Oscar’s healthcare opportunity

Investment Analysis Clubs Macro Economic Trends and Risks
1

A possible scenario

Oscar is 60, a senior manager at BigCorp. He has savings to cover retirement and early retirement.

He would like to leave BigCorp to teach pottery as a contractor (no health benefits) at the community college and also make and sell some of his own pottery.

He can afford to leave BigCorp except he is anxious about covering his health care needs until he is 65 (and can enroll in Medicare) so he chooses to stay at BigCorp.

Because he is unexcited about BigCorp, he just coasts and does average work and leans on his highly productive junior manager Sally.

If Oscar could be confident in his healthcare coverage (access and reasonable price - he is able to afford a fair price for reliable coverage), he would leave BigCorp to pursue pottery and several positive things happen:

  • Oscar is happier doing pottery and has more time to exercise - he cuts back on whiskey and loses 20 pounds.
  • Oscar’s A1C and blood pressure improve and he is able to drop two expensive medicines and stop an annual visit to a specialist
  • Oscar’s medical costs are reduced
  • Sally is promoted to senior manager
  • With greater say in her new position, Sally implements several new processes with the help of AI (which Oscar never much liked) that improve team efficiency by 20%
  • With the extra time that the team has, Sally and team develop a new prototype that is pitched to one of their top customers. The customer decided to beta test it for 6 months on a trial license
  • Bolstered by Sally’s success, BigCorp gives Sally additional headcount for a junior position
  • Sally hires Sam, who was interning for free and living with his parents
  • With his new income, Sam rents his own apartment and leaves his parents’ health insurance plan as a dependent and now pays for his own health insurance
  • Sam is young and healthy, so he pays for healthcare but doesn’t use any yet
  • Sam’s parents, now with the extra space freed up in the house and lower costs from no longer supporting Sam, undertake …

Lot’s of the economic opportunity set unlocked.

Higher GDP.

Healthier people.

More productive people sharing health costs.

7 Likes
1 in 4 Americans staying in a job for health insurance
1 in 4 Americans staying in a job for health insurance
2

Thought Experiment

Definitions

Scenario 1: Current State

Workers requiring health insurance are restricted to the smaller opportunity set, EOh (smaller than EO).

Scenario 2: Alternative State

Assumption:
Take the current per-person annual health care cost under private insurance, let’s call it $10k per year. Assume a new national policy de-couples health insurance from specific employment opportunity but everyone still pays the same $10k regardless of “eo”.

Implication:
Workers requiring health insurance may now select “eo’s” from the larger set, EO.

By basic math, the larger set is likely to have a better “eo” than the smaller set, Eh, for any given worker (would you rather have 100 job opportunities or 130?)

By assumption, per person health costs are the same in the two scenarios. (but in a dynamic world, these costs could adjust, perhaps downward because workers now have more economic choices.)

Therefore, we can achieve better economic outcomes, and higher GDP, even by still assuming today’s existing private employer health costs by de-coupling health care from specific “eo’s”.

This would have the potential to reduce the percent of GDP allocated to healthcare in the US - without even attacking health costs directly - but by merely increasing the opportunity set.

More opportunities leads to better economic outcomes.

Land of opportunity.

5 Likes
1 in 4 Americans staying in a job for health insurance
3

There you go again, making perfectly good sense.

7 Likes
4

I prefer to replace thought experiments with real world examples and comparisons to the US.

Almost all nations that offer universal healthcare do worse in terms of GDP output and growth on a total and per capita basis

Almost all of them show less risk taking in terms of entrepreneurial activity (building businesses and new sectors at scale)

Almost all of them are now in a much worst state in terms of the govts’ balance sheet and facing either fiscal cliffs or severe austerity measures.

“Hungry dogs run faster”

2 Likes
5

Hmpf. It would be truly idiotic to measure on “total output” since different countries have different sizes, different populations, different histories, and different starting points. Only a fool would propose that.

But growth rates, well there’s something that might be a fair comparison.

US GDP growth is 2.0% in the latest statistics.

Here are some countries which are higher:

Bahamas (2.1%)
Singapore (2.2%)
Czech Republic (2.3%)
Turkiemenistan (2.3%)
Brazil (2.4%)
Chile (2.5%)
Uruguay (2.5%)
Kuwait (2.6%)
Jordan (2.7%)
Samoa (2.7%)
Peru (2.9%)
Spain 2.9%)
Bangladesh (2.8%)
Qatar (2.9%)
Polan (3.2%)
Albania (3.4%)
Laos (3.5%)
Turkey (3.5%)
Taiwan (3.7%)
Turkey (3.8%)
Saudi Arabia (4.0%)
Egypt (4.3%)
Cambodia (4.8%)
China (4.8%)
Indonesia (4.9%)
Philippines (5.4%)
Tanzania (6.0)
Zimbabwe (6.0%)
Vietnam (6.4%)
India (7.6%)
And many more. Here is the full list:

Now some of these re outliers. Perhaps those with pure extraction economies riding a wave of shortages, some are starting from an abnormally low base thanks to macroeconomic events in the past year or two, and perhaps some are simply exhibiting the law of large numbers (although I note China is more than double that of the US).

The point is, if you’re going to diss a “new” idea, your measure should be somehow relevant to the argument, not something like “Oh we’re the biggest”, which would work if you’re Blockbuster or Nokia or Sears - right up until that argument is proven hopelessly useless.

8 Likes
6

Interesting thought experiment that is theoretically attractive but, does that mean that you’re assuming that Oscar would actually return to good health (and be able to drop his expensive meds) simply for giving up his coping mechanisms of boozing and overeating?

The more likely scenario is one that’s been discussed many times … that enough time spent in the early stages of T2D (sufficient to require expensive interventions in attempt to control an elevated A1c, say) really IS a pathologic state. With hidden downstream consequences that continue to progress…a sort of physiological compound interest.

4 Likes
7

You overlooked where I included per capita for some reason.

2 Likes
8

Correlation is not causation. If we look at GPD per capita and PPP, there’s nothing that indicates universal healthcare negatively impacts GDP, GDP growth, or GDP per capita.

Our healthcare system is broken, it needs to change.

7 Likes
9

It is expensive and we can do better. The current system is not in my mind preventing the world’s greatest entrepreneurs from pursuing their dreams. I see no reason to move head long into another govt controlled system, given our current financial state and the incompetency in Washington. But if it so important to those on the discussion board, pool your resources and do it on a small scale. Let those with the highest net worth pay the most or however you choose to divide it and let us know how it goes.

10

No one has mentioned universal care in this thread until you did.

I suggested making the economics of healthcare equal across employment opportunities (“eo’s”), where “eo’s” can be anything from corporation to small biz to sole proprietor to contractor/gig to student to not working (eg, in between jobs).

In fact, suppose we take the economics of the average employer plan (total per person health cost, health coverage details), as they are today, and somehow make those economics available to all “eo’s”?

The above is the thought experiment part.

What is the somehow part? The actual “how might we do that?”

Well, I don’t know.

You raised universal healthcare.

How about another suggestion?

What if everyone not having access to a decent employer plan could

  • pool their capital and beneficiaries, and
  • create an insured pool
  • with premium-paying beneficiaries, and
  • purchase health insurance like a like large employer plan
    ?

This is just private individuals making individual decisions to pool their capital for a particular economic outcome - very free market.

Would you at least be open to that concept?

Equalizing health care across all “eo’s” would unlock more economic output as already explained upthread - a 100% free market concept.

This is about as free market as one can get while still trying to cover everyone.

Yes, this is not simple to implement, there are challenges such as all federal and state regulations, the problem of pre-existing conditions and making the insured pool a random sample, and of course any and all vested interests that would politically oppose it for some reason.

11

Let me go back to my previously grandfathered in HSA high deductible plan that cost about $5k per year to cover DW & me. You could even argue $25k/year if we both had to spend up to the deductible, which we never did. Still way cheaper than the Obamacare plan we are forced into now.

3 Likes
12

If you don’t mind saying,

How many years ago were you paying $5k?

What is your current per-person premium per year/month?
(net of any subsidy - what you pay, no need to detail the subsidy)

And which plan level? (bronze, etc)

1 Like
13

Thanks for sharing! I may be mistaken, but this whole topic originated from the fact that 25% of Americans feel stuck in their jobs on account of healthcare. Somehow we veered into whether or not universal healthcare would fix that problem.

@albaby1 correctly stated that marketplace insurance and employer provided group insurance cost the same. What hasn’t been discussed is how this plays out.

I pay $8,000 per year for a high deductible family coverage plan. My company pays $22,000. If we accept that marketplace and employer group insurance cost the same, I’d need to figure out how to pay my company’s part to leave my job and keep the same level of insurance in the marketplace.

That is why people feel stuck in their job.

5 Likes
14

And my thought experiment assumes this as well.

I agree that cost is the overriding issue.

But I also believe that health care should be untethered from employment.

But, again, we still have to cover the cost.

I would advocate:

  1. Untether healthcare from specific employment.
  2. Reduce cost.
2 Likes
15

…followed by a “parade of incredibles.”

It’s a lovely just-so-story. But it’s easy to see why you had to construct that long list of positive side effects from Oscar leaving. Because his initial decision to leave BigCorp results in a massive economic loss. Oscar is, in this telling, a senior manager with (presumably) ~40 years of experience preparing for that role. He is going to be enormously economically productive as a senior manager. When he leaves, all that skill and training and experience walks out the door with him, and he takes up a job where he has virtually no skill and training and experience and not necessarily any talent. His productivity has collapsed. He might be happier, but he’s going to be vastly less economically productive.

Instead of the parade of positives, what if things go a little less well:

  • Sally is promoted to senior manager much earlier than she should have been. Management was counting on Oscar leaving five years later, so Sally hasn’t been properly prepared. Losing Oscar’s ~40 years of experience and ability is a massive loss for BigCorp.
  • Over her head, Sally doesn’t implement any new measures. In fact, she’s unable to keep team efficiency as high as under Oscar at all. The team suffers, and there are no new hires.
  • Sam stays as an intern, of course.
  • Oscar finds that it’s not nearly as rewarding to be an untalented potter as he thought. He’s got way too much free time, and the lack of sales is depressing him. Free from the need to keep up formal appearances and without a fixed schedule (except for his afternoon/evening classes), he starts sleeping in and eating too much. Rather than cutting down on his whiskey intake, it increases. His A1C and blood pressure deteriorate, he picks up an extra visit to a specialist and one more expensive medication.
  • Meanwhile, Ralph is a young potter in town. Unlike Oscar, he both has genuine talent and a drive to devote himself to actually making a career in pottery and art.
  • Ralph was going to open up his own pottery shop - a risky venture, but he was planning on supplementing it with stable dependable income from taking a job teaching at the community college. However, some FIRE dilettante decided to quit their job early and work for peanuts, so the college hired him instead.
  • So Ralph gets stuck taking a position he doesn’t want - instead of pursuing pottery, which he has a genuine skill and passion for, he has to take a depressing entry-level position at another division of…BigCorp.

In this retelling, it’s obvious that things are worse. Oscar and Ralph have basically just switched the places they “should” have had. Oscar’s skills, talent and experience made him most productive at BigCorp (even half-assed), while Ralph’s skills and talent made him most productive in pottery. But once Oscar didn’t have to care any more about whether he was doing what was economically productive, he left the spot where he would contribute the most to the economy and took the spot that Ralph might have taken instead.

In reality, neither my fable nor ML’s just-so-story is especially likely to happen just that way.

3 Likes
16

Approximately 3 years ago.

We pay just under $2700/month for “family coverage” of just me and my wife. Both early 60s and excellent health. No meds, nothing.

Subsidies? Surely you jest. Zero is the answer.

I believe the silver plan, but I would have to double check.

DW reminds me every month when I write a check that she is glad we can afford it. While I’m po’d about there goes a wood working shop upgrade that I now can’t make.

2 Likes
17

Thank you. Good example.

2026 Employer Plan

Employee pays: $5k (annual)
Employer pays: $10k (assume employer picks up 2/3 cost)
Total per person = $7.5
Per person 2026 dollars = $9k (assume 3 yr premium inflation at 6%)

2026 ACA Plan

Per person 2026 dollars = $16.2k

ACA costs $7k more (and I’m guessing the quality is not $7k more - but that’s a guess)

Why can’t the market (private, ACA, or anything else) provide a plan the costs the same as the employer plan?

JLC can and will pay a fair, private market rate that is the same as the employer rate.

Why forced to pay the extra $7k?

1 Like
18

Yes, I would be open to it. Congress is floating a bill now that takes steps towards this approach. The problem though that may develop is that healthy and young pools will develop, excluding older and unhealthy individuals to keep costs low. It then brings us back to the problem of coverage at a reasonable price for those with more comorbidities and high ongoing care needs.

I like this concept though but maybe paired with a govt option that provides catastrophic coverage.

I still think we run into a problem of pools developing that omit the unhealthy. The argument for universal care, it does maximize the pool and spread the cost the most number of potential insureds. It in fact pushes the burden to the young and healthy.

1 Like
19

Not in my world.

By assumption, he is not productive.

He is experienced and could be highly productive, but he is not.

He coasts and is less productive because he wants to spend his time elsewhere (making a decision that fits his personal utility:

)

Don’t you think that scenario happens somewhat?

I do and I bet the rest of the world does as well.

Not in my world.

By assumption, Sally is ready for the next role and outperforms Oscar, who was coasting.

Don’t you think that scenario happens somewhat often?

I do and I bet the rest of the world does as well.

Here’s the economic and behavioral problem with assuming all of the worst outcomes: people are naturally incentivized to choose the better outcomes.

That’s why people advocate for the free market model: it has some natural selection, optimizing properties towards better outcomes.

But you know that.

Given a future set of positive versus negative economic outcomes, history shows a bias towards the positive economic outcome.

The line of US per capita productivity goes up and to the right.

That line is the outcome of a large collection of individual decisions.

More output per worker also facilitates more leisure time as we can produce the same output with less effort.

Human behavior is naturally incentivized towards positive outcomes for both economic productivity and leisure time.

The whole purpose of this thought experiment is to understand if we can:

  • get more positive outcomes
  • by de-linking health care from employment (keeping costs fixed - in the thought experiment)
  • so that individuals have a larger “eo” set
  • and therefore a higher chance of obtaining a more positive outcome than without the de-linking

The thought experiment clarifies high-level, strategic goals.

It is not a detailed plan for policy implementation, which has real challenges, but the goal here is not to try to solve every single thing that is wrong with health care delivery in the US.

20

Sure. And in my world, he is. That’s why these “just so stories” aren’t especially useful in trying to figure out the effect of these types of changes.

Sure, some Oscars will be so bad in their current performance that it completely outweighs the fact that being a manager is generally the “highest and best use” of their time economically after spending ~40 years accumulating experience, knowledge, and skills in that field. That there isn’t a reduction in their economic output if they switch from doing the the thing they’ve spent their whole life training to do in order to suddenly become…a pottery guy? But that’s probably the minority.

The main focus of this narrative is a guy leaves the job he’s competent at for one that’s an avocation. It’s exceptionally unlikely that this is going to result in an increase in his economic productivity.

I mean…it’s not a thought experiment, is it? It’s just a narrative where every element of the narrative is something that supports your position. It’s simple to construct an alternative narrative where the things that happen run counter to that position. That doesn’t really help us understand what would happen if we made this switch.

Sure, maybe it lets Oscar fulfill his dream of giving up a job he’s actually skilled at and qualified for BigCorp to become a mediocre potter. But that’s unlikely to be a net positive for the economy (he’s essentially retiring early, no longer being very productive and blocking someone who could be more productive in that potter’s position from being able to do it). To say nothing of the impacts that come from paying for this program.

1 Like