Today we are going to talk about risk. First we will define risk, then we will walk through an example of how we calculate risk in layman’s terms, and finally we will discuss what the risk means to you, your family, your wallet, and most importantly your insurance premium. We will also discuss why these things are so difficult to calculate.
…the proportion of individuals in a population (initially free of disease) who develop the disease within a specified time interval. Incidence risk is expressed as a percentage (or if small as per 1000 persons).
The incidence risk assumes that the entire population at risk at the beginning of the study period has been followed for the specified time period for the development of the outcome under investigation. However, in a cohort study participants may be lost during follow-up.
The Concept
If we can calculate a risk as above, then assign a dollar value to the treatment, then we should be able to calculate a cost for that disease for an entire population. If we set the time interval at a year, as most risk is calculated, larger samples tend to be more accurate, and multiply the incidence of disease by the number with the disease and then divide by the number in the population, we find a total cost of that disease for the entire population. If we then divide by the number in the population we get the cost of that disease per individual per year. If we finance that cost by 12 to finance it over a year, like most health insurance does, then we find what the cost of the risk for that disease is per month.
Your eyes are glazing over. The following is an example.
The Example
Let’s use big round numbers for ease of calculation, and an outpatient appendectomy as the example.
Doing the math, the US population’s risk of having appendicitis is about 0.0714% or 71.4 out of 100,000.
We are looking for the total cost, however. Notice the assumption in our admittedly too simple example is that appendicitis requires an appendectomy.
So the total cost comes out to be $375,000,000 per year for every incidence of the appendectomy procedure in the US.
Divide that by the population and you get risk for the individual.
So the individual financial risk for an appendectomy in the US is about $1.07 per year. Yes, that is shockingly low. That is only one procedure out of over 10,000 but compare that to what you pay for your personal health insurance and what you have to go through to get any kind of claim paid. Now you begin to see what the big insurers actually do with your premiums that isn't "pay for your healthcare."
Most of us pay for our health insurance by the month, so we’ll include a 10% interest/fudge factor to the calculations to get a monthly cost per capita for this one procedure.
The individual financial risk per month for an outpatient appendectomy for individuals living in the US, then, turns out to be about $0.098 per month each.
Less than one thin dime.
If you were shocked before, you should be outraged now.
What did you say you paid per month for health insurance?
Caveats and Provisos
There are 11,163 procedure codes in the US procedures list. Populations are broken up into tranches, or sections, by age. Younger people will have less incidence of everything and older people will have more. It isn't really fair for the young to just carry the old in equal measure, but it also isn’t fair to have the elderly just die because they can’t pay for their own expensive healthcare. The mitigating factor is these tranches.
This calculation must be done for each incidence of the tranche and the procedure. If we divide the population into ten-year tranches, 20-90 gives us 8 times the number of procedures, 11,163 or 89,304 times this calculation must be done. That is not actually cumbersome at all, but finding the data to support the medical usage is. More on that later.
Mitigating Factors
For the 11,163 procedure codes documented in the Current Procedural Terminology (CPT) code set, there is little to no documentation of medical usage by procedure and demographic, anywhere. I really hesitate to say that the big insurance companies suppress this information for fear that we could figure out how much of the money you pay them is wasted, but I see no other explanation. My team and I have spent months combing the internet and trying to find medical usage for each of the 11,163 CPT codes and it simply isn’t there. Medical usage is the one thing that isn’t common knowledge in our calculations above. Clearly the information is out there since your current health insurance company has priced your policy, but they aren’t sharing. Again, I don’t like and don’t believe in conspiracy theories.
Make your own conclusions.
Conclusions
For the big scary, invasive, appendectomy, your risk should be less than one thin dime every month. The average cost for that same appendectomy is $28,654. What is the disparity between our $1500, or the Medicare price of between $595.29 and $735.04? Greedy hospitals and insurance companies. Where does the difference go? As above, it is either wasted on the monkey motion of medical coding, adjudication, denial and resubmittal, et al., or it goes into some fat cat’s back pocket.
For fairness, our example is intended to generate outrage. While they are real numbers published by The Centers for Medicaid and Medicare (CMS), the numbers we used were artificially low. While the Medicare rate is somewhere in the $600-700 range as above, hospitals are allowed to use line item charges on claims. The hospital rate for the test case appendectomy is between $10,000 and $35,000, with the average Ambulatory Surgical Center (ASC) Medicare reimbursement coming in at $6336.84 in 2024, as reported by the CMS. If we then apply our formula to that more real world payment we get about $0.93 per individual per month for the described procedure. That is still a far cry from what you are paying for your health insurance now.
While the knowledge that we can’t completely calculate the risk, yet, is unsatisfying at best, what we can do is tell you what we are going to charge for our service: $10 per month, plus the actual cost of the risk.
That really answers all the questions you need to get behind this solution.You already pay for the risk. You also pay for medical coding, insurance networks, adjudication, delays, denials, rate negotiation, sales/brokers/agents, the cost of a third party EMR, skyscrapers in every major city in the US, and the hundreds of thousands of employees that work at the insurance company and hospital/practice to deal with their shenanigans, and all the million other little things that your big greedy insurance company (and big greedy hospital too) makes you and your doctor do that adds to the cost of your health insurance. We calculate that at least half of what you pay them is wasted and less than half of that premium comes back to you as benefits.
So, your incurred risk is just math and is the same as your current insurance. You are simply replacing everything they do with a $10 per month data management fee.
Simple. Transparent. Efficient. Effective.
That is it.
This is also the only plan that actually works and doesn’t cost twice as much as every other health plan in the world, in fact, half of the cheapest over time.
We have the EMR/Insurance program built and deployed for use right now
Contact us here or on our site and we will be happy to provide a demonstration of the fully functional prototype.
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We have built a comprehensive health information system to keep the patient healthy and on the right track with the ability to incentivize healthy living. This system includes the automation of the health insurance industry completely. We have designed and are currently building an ERP style Practice Management System, to control hospital costs. Implementing this system should be fairly simple and will completely revolutionize the way healthcare is paid for, saving countless lives. We have shown a way to use this system to make the best healthcare system in the world also the most efficacious and the most affordable.
