Dave Ramsey Fails Arithmetic In His "Math of Obamacare" Video

I recently came across this video from Dave Ramsey. It was posted on Facebook with a comment like "Watch this and share with your friends." The implication is that the video provides some basic math facts that will prove that the Affordable Care Act is flawed. I was intrigued …

If you don't want to spend 8 minutes to watch the whole thing, here is a brief summary: You can have political arguments. You can be Democrat or Republiccan and have positions or opinions. But you cannot argue with basic math. The math of Obamacare does not add up. Insurance, Dave says, is based on simple actuarial math and when you inject new uninsured people into the insured pool, costs will rise. For example, that 500 pound unhealthy, uninsured person is now going to be on your insurance policy, and this will lead to your rates going up. Because unhealthy people are a higher cost on an actuarial basis than healthy ones, insurance rates will go up, at least double. He goes on to say that requiring health care is as socialist as requiring every American to have a gun.

There are so many flaws in his argument its hard to know where to start. My first reaction was I couldn't believe how lazy he was in putting this together. But, if you have to pump out a radio show every day, sometimes research is just too much of a burden.

First, let's look at the claim that the actuarial math doesn't add up. Dave says that when uninsured are added to the insurance program, rates will go up. However, this is not true UNLESS the actuarial rates of the uninsured have a significantly more negative ratio than those who are currently insured. That is, are there more unhealthy uninsured than unhealthy insured? Dave doesn't say - so there is no factual basis for his claim that rates will go up. He didn't bother to research this either.

But let's look at his claim to see if it holds water. If you have a group of people who are uninsured, what would you think is the single most important factor that will contribute to the cost of medical care? If you said "age", you would be right. The older people get, the more treatment they need. The elderly are still covered by Medicare and Medicare Advantage -- not the Affordable Care Act. Insurance companies remain exempt from having to offer coverage to elderly patients who cannot afford it.

So, to know if actuarial costs go up, Dave would have needed to have looked at the comparative health of the insured versus the uninsured in the 21 to 65 year old range. Instead, Dave offers a slight of hand with the 500 pound, grossly over-weight uninsured person, helping you reach the conclusion that the insured are vastly more unhealthy than the insured. His imagery lets the reader extrapolate that _all_ uninsured are fat unhealthy people. And when these fat people get in your insurance group, your rates are going to go up. In fact, this is not the case. A study by HHS this year, stated that the Body Mass Index (a ratio of height and weight) is roughly equivalent between the insured and the uninsured, specifically: The average BMI for uninsured consumers is solidly overweight (27.9 BMI) as is the average for insured consumers (27.2 BMI).
In short, Dave is wrong about implying that fat people, or old people, are going to drive up medical costs.

The other interesting point that Dave mentions is that starting in October, us insured people are going to have to start paying for the uninsured. Well, not exactly. Since 1986, EMTALA requires that hospitals and emergency rooms treat everyone regardless of their ability to pay (i.e. even if they are uninsured). We have already been paying for this. What does that cost? Seven years ago, California estimated that the cost of providing written-off care to the uninsured cost the insured California family $1,185 per year. So today in 2013, with an average medical insurance cost rise of 8% a year, in California the uninsured cost the insured $2030 per family. In short, any percent of the uninsured that start paying for medical care is a better net result than at present.

Dave also says Obamacare is socialized medicine. This one perplexes me. The health exchanges required under the Affordable Care Act are insurance web sites where uninsured residents of each state (must) go to purchase insurance from a commercial medical insurance provider. That is, the uninsured now must enter the insurance marketplace and buy insurance from an insurance company. The federal government has rules that prevent insurance companies from actuarial cherry-picking. More importantly, the ACA requires that the exchanges treat state residents as a "group" to take advantage of the economy of scale of group versus private insurance. For example, in Florida, I had a Cigna medical plan for my family which I purchased through Cigna direct which cost $1250 per month. My wife got a job with a company of about 150 employees, and the same plan with Cigna is now $550 a month. Nice economy of scale. It's a side effect of capitalism that health exchanges take advantage of. But, moving the uninsured into the insurance marketplace is socialism in Dave's book.

Overall, Mr. Ramsey's video lacks any serious critical thinking; it is devoid of even one basic fact. He doesn't even try to present facts and then formulate a conclusion. Instead he says the math doesn't add up. He is right about that "1 unfounded statement + 1 unfounded statement = 0 credible statements".

Welcome

I started this blog to provide facts about today's issues, mostly political, that circulate around me. After I read or watch "news" (more on that later), I'll post facts on the topic. I love a good debate. I like the interchange. I'm baffled how critical thinking and discussion is missing from our media sources. Read on ....