averaged around $6,000 a year, which is low. My made up medical expenses were also low. The chart does not include compensation for inflation.
In the Medical Savings and Loan you would take the life time medical experience of a large number of people. Aggregate the data to create a general model of the expected lifetime income and expenses of policyholders. You would use this information to help people create a structured savings plan for their health care. This second table shows data for 12 fictitious people.
| Experience of 12 Fictitious People | |||
|---|---|---|---|
| Name | Income | Insurance | Medical Expenses |
| Jack | $1,942,285.00 | $227,000.00 | $167,563.00 |
| Moonbeam | $2,432,647.00 | $334,572.00 | $147,219.00 |
| Bubba | $842,170.00 | $78,000.00 | $94,127.00 |
| Dana | $1,234,567.00 | $333,333.00 | $808,612.00 |
| Clara | $987,654.00 | $123,456.00 | $75,476.00 |
| Zimbutu | $1,212,121.00 | $250,000.00 | $222,222.00 |
| Hank | $1,111,111.00 | $302,123.00 | $157,841.00 |
| Aimie | $876,147.00 | $200,000.00 | $167,563.00 |
| Coco | $1,414,214.00 | $288,756.00 | $182,321.00 |
| Flo | $1,333,333.00 | $222,222.00 | $333,333.00 |
| Pedro | $2,134,587.00 | $275,000.00 | $123,456.00 |
| DJ | $927,796.00 | $84,000.00 | $177,642.00 |
| Total | $16,448,632.00 | $2,718,462.00 | $2,657,375.00 |
| Average | $1,370,719.33 | $226,538.50 | $221,447.92 |
In the structured savings program, you would take some of the money from the income column and the middle column and put that into the savings account. You would hold some of the money from the middle column aside to make a loan reserve and you would take a large chunk of the money from the middle column and hold it aside for grants.
So, let's you had a group of 10,000 average Americans interested in switching from insurance to the Medical Savings and Loan. This group is likely to have a total lifetime income of some $14B. They might pay something like $2.5B in insurance premiums and have an expected health care bill of $2.2B.
In the Medical Savings and Loan, you might do something like hold back half of the money in the insurance column for grants and loans. You would put the rest of it in the savings account.
To make sure the savings accounts are over-funded, I would move some of the money from the income column into the savings accounts.
It is likely that people in the Medical Savings and Loan would make better use of their money than do with insurance. The contend that the program would increase the health, wealth and wellbeing of participants.
It sounds great...on paper. But in this Obamacare economy, I do not see many people putting up those kind of #s and having that kind of discipline.
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