Medicare: Assessing Risk

Merriam-Webster defines risk as “the possibility of loss or injury.” In other words: peril.

Insurance, at its core, is a tool for managing risk. Many people buy insurance hoping to protect themselves from risk—but that’s not quite accurate. You can’t truly remove risk. You can’t even minimize it in an absolute sense. Risk is ever-present. What insurance does is help reduce the impact of loss if and when a risk becomes real.

In 2015, renowned thinker Nassim Taleb addressed a room full of insurance professionals at a KPMG-hosted event. He said:

“There are two ways to approach the problem of risk. The first is trying to understand the dynamics of the world. Interesting, but this wont get you far. The second is to make sure your contract insulates you from [risk].”

Taleb’s point was simple: trying to understand risk is fascinating, but ultimately incomplete. What matters more is having structures—contracts—that reduce your exposure to catastrophic loss. That said, through years of study and work with clients, I believe there’s a third path people take, whether they know it or not.

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3 Approaches to Living with Risk:

1. (Understanding the Risk) Mapping all the systems, variables, and probabilities. Theoretically possible. Practically? Rarely useful. The human experience is far too complex to model completely.
2. (Insulating yourself from risk) This is where insurance comes in. When a worst-case scenario strikes, you already have a plan in place—ideally one that transfers much of the financial burden.
3. (Ignoring Risk) This is the most dangerous path. Often, people who partially understand risk feel they can “think their way” around it. They don’t take action, hoping it all works out. But risk doesn’t care about your thoughts. It shows up anyway.

Personally, I’ve been working hard to remove that third approach from my system. I value clarity and security. That’s why I choose to focus on insulation: carefully crafted contracts that reduce the emotional and financial cost of unexpected events. That’s also the lens through which I serve my clients.

No plan can cover every possible risk. But the biggest risks—low-frequency, high-severity ones—can be named, studied, and protected against.

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There is no universal solution to assessing risk, protecting against it, or even understanding it. The optimal strategy will include a balance of minimizing risks via contracts and managing risks through awareness and understanding.

When assessing risks associated with Medicare insurance, it helps to consider the following.

3 Considerations for Medicare Beneficiaries:

1. What diagnoses, treatments, and conditions are already present? What medical risks are statistically more likely?
2. How will you handle monthly premiums, unexpected bills, or changes to your care needs? Money is always a part of the risk equation.
3. Are you on regular prescriptions? Playing pickleball three times a week? Seeing a chiropractor or therapist? These habits impact what kind of coverage will serve you best.

These are the first things to look at and assess when approaching the risk management decisions associated with Medicare. When you have to make decisions for you or a loved one, let’s discuss your special circumstances.