The problem-plagued rollout of healthcare.gov has dominated the news in the USA. Proponents of the Affordable Care Act (ACA) urge that teething problems are inevitable and that’s all these are. In fact, President Obama has been at pains to say the ACA is more than just a website. Opponents of the law see the website failures as one more indicator that it is unworkable.
The premise of the ACA is that young healthy persons will sign up in large numbers and help defray the costs expected from older persons and thus provide a good deal for all. It has also been argued that the ACA is a good deal for young healthies. The debate between proponents of the ACA and the opponents of ACA hinge around this point. See for example, the debate (shouting match?) between Dr. Zeke Emmanuel and James Capretta on Fox News Sunday. In this segment, Capretta says the free market will solve the problem (but it hasn’t so far, has it?) and so Emmanuel says it must be mandated.
So when then has the free market not solved the problem? Robert X. Cringely argues that big data is the culprit. Here’s his argument:
- In the years before Big Data was available, actuaries at insurance companies studied morbidity and mortality statistics in order to set insurance rates. This involved metadata — data about data — because for the most part the actuaries weren’t able to drill down far enough to reach past broad groups of policyholders to individuals. In that system, insurance company profitability increased linearly with scale, so health insurance companies wanted as many policyholders as possible, making a profit on most of them.
- Enter Big Data. The cost of computing came down to the point where it was cost-effective to calculate likely health outcomes on an individual basis.
- Result? The health insurance business model switched from covering as many people as possible to covering as few people as possible — selling insurance only to healthy people who didn’t much need the healthcare system. The goal went from making a profit on most enrollees to making a profit on all enrollees.