is that people like to buy out of unpleasant decisions. So, for example, a good thing about having insurance is that one does not have to say, my kid is sick but I am not sure that I can afford to take him to a doctor. That is a very unpleasant situation. Other than that, it seemed to him that one simply wants to look at people who have had big medical expenditures and been disadvantaged by them.

Pamela Short commented that the theory of insurance is that, with something like medical care, only a very small percentage of people will get sick, but it costs a lot of money when that happens. So the idea is to pool that risk, to average it out. Everybody pays the average, and nobody faces the extreme tail. Because the extreme tail drives consumption way down, risk-averse people would prefer the average over the risky possibility. Those expenses do not go away, but for individuals they are pooled. She certainly was not trying to say in her presentation that the study panel needed to propose a measure that would be sure to show that the ACA is a good thing. This is important is because it is a way of quantifying the value of insurance to people who do not use it. Again, she said, think about life insurance or car insurance, which people do not want to use. People spend quite a bit on insurance of different sorts, and this workshop is just trying to give medical care insurance its due.

Sarah Meier raised the question of the value of insurance. Insurance is a mechanism that results in an income transfer in the event of illness that people would not be able to afford in the first place, she said. If the next thing they would buy if their income were expanded were health care, then that is the value in the insurance. She also commented that people will be mandated to buy insurance premiums that are not necessarily affordable. The reform structure is that premium rating can vary by age categories. It also limits the subsidy structure at 400 percent of the family poverty level. So it is feasible that people who fall just above this level, who are also pre-Medicare age, will actually be paying a surprisingly large percentage of their income for the premium.

Referring to an earlier comment regarding the regression-based model, Meier agreed that it is the better approach. She pointed out that families are made up of individuals. She and Wolfe suggest in their paper classifying health risk at the individual level, so the suggestion is that these predictive variables are individual risk characteristics. Not only are they thinking about health risk as an individual aspect, but also insurance policies within a family may vary. Some family members may have a Medicaid-covered individual, and some a privately insured individual. So figuring out how to model a family’s likelihood of exceeding a certain value, when everyone in the family could contribute a different amount of money to that value, under different scenarios, and on top of that everyone in the family has perhaps a different insurance dynamic, is something they could not pull



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