the measure should be capturing this idealized consumption that people would have if they were not facing constraints.

Wolfe added that this method takes into account the way the insurance policies are designed. This can be a problem in terms of the data that are available, but in terms of the method, it does take account of family members’ utilization. It takes the deductible, which may be a single person’s deductible or a family maximum, so all those parameters are taken into account when the family is combined. The characteristics of the insurance plan are not the issue, because if one knows them then one presumably knows them at the family level, and when one combines the risk of the individual family members, then one applies the policy as it applies to the family, if it is a family policy. There may be a data limitation in terms of what is known about the characteristics of insurance policies. But if one had those insurance policy characteristics, then one could aggregate the risk at the family level and then apply the insurance policy.

David Betson (University of Notre Dame) complimented Meier and Wolfe on their paper. As a member of the study panel, he cautioned that it is not for the panel to set what is an adequate benefits package. That is not necessarily the members’ area of expertise, although some of us certainly could weigh in on those issues, he said. But it is very important to know, as things roll out, what would be available from the data that reflects what is being done in society. In actuarial work, one often hears this kind of referral to typical benefits offered, typical large employer benefits, and typical small employer benefits. So the ACA will help very much because its benefits standards will reduce some of that variation and make data collection easier. But the study panel should not make value judgments, he said.

Michael Hurd (RAND) had two comments, one very specific to the paper, another one much more general. The first has to do with the adjustment for out-of-pocket medical expenses. It really affects the elderly the most, and that brings up the issue of assets. The elderly have quite a few assets. The paper recommends annuitizing assets for an income flow, but in fact people do not annuitize. The assets are meant partly to be precautionary assets. Medical expenditures are partly episodic and partly chronic, so people should be allowed to (and in fact do) spend episodically out of their assets. So an annuitization would distort the availability of those economic resources to buffer against risk.

His second comment was much more general. He questioned why the study panel would want to develop a measure of economic ex ante risk. That is a complex undertaking, requiring the joint modeling of economic resources and risk for health care spending and producing ex ante probability distributions that are not just a variance but the very high end because of the skewed distribution of outcomes. These have to be jointly modeled with economic resources because spending varies with economic resources.



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