The Queen of the Death Spiral: Kathleen Sebelius

Kathleen Sebelius testified in front of the ways and means committee 02/29/2012. What did she say?

“Well again, congressman, what you’re seeing, it wouldn’t have mattered if we had passed the Affordable Care Act or not,” she said. “The private market is in a death spiral.” - Health and Human Services Secretary Kathleen Sebelius, 02/29/2012 (1)

“Later on Tuesday, in an address to the American Cancer Society’s Cancer Action Network, Sebelius discussed the “broken” health insurance system that Obamacare aims to fix.” (2)


Examining Sebelius’s Insurance Credentials

One might want to examine Sebelius’s implicit vast experience in the field of insurance to determine what credentials she has for making such a notional assertion. How about those insurance credentials?

Abridged Secretary Biography [directly from the H.H.S web site]

“Kathleen Sebelius was sworn in as the 21^st Secretary of the Department of Health and Human Services (HHS) on April 28, 2009. Since taking office, Secretary Sebelius has led ambitious efforts to improve America’s health and enhance the delivery of human services to some of the nation’s most vulnerable populations, including young children, those with disabilities, and the elderly.

As part of the historic Affordable Care Act, she is implementing reforms that have ended many of the insurance industry’s worst abuses and will help 34 million uninsured Americans get health coverage. She is also working with doctors, nurses, hospital leaders, employers, and patients to slow the growth in health care costs through better care and better health.

Under Secretary Sebelius’s leadership, HHS is committed to innovation, from promoting public- private collaboration to bring life-saving medicines to market, to building a 21st century food safety system that prevents outbreaks before they occur, to collaborating with the Department of Education, to help states increase the quality of early childhood education programs, and give parents more information to make the best choices for their children.

Secretary Sebelius served as Governor of Kansas from 2003 until her Cabinet appointment in April, 2009, and was named one of America’s Top Five Governors by Time Magazine.” (3)

　

Hmmm. No insurance experience. Lets drill down deeper:

　

‘Sebelius was born and raised in a Roman Catholic family in Cincinnati, Ohio. She attended the Summit Country Day School in Cincinnati and graduated from Trinity Washington University in Washington, D.C. with a B.A. in political science. She later earned a Master of Public Administration degree from the University of Kansas. She moved to Kansas in 1974, where she served for eight years as a representative in the Kansas Legislature and eight years as Insurance Commissioner before being elected governor.

Sebelius is the daughter of former Democratic Ohio Governor John J. Gilligan, and thus they became the first father/daughter governor pair in the United States after her election.[3] Following passage of the Health Care and Education Reconciliation Act of 2010, she pointed out another father-daughter connection: her father had been in the House of Representatives when Medicare was originally passed in 1965.” (4)

Hmmm x 2. No private insurance industry experience but a life long politico complete with a political science degree and a masters in public administration. And that insurance commissioner position? Its an elected position. More succinctly: "Sebelius served as executive director and chief lobbyist for the Kansas Trial Lawyers Association (now Kansas Association for Justice) from 1977–1986. She was first elected to the Kansas House of Representatives in 1986. In 1994 she left the House to run for state Insurance Commissioner". And the responsibilities of the elected insurance commissioner position in the state of Kansas?  "Regulate and review companies, educate consumers, assist consumers and license agents". We are not talking actuary science, we are talking bureaucrat position. Born and trained politico, with little or no private industry insurance experience. Go figure!(5) (6)

Hence we have the political science major making notional propositions about private insurance, a field of study that she has not experienced. Her vast private insurance industry experience boils down to quasi-experience as an elected position, that of insurance commissioner of the state of Kansas, which was the role of politico-bureaucrat regulator.


Returning to Ms. Sebelius’s notional proposition of the private market for health insurance is a “death spiral”

Upon further review, one might want to take Ms. Sebelius’s notional proposition of a “death spiral” regarding private health insurance and agree with her proposition. Yes, for a moment let us agree with the queen of the death spiral.

Examining the proposition one has to first realize that “insurance”, and the cost thereof, is merely a reflection of what particular underlying risk is insured. That is, say one insures private commercial vehicles, the related characteristics of commercial vehicles, frequency and severity of claims regarding commercial vehicles, operator characteristics, cost of administration, area the vehicle operates, etc. yield a cost to insure. Stated alternatively, the cost of insurance is merely a reflection of the cost to insure the underlying risk. However, the underlying risk is by no means insurance and insurance is conversely not the underlying risk. This is, one must never assume the underlying risk is insurance as the two are related but by no means the same phenomena. Insurance is merely a transfer of pure risk for a consideration [premium]. The pure risk on the other hand is the pure risk. The pure risk may or may not be insurable.

Therefore, if Ms. Sibelius notional proposition is deemed as being fact, which it is not, then that means the insurance is a “death spiral” meaning the underlying risk has characteristics of “death spiral”. That is, the pure risk in and of itself is un-insurable [death spiral]. Consequently, the availability of insurance and the cost to insure the underlying risk if in death spiral mode means the pure risk itself is in a “death spiral mode”.

Hence, unbeknownst to Ms. Sebelius she is asserting the underlying risk, which is health-care, is in a death spiral. Therefore, restating Ms. Sebelius’s notional proposition: “The private health-care delivery system is in a death spiral.” Its not the “insurance” its really the “risk”. Ah, the evil of it all!


Sebelius and her ‘….“broken” health insurance system that Obamacare aims to fix.” ‘


Later in the same day Sebelius makes a separate assertion regarding fixing a private insurance system with a public or collective action system. That it’s the insurance that needs fixed and merely moving the insurance from private to public will fix the “insurance”. That is, social insurance such as Medicare, Medicaid, and Social Security “fix” problems in the realm of insurance. That is, Sebelius is engaging in political dupery. There is grand evidence that social insurance supplanting private legal reserve insurance results in disaster.

Stepping back for a moment, we know that insurance is merely a reflection of the cost of insuring the pure risk. That the pure risk and insurance are related but by no means the same concept. Hence changing the insurance delivery system has little to do with the underlying risk. Be it private delivery health insurance or a scheme such as ObamaCare neither is changing the underlying pure risk in any significant fashion. That is, Sebelius is engaging in nitwitery.


Summary and Implication

The insurance mechanism is related to the pure risk. However, insurance and pure risk are separate concepts. Purposefully confusing risk and insurance, as being one in the same, is Sebelius’s attempt to put forth the concept of: political dupery, under political nitwitery, and in government mysticism we trust.

The underlying risk which is health-care is the concept that needs examined. Changing insurance model/delivery system will not change the pure risk or the health-care delivery system in any meaningful fashion.

Likely Sebelius, political notional-ist at large, implicitly assumes price fixing schemes aka ObamaCare will “fix” the underlying risk. Unfortunately, not one single price fixing scheme in all of recorded economic history has succeeded.

Notes:

(1) Obama Cabinet Secretary: 'The Private Market is in a Death Spiral', CNSNews.com, 02/29/2012
http://cnsnews.com/news/article/obama-cabinet-secretary-private-market-death-spiral

(2) Ibid.

(3) HHS.gov
http://www.hhs.gov/secretary/about/biography/abridged.html

(4) Kansas Insurance Commissioner, http://en.wikipedia.org/wiki/Kansas_Insurance_Commissioner

(5) Kathleen Sebelius, Wikipedia, Early life and family.

http://en.wikipedia.org/wiki/Kathleen_Sebelius

(6) Ibid.