When it comes to assessing or "monetizing" the possibility of a bad future event, the insurance-minded Disease Management Care Blog recalls that a common approach is to multiply the probability of the outcome and its value. For example, if the chance of a $100,000 house burning down in the next year is 1%, the present value of that risk is .01 x 100,000 or $1000. That $1000 figure is the starting basis of calculating the cost of homeowner's insurance.
While that logic only goes so far, it can be a useful way to look at other types of risk. For example, instead of confidently proclaiming that the Affordable Care Act "will" or "will not" lead to a deficit, it may be wiser to describe the range of probabilities. So, depending on future GDP, inflation, disease burden, and other factors, it could be reasonably estimated there is an "X" percent chance it will increase the deficit by "Y" billions of dollars. Multiply that downside risk against the size of the deficit, and Congress and the White House could use that number to discuss the implications for this year's budgeting.
Fat chance of that happening.
With just hours until the State of the Union ("#SOTU") address, it appears our cerebral President won't be thinking that way. Rather, it's more likely that he extol healthcare.gov's repaired functionality, remind listeners that millions of Americans have signed up for insurance, push a "regulatory" agenda and threaten that, so long as he wields the veto pen, "there's no going back."
While the DMCB admires the President's pluck, it still fears that Obamacare could turn out to be his Napoleonic Russian invasion. While he's taken "Moscow" with the passage of the ACA, the countryside is filled with angry partisans, the 2015 elections portend a long cold winter and his supply lines are threatened by botched health insurance data feeds, a dodgy mandate, unintended consequences and costly risk pools.
Once the political theater of SOTU is over, the DMCB suggests that Mr. Obama's advisors should quietly ascertain the likelihood that the ACA gets worse (1%?, 10%?, 25%?) in 2015 and multiply that times the value of the President's legacy. A realistic appraisal of that number may prompt the President to look at his signature achievement in a new light, gauge the political theatrics for what they are and devote a commensurate level of Oval Office attention to making the law work.