Health modeling

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WFJ
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Health modeling

Post by WFJ »

I am curious if anyone has created models that include the p=1.00 of eventually not being able to care for oneself? All ERE models (and most FIRE) assume the individual is healthy and able to engage in all forms of self-reliance. But something as simple as a broken right arm, or if a couple, a case of a mysterious virus (2019), can render all ERE models flawed or useless. Health issues that would render self-reliance difficult if not impossible is a right skewed X^2 distribution with a cumulative probability of 1.00 and impossible to ignore for any ERE model to be complete.

My (Net Worth)/(Expenses) is between 100 and 300 depending on location and whether a car is needed but continue to work as above is difficult to estimate as expenses will dramatically increase with any health compromise. A Markov switching model would need to be applied to assume two states: Healthy and Not Healthy. Another issue to explore is whether the state is temporary (broken arm) or permanent (sight/hearing/mobility/etc...). In my own case, I estimate expenses would spike 200%-400% due to common injuries suffered (ACL/car accident/cancer).

I'm curious if anyone has ever estimated how much of their self-reliance can be completed with one arm, or when mobility is restricted (loss of sight/crutches/wheelchair)? These risks are most likely lower for those in ERE as miles driven or work-related stress are major causes of health issues, but everyone will get old and lose their ability to completely care for themselves at some point in their lives assuming one does not die in perfect health in a skydiving accident.

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Alphaville
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Re: Health modeling

Post by Alphaville »

i'd suggest annualized rather than monthly expenses.

also we had a board member with cerebral palsy introduce themselves recently but unfortunately there was no followup.

you can't markov-chain all of life. therefore, keep your health & disability insurance, where your maximum out of pockets can actually be calculated vs. uncovered events.

Dream of Freedom
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Re: Health modeling

Post by Dream of Freedom »

WFJ wrote:
Sun Apr 25, 2021 2:54 pm

I'm curious if anyone has ever estimated how much of their self-reliance can be completed with one arm, or
I actually broke a bone in my right hand about 3 years ago. It didn't slow me down too much as far as self reliance. The main problems it caused me were writing and using a mouse. Some time spent with an adult coloring book got my writing legible but slow. The mouse was terrible.

Edit: Though my issues were with fine motor control, not moving heavy objects, I am also a moderately muscled mesomorph of above average height. So some people might have more problems.

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Bankai
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Re: Health modeling

Post by Bankai »

Ultimately, leaving a career and retiring early is a leap of faith. One will never be fully prepared for every eventuality and yes, things will go wrong at some point after pulling a trigger. But that's why the stash and the skills one developed to build that stash and the free time the stash allowed and all the relationships one built using that free time are for. Money gives security only to a point, after that it's all about adaptability, skills and connections. It's important to have faith in future self's ability to deal with life's surprises.

As to your particular examples of blindness and limb loss, those are almost 3 sigma events and therefore not worth worrying about in my book, and even wheelchair is only 1.5%. If you do worry about them, you should worry more about all the possible things that can go wrong and also have higher probability. Cancer is about 2 orders of magnitude more likely than blindness or limb loss, so focusing on preventing it seems like better use of one's limited time and energy. Same with heart disease, diabeties etc. At 100x (presumably annual) expenses more money doesn't but any more security and it's better to spend that time optimising one's health habits and minimise chances of any adverse health issues. And then just live and deal with life as it unfolds.

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Re: Health modeling

Post by jacob »

The "systems" would have to be downsized much like people move into smaller and less maintenance-intensive places when they get [too] old(*) or run short on spoons https://en.wikipedia.org/wiki/Spoon_theory . This would mean a less ambitious or more organized life more akin to lower WLs with less money since spending efficiency has decreased. However, one would be no worse off than a salaried person would be trying to maintain their job with one arm and no eyes or what else the example called for.

Presumably both cases have insurance---it would be nuts not to.

This presumes one is fine with e.g. SS disability level payouts (the average payout is 225% of what I spend) and Medicare level treatments. The alternative would be to spend an extra decade at work in order to accumulate millions to pay for the Cadillac version of a contingency that's rather unlikely. But people do that!

But the tl;dr is that the difference in such a situation between you and the average person (who "doesn't have $400 in cash for an emergency") is that you have a lot of money and they don't.

(*) It is wise to plan ahead for this move lest one end up with "technical debt". A typical situation would be someone with a complex financial situation but diminishing brainpower/attention span to handle it. Someone with a 2000lbs hoard of collectibles but no energy to clean it up. It could also be accumulated damage from lifestyle diseases which get somewhat harder to "pay off" with age.

The bigger problem is likely mental. It happens that someone freezes their development in a certain self-image. For example, their life is all about, I don't know, bird watching or flying airplanes, ... and then they lose their eye-sight and spend the last 20 years of their life lamenting that they're now useless as birdwatchers or pilots instead of switching track. In that regard a WoG is not as risky as a job because punching out a node leaves other nodes somewhat intact. If I lost a arm, I could still read, write, or edit. If I lost my eyes, I could still exercise or conceivably do handtool woodworking. Having some practice not self-defining or doing "just one thing" should make adverse outcomes easier to deal with.

basuragomi
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Re: Health modeling

Post by basuragomi »

Just cribbing from my journal, this is for Canada:

Image

NPV5 of lifetime healthcare costs:

Code: Select all

Percentile:	50%	95%
Drugs: 		$  500	$250,000
Dentistry: 	$6,720	$ 13,500
Optometry:	$2,250	$  5,000
Total: 		$9,500	$268,500
Below 65: 0.04% of the population below 65 is in a long-term care home.
Above 65: 0.14% of the population 65-74 and 1.2% of the population 65+ is in a long-term care home.
Above 75: 1.3% of the population 75-84 and 3.8% of the population 75+ is in a long-term care home.
Above 85: 14.2% of the population 85+ is in a long-term care home.

Private long-term care homes are about $70,000/person/year. I didn't figure out what the distribution of stay lengths are but the average is less than 2 years before death. The present value of even a 99th-percentile long-term care outcome is pretty low (in Canada).

Frita
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Re: Health modeling

Post by Frita »

My spouse is more of the numbers guy and has this modeled out for maximum care. We do discuss how our Iives will and could change as we age. Decline and death will occur. Despite being healthy and taking excellent care of oneself, those two are givens. Accidents happen. Life can be unpredictable. Sometimes unpredictable accidents occur in medical facilities, from taking pharmaceuticals, from side effects of treatments/cures/interventions, and/or isolated to gross incompetence. Personally, I don’t find insurance reassuring; my spouse, less so. It’s a tool, a mechanism to pay for healthcare, not to ensure health and guarantee a long life.

A bit off topic and perhaps controversial , I do support Death with Dignity as an option. It’s a personal choice that I believe should be available to all.

@ClassicalLiberal
This is a topic where I markedly miss you, dude.

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Alphaville
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Re: Health modeling

Post by Alphaville »

Frita wrote:
Mon Apr 26, 2021 10:49 am
Personally, I don’t find insurance reassuring; my spouse, less so. It’s a tool, a mechanism to pay for healthcare, not to ensure health and guarantee a long life.

A bit off topic and perhaps controversial , I do support Death with Dignity as an option. It’s a personal choice that I believe should be available to all.
right, as you explain so well, there is no guarantee to health and a good life.

the insurance is just to cover the cost of making up for the loss of health or ability. e.g.: can no longer ride a bicycle, must hire cycle taxi. can't climb stairs, must add elevator or move. damaged organs: get transplant, etc.

it's of course possible to self-insure, but the backup to current lifestyle ought to be available to make modifications as abilities decline, either suddenly or gradually. eg one may need prosthetics, occupational therapy, or a caretaker, or pricey pharmaceuticals.

caretakers used to be one's own children, in the old days. these days... 50/50 maybe? and even then... when we took care of my grandparents and great grandparents, even with family around all day, we ended up hiring nurses to help out.

plus... a child is rarely qualified to teach you to regain dexterity after a crushed hand or to relearn speech after a stroke, for example. occupational therapists do that.

prosthetics and aids are improving every year, e.g. compare today's artificial limbs to the ones from 50 years ago. bionic eyes, in development, will come at a price. stephen hawking's voice computer was not cheap i'm sure, especially in the early days. computer/human interface will help address disabilities but it won't be free, especially in the usa, where we get innovation, but at high prices.

eg https://www.biospace.com/article/artifi ... w-heights/

last: i don't know how else to put this, but yeah, death with dignity is definitely my ultimate retiring plan :lol:

WFJ
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Re: Health modeling

Post by WFJ »

Bankai wrote:
Sun Apr 25, 2021 5:32 pm
Ultimately, leaving a career and retiring early is a leap of faith. One will never be fully prepared for every eventuality and yes, things will go wrong at some point after pulling a trigger. But that's why the stash and the skills one developed to build that stash and the free time the stash allowed and all the relationships one built using that free time are for. Money gives security only to a point, after that it's all about adaptability, skills and connections. It's important to have faith in future self's ability to deal with life's surprises.

As to your particular examples of blindness and limb loss, those are almost 3 sigma events and therefore not worth worrying about in my book, and even wheelchair is only 1.5%. If you do worry about them, you should worry more about all the possible things that can go wrong and also have higher probability. Cancer is about 2 orders of magnitude more likely than blindness or limb loss, so focusing on preventing it seems like better use of one's limited time and energy. Same with heart disease, diabeties etc. At 100x (presumably annual) expenses more money doesn't but any more security and it's better to spend that time optimising one's health habits and minimise chances of any adverse health issues. And then just live and deal with life as it unfolds.
This would be "losing the forest from the trees". If one adds up all the ways one could become disabled or unable to care for oneself (let alone function at a high self-reliant level), the cumulative probability for all living things is 1.00 and ignoring this reality is a major omission in any model. This is a 100% risk that is ignored in ERE and wondering if this is due to tunnel vision or some other bias.
Last edited by WFJ on Wed Apr 28, 2021 11:30 am, edited 1 time in total.

WFJ
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Re: Health modeling

Post by WFJ »

jacob wrote:
Mon Apr 26, 2021 7:42 am
The "systems" would have to be downsized much like people move into smaller and less maintenance-intensive places when they get [too] old(*) or run short on spoons https://en.wikipedia.org/wiki/Spoon_theory . This would mean a less ambitious or more organized life more akin to lower WLs with less money since spending efficiency has decreased. However, one would be no worse off than a salaried person would be trying to maintain their job with one arm and no eyes or what else the example called for.

Presumably both cases have insurance---it would be nuts not to.

This presumes one is fine with e.g. SS disability level payouts (the average payout is 225% of what I spend) and Medicare level treatments. The alternative would be to spend an extra decade at work in order to accumulate millions to pay for the Cadillac version of a contingency that's rather unlikely. But people do that!

But the tl;dr is that the difference in such a situation between you and the average person (who "doesn't have $400 in cash for an emergency") is that you have a lot of money and they don't.

(*) It is wise to plan ahead for this move lest one end up with "technical debt". A typical situation would be someone with a complex financial situation but diminishing brainpower/attention span to handle it. Someone with a 2000lbs hoard of collectibles but no energy to clean it up. It could also be accumulated damage from lifestyle diseases which get somewhat harder to "pay off" with age.

The bigger problem is likely mental. It happens that someone freezes their development in a certain self-image. For example, their life is all about, I don't know, bird watching or flying airplanes, ... and then they lose their eye-sight and spend the last 20 years of their life lamenting that they're now useless as birdwatchers or pilots instead of switching track. In that regard a WoG is not as risky as a job because punching out a node leaves other nodes somewhat intact. If I lost a arm, I could still read, write, or edit. If I lost my eyes, I could still exercise or conceivably do handtool woodworking. Having some practice not self-defining or doing "just one thing" should make adverse outcomes easier to deal with.
This is closer to the point as how many "spoons" does it take to maintain a self-reliant lifestyle? Definitions of disability from an insurance perspective would be very different from the definition from an ERE perspective. How long could one go who was using 10 spoons to 3 spoons or how much spoon slack is built into the system today and at some point in the future are the major blind spots in ERE. Acute health issues can not be hacked and must be addressed by traditional methods.

I would also estimate that those over 40 know of several people who have fallen into a "healthy one day, dependent the next" category, while those under 40 (outside of close family members) are less likely to have observed this fact of life.

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Bankai
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Re: Health modeling

Post by Bankai »

WFJ wrote:
Tue Apr 27, 2021 5:04 pm
If one adds up all the ways on could become disabled or unable to care for oneself (let alone function at a high self-reliant level), the cumulative probability for all living things is 1.00
So you assume everyone becomes disabled in old age? But most people die while still going strong. Most people also reach old age with no money other than social security/state pension and somehow manage just fine. Anyone retiring early at 3% SWR has very good odds of being very rich by the time they might need to pay for care. I'd rather have more time during my 'good years' now when I'm in excellent shape than more money 50 years from now which I'm likely to ever need.

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Ego
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Re: Health modeling

Post by Ego »

WFJ wrote:
Tue Apr 27, 2021 5:04 pm
If one adds up all the ways on could become disabled or unable to care for oneself (let alone function at a high self-reliant level), the cumulative probability for all living things is 1.00 and ignoring this reality is a major omission in any model. This is a 100% risk that is ignored in ERE and wondering if this is due to tunnel vision or some other bias.
Money very rarely solves the problem. It can in some cases cushion the fall but it does not eliminate the risk. The question then becomes, how many years are you willing to trade to buy that cushion you may never use? Those healthy years that you are trading away today are valuable. You will probably be trading a year today for a cushy month in the future. What will that cushy month look like? How much different will it be than how it would have been had you not bought the cushion?

When you are on your deathbed will you wish you bought more cushions or will you wish you lived more today?

Wouldn't it be wonderful if we were able to make major decisions like this and then fast-forward through life to see the consequences play out over the whole life?

Qazwer
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Re: Health modeling

Post by Qazwer »

I think the better risk methodology in this case is probably more scenario planning rather than explicit mathematics. So it would be worthwhile to ask how much any of your activities are reliant on physical (cut wood, carry water) and how much on maintaining ability to make new friends (mental health) or learn new things (repair stuff by watching YouTube videos) etc etc
It is not an absolute but like any trade off and any test of resiliency of a system you have to think through various potential shocks to the systems.
We will all get older. We will all likely get injured at some point. Insurance could cover the medical expenses but they will not cover lifestyle changes especially if you need to be healthy in some dimension for whatever plan you have.
Solutions historically used to be cushioned by family and community. ERE in many ways is a methodology of going back to older systems, but not that of a localized family. Grandparents can still be useful in caring for the young. Money can be a way somewhat to mitigate our more nomadic lifestyle. One solution that (on average) neither ERE nor the salaryman type seem to want to choose though is to live with family and community. The advantages of the world are too great at this current time. Rural communities where the family structure has tried to hold together in this country have stagnated. So with our modern trade offs, life cycle economics kick in. You in some ways save now for when you cannot earn an income later. Or if you can replace income with skills to a large degree now, you still have to at least partially consider saving now to a degree so that you can replace skills later with money. Or you need to maintain family. Or you just accept to live on a whole lot less with lower standard of living later. Trade offs may or may not be worth it. YMMV

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Alphaville
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Re: Health modeling

Post by Alphaville »

Qazwer wrote:
Tue Apr 27, 2021 10:10 pm
I think the better risk methodology in this case is probably more scenario planning rather than explicit mathematics.
i read this and it got me thinking that, while we can't formulate this for an individual, actuarial science actually deals with this regularly for populations based on existing data + projections.

i went looking around a bit, and what we're looking for here are morbidity tables.

eg
https://www.soa.org/resources/experienc ... -workbook/

which i will not get into :lol:

but really there is no need to reinvent gunpowder i think. purchasing insurance at competitive rates ought to cover your cohort+ the insurer's profit margin.

which i'm willing to pay to compensate for the work they perform and the risks they assume.

how you will individually perform vs your cohort is the noncomputable part. i'd rather have insurance and not need it than need it and not have it. being left in the lurch is a horrid experience.
Last edited by Alphaville on Tue Apr 27, 2021 10:44 pm, edited 1 time in total.

Qazwer
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Re: Health modeling

Post by Qazwer »

You are talking about major disability where insurance kicks in - what about someone who heats their house with wood from trees they chop themselves and break an arm? Insurance will cover the X-ray and cast. No disability insurance for heating your house that I know of. Hence each plan should be stress tested for life. Add in you used to haul the wood x feet. That might not be that easy when you are 80 years old. Insurance is good for health care. Insurance can also work for people who built their life around money. It is harder though if you do things for yourself.

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Alphaville
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Re: Health modeling

Post by Alphaville »

Qazwer wrote:
Tue Apr 27, 2021 10:43 pm
You are talking about major disability where insurance kicks in - what about someone who heats their house with wood from trees they chop themselves and break an arm? Insurance will cover the X-ray and cast. No disability insurance for heating your house that I know of. Hence each plan should be stress tested for life. Add in you used to haul the wood x feet. That might not be that easy when you are 80 years old. Insurance is good for health care. Insurance can also work for people who built their life around money. It is harder though if you do things for yourself.
aflac will hand you "cash for accidents, no questions asked" but imo emergency savings work better: https://www.aflac.com/individuals/produ ... rance.aspx

anyway in this case it's better to self-insure via your own money or community connections.

eg. where i used to live people heat their homes with firewood, but old people clearly can't hack it and depend on younger relatives to provide. "go chop some wood for your grandma."

so we're trying to convince my wife's parents to plan for their old age and get a pellet stove, but they always wait for the last minute. which might be a good financial strategy in case they never actually need it :D (they have younger people around... i'm just not sure they're reliable)

but yes if you do things for yourself you have to plan for when you slowly can't do it anymore, but still have a desire to live. has to be factored in that you or your loved ones might at some point require assisted living.

J_
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Re: Health modeling

Post by J_ »

WFJ wrote:
Sun Apr 25, 2021 2:54 pm
but everyone will get old and lose their ability to completely care for themselves at some point in their lives assuming one does not die in perfect health in a skydiving accident.
Have foresight. 15 years ago I adapted my house for such. Made an extra shower and bed(room) on ground level. Made an extra pantry (simple kitchen) on the first floor.
So if I get impaired in one way or the other I do not need to climb stairs (+ if it is needed the first floor can be given to a nurse-person as a trade off for rent getting (some) assistance).

WFJ
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Re: Health modeling

Post by WFJ »

J_ wrote:
Wed Apr 28, 2021 9:32 am
Have foresight. 15 years ago I adapted my house for such. Made an extra shower and bed(room) on ground level. Made an extra pantry (simple kitchen) on the first floor.
So if I get impaired in one way or the other I do not need to climb stairs (+ if it is needed the first floor can be given to a nurse-person as a trade off for rent getting (some) assistance).
This is the additional costs that would be interesting to estimate.

Qazwer
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Re: Health modeling

Post by Qazwer »

‘This is the additional costs that would be interesting to estimate’

Going back to scenario planning

First define the health shock which you are looking at
eg

Injury (broken foot)

Age (weakness, mental decline etc etc)

Then look at your current systems you use to supply your current wants or needs

Use a bicycle to grocery shop
Make a new friend to borrow a car from when needed
Car repairs you do yourself

Etc

Come up with alternative plans - calculate the difference in costs

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