The Phaserl


Why We’re Doomed

by Karl Denninger, Market Ticker:

This is the reason I’m giving up folks:

A new Rasmussen Reports national telephone and online survey finds that 88% of Likely U.S. Voters say it’s important for Congress and the president to have some sort of replacement program in place if they repeal Obamacare, with 69% who say it’s Very Important. Eleven percent (11%) don’t think it’s important for them to have a replacement plan ready, but that includes just three percent (3%) who say it’s Not At All Important. (To see survey question wording, click here.)

Let me start from the beginning when it comes to insurance of any sort.

The cost of insurance is determined by the following arithmetic formula:

$ = p(event) * cost(event) + profit(insurance company)

This is not my opinion it is a mathematical fact.

Those who deny mathematics are idiots, frauds, thieves or all three at once.

Now let’s ask a question: If you have just totaled your car what is the price of collision insurance on your car?

p(event) is 1.0 (probability of a collision) since the wreck already happened.

Therefore the price of said insurance will be the cost to replace your (now-totaled) vehicle plus a profit for the insurance company (without which it will not stay in business.)

In other words it is always cheaper in that instance for you to just go buy another car because you are paying the insurance company a profit for no reason at all.

It is usually not all that hard to figure out what the cost of an event is; given enough of a data set it’s actually quite easy since an insurance company cares only about the average cost of the event across all of those people it insures of like sort and with like limits. The hard part is the p(event) piece, and if you get that wrong as an insurance company in the wrong direction you will go bankrupt fast. For this reason insurance companies pay actuaries quite a lot of money to get as close to the true value of p(event) as is humanly (and, with all the computers we have now, analytically and computationally) possible.

For this reason those who argue for “health insurance” for pre-existing conditions are either ignorant or worse, they are actual thieves who deserve to all be thrown in prison because what they are demanding is the ability to steal from everyone else.

That sounds harsh, and it is.

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1 comment to Why We’re Doomed

  • Ed_B

    The biggest problem we face with all this is that there is no distinction being made between “health care” and “Health insurance”. These are VASTLY different things, yet seem to be interchangeable in the usual discourse. Health insurance exists because we MIGHT get sick. It was never designed to handle people who ARE sick. Consider that this is no different from other types of insurance. You can’t buy fire insurance when your home is ablaze. You can’t buy auto insurance AFTER your car is wrecked. Dead people cannot buy life insurance. All insurance protects us financially from unexpected possible losses. It does nothing for established facts.

    Health care on the other hand, is just that… the application of medical assets aimed at reducing pain and suffering from illness and injury.

    I sympathize deeply with all who have a pre-existing medical problem. I have a couple of those myself. No, it’s no fun at all. But both are something with which I can live and I do. In fact, I have come to understand that these are blessings in disguise. They are challenges that can be met and overcome via strength, will-power, and faith… plus a little doctoring. If such things are to be addressed, and many believe that they should be, then it will not be via “health insurance” but by something else entirely. I’m not sure what that would be but do know what it cannot be if it is to be successful. I am hoping that the Trump Administration will be able to handle this in a rapid, humane, and financially responsible way. If so, then that will be very good for our country.

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