Archive | July, 2009

Is Health Care Reform Dead?

19 Jul

 

Is health care “reform” falling apart, probably not?  Congress is still rushing full speed ahead despite growing realization that there is no reform going on, but rather expansion of coverage and little else.  Health care reform in its current form should fall apart and rather than pushing an ideology, let’s try reform.

From Massachusetts to Washington, DC, old ideas are becoming new again.  Physician capitation and group practice is in the news.  In the Sunday July 19 Washington Post an article notes that a new idea is the use of team of health care professionals coordinated by a primary-care physician.  Massachusetts wants capitation in lieu of fee for service.

Obama wants to expand health care without increasing the deficit, ok, but what does that to do with the growth of health care costs that are more than twice-general inflation?  The President repeatedly talks about the stress on the economy caused by health care costs, again, ok, but what does legislation that expands coverage and does nothing to control future costs have to do with his agenda?  Finally, controlling the cost of health care to the federal government is one thing, but that is not controlling costs for the rest of the economy.  In fact, often the opposite is true.

As I have said many times over the years, the HMO was the answer to our health care cost and coverage problems.  America rejected that idea, for all the wrong reason but rejected it nevertheless. Now the basic concepts that are part of a well run HMO are the things missing from any so-called reform package.  In the meantime as I mentioned above, the concepts now thought of as new but long a part of the HMO, like capitation or better still salaried physicians, the idea of a primary care doctor as coordinator of all care are seeping up.  Has the light dawned on those anointed few, probably not?

Capitation died because there were charges of physicians avoiding care because they could not make money. The primary care doctor as coordinator or gatekeeper was seen a preventing access to needed specialist and after all, who better than the patient to know when specialty care is needed?  Capitation meant that to make money a doctor had to take on new patients and to keep up that workload; it was charged that only minutes were spent with a single patient.

None of this is new, those of us who have managed employer based health plans have heard it all before, tried it all before.

Controlling health care costs will not work until and unless the American people have a different, more educated, more realistic view of what health care can deliver, what true quality care is and that there is a point where the cost benefit must be determined.  We are a long way away and our politicians refuse to make that case rather they are more comfortable in promising business as usual.

Massachusetts Big Idea

17 Jul

In an effort to control costs and help it’s ill conceived health care reform survive, the state has come up with a brilliant idea. It wants to pay physicians a fixed monthly fee per patient and have physicians form groups to provide care.

Should we tell these geniuses that’s an HMO and it was tried twenty years ago.

Beware the AMA

17 Jul

The AMA has offered support for the House health care reform legislation in a letter to Charles Rangel.

So, is the AMAs support for reform consistent with lowering costs when those savings of necessity must come in large part from doctor’s pockets?

The AMA fought HMOs because they feared HMOs would take patients and lower costs. Physicians then started their own HMOs and tried to run them as business as usual without fundamental change in health care delivery thereby hastening the HMOs demise.

If the AMA is for reform there isn’t any.

Don’t jump for joy over early retiree subsidy

15 Jul

 

Before you as an employer get too excited by the provision in the House just released health care reform bill related to subsidizing large claims for early retirees, it is not what you may think. Here is a key point in the legislation

“(3)  USE OF PAYMENTS.—Amounts paid to a participating employment-based plan under this subsection shall be used to lower the costs borne directly by the participants and beneficiaries for health benefits provided under such plan in the form of premiums, co-payments, deductibles, co-insurance, or other out-of-pocket costs. Such payments shall not be used to reduce the costs of an employer maintaining the participating employment-based plan.”

What “health care reform” really means

14 Jul

 

I want it and I want it now!

I want it and I want it now!

President Obama wants health care reform and he wants it now.  In fact, he wants legislation to pass before the August Congressional recess. His view is that the American people desperately need health care reform.  Mr. Obama’s promise is health care reform that controls costs, expands coverage and ensures choice.  He also makes the repeated case that controlling health care costs is essential to the economy.

The problem is that legislation rushing through Congress does not control costs in the next several years and perhaps not all, period.

For example:

Here are some of the components in the legislation in current form

  1. Eliminate underwriting standards that restrict coverage for preexisting conditions and charge more or delay coverage for people with medical conditions
  2. Mandate unlimited coverage in health insurance policies and self insured employer plans
  3. Require full coverage with no deductibles for certain preventive services and pediatric care
  4. Expand coverage under Medicaid
  5. Establish minimum benefit requirements for employer plans
  6. Add long term care coverage through employers
  7. Reduce payments to health care providers under Medicare and Medicaid
  8. Expand coverage to more Americans
  9. Raise taxes in some combination
  10. Require numerous filing and reporting by employers and health insurance companies

Whether you agree that any or all of these ideas are good or not is not the issue, the issue is that each and every one of these steps will increase health care costs and related administrative expenses for many years into the future.  The fact is that none of these items will stem the rise in health care costs due to medical inflation, the aging population and health status of the American public.  What we do have is a formula for increased demand in health care services, cost shifting to the private sector and taking credit for savings that are little more than a wish list. Any elements of the legislation intended to raise the quality of health care or to slow the growth in health care costs are long-term goals, so long term that it is impossible for anyone to know if they will work at all.

If you don’t agree, look to Massachusetts and you will find more people covered by health insurance, a growing problem with adverse selection due to mandated coverage and the elimination of underwriting rules, ever growing costs exceeding previous budget projections and still people who cannot afford health insurance.

And, that’s the truth about “health care reform” we are so in a rush to put into law.  This is not what the American people desperately need.

Pretend I am not here

Pretend I am not here

Madison Avenue is no place to get your health care

14 Jul

 

“The best care anywhere.  If you come here first you will often have a better outcome.”

These are some of the claims contained in medical advertising.  Are they true, who knows, they are marketing tools to get you to use one hospital or another.  What is the purpose of such advertising, is it to raise the quality of your health care?  That is doubtful; rather the intent is to raise the income of a facility.

med ad 2If you want a good doctor, how do you find one?  Well, more often than not it is the referral by another doctor or a friend or relative.  Do they have good data to support their suggestion, no they do not.  Is the billboard advertisement telling you one health plan or the other has better doctors any more reliable?  No it isn’t’ and there is no good source to determine the quality of the doctor who is treating you.  In addition, beyond the quality of health care there is no way to determine how efficient the doctors operation (small business) is or if you are getting value for your money. 

More often than not if a doctor does not participate in a health plan or Medicare it means one thing, it means he charges high fees.med ad 1  Does a high fee mean that the doctor provides higher quality care, no it does not.  However, isn’t it interesting that even if this were true, why should a higher quality doctor be paid more and why don’t all doctors provide similar quality care?  Don’t we expect all doctors to provide high quality health care? In reality, a high fee doctor may simply mean he operates with higher costs, perhaps an inefficient office operation and in some case because quality is not so good and his malpractice insurance costs are high.

There is absolutely no reason for hospitals, pharmacy companies or physicians to advertise their services.  There is no reason to artificially increase demand health care.  However, there is a critical need for quantitative, quality data that is available in simple terms for anyone to access.  Let all health care providers compete on quality first and cost second.

Tell me again about global warming

14 Jul

 

A few years back, I was at my house on Cape Cod, it was the July 4 weekend and when I got into my car, the outside temperature was 101 degrees. I headed for the nearest store and bought the last three air conditioners.  The house was reasonable comfortable, noisy but cooler.

In the years before that incident, it was typical on Cape Cod to need a sweatshirt walking around at night and to sleep with a blanket…with no air conditioning.  In fact, it was unusual to find a motel with air conditioning.

It appears that global warming was having an impact.  I just hope that the impact is not so severe before I am gone that the melting ice cap also results in the Cape being under water.

But wait, it is now July 2009 and I have central air conditioning, but I am not using it.  Why, you ask with chagrin?  Well, because it is so darn cold you can’t sit on the beach

July was never like this

July was never like this

comfortably, the daytime highs this July are barely in the 70s and tomorrow night is predicted to be an all time low of 58 degrees.  What the heck is going on?

Do I buy this global warming stuff or not?  Has the market bottom, or topped as the case may be?  Are we in a retrenching mode?  I need help; do I invest in tee shirts or sweat shirts?

Optional Long Term Care

14 Jul

 

I know what is best, trust me

I know what is best, trust me

The senate HELP Committee draft legislation for health care reform contains a provision that will automatically enroll Americans in a long-term care insurance program.  The maximum premium is to be $65 per month.  If you do not want it (and remember that is it coming out of your pay), you are free to drop the coverage.  Why would this be in health care reform legislation that is intended to expand coverage to all Americans and (ho, ho, ho) control costs?  The short answer is that Senator Kennedy wants it in the legislation.  Is that sufficient for it to stay in whatever form the health care bill takes?  Under normal circumstances perhaps not, but as is typical in Washington maneuvering, the premiums are set so that there is a projected excess of premium over claims of $50 billion over the next ten years.  That is of course if Americans actually buy the coverage.  However, it also means that if the long-term care option is dropped the Senate has to find another $50 billion to pay for the expansion of health care.  In the final analysis, be patriotic and buy LTC insurance from the federal government to help finance other programs.  It would be hard to make this stuff up.

What does it mean to link a public option under health care reform to Medicare?

13 Jul

 

In short, it means that the private sector will be paying more; it is that simple.  Look at it this way, even now under Medicare the payments are well below the private sector and even below the cost for some services.  The White House has announced new deals with the pharmacy industry and with hospitals to cut their costs to the federal government.  One has to ask how does that save money or free up money to add new entitlements.  The math is simple, if the money reduces the federal expense there is more federal money to spend and the unintended consequences (and I use the term loosely) is that costs go up for everyone else.  Think of it as a stealth tax on everyone who has health insurance in the US.  To help pay for expanded coverage for some Americans all other Americans with health insurance will pay even more if further cuts are made to the payments made by Medicare.  Most, but not all of this burden will be on employers making their ability to remain competitive that much more difficult in this economy.  Think of it as a big shell game, the federal government moves money around and around and as long as it comes off the federal books, it is ok.

Now, let us take this one-step further and assume there is no private sector and the public option becomes the only option.  There is no place to shift costs.  If the federal program keeps managing its costs simply by not paying providers what it takes to provide quality health care then what happens?  Or, if in the interest of meeting budget constraints public option medical costs have to be cut, then what happens?  Play out this scenario a few years and the answer become the same as it is in every other country that has such a program.  Health care providers make considerably less, services are limited, waits are longer for some non-urgent care, routine care is not a priority and those who can afford it buy supplemental coverage to obtain the services they were used to and expect.

If this is the health care system America wants, so be it. However, it would be nice to have our politicians tell us where we are truly going.

Did Americans make a big mistake last November?

13 Jul

 

Yes, I am talking about the election.  I suppose that the simple answer to that depends on whether you are a Democrat, a liberal or a Republican and perhaps conservative.  I say simple answer because I suspect that many of the people who voted as they did were indeed voting for change, change from the current administration but not necessarily change of the kind we are now seeing from Washington.  Fifty-two point nine percent of Americans voted for Mr. Obama.  I do not see winning barely more than half of the votes as a mandate to change America and yet that is exactly what we are seeing, a new direction for America that appears to be taking us into a socialized democracy.  A direction that abhors the accumulation of wealth as being somehow unfair, a direction that will lower the competitive American spirit, appetite for risk and the reward that comes with it, in short we are moving to an America that is not much different from the rest of the western world.  That is essentially mediocre, average, mundane, ok, but nothing special.  At the same time, we see the growth of China and India.  It seems to me now is the time like no other in recent history for the United States to gear up what got this country to a place of world power and economic leadership, a time for innovation, risk taking, entrepreneurial spirit and not government dependency.  To be sure, this is no easy task and there will be winners and losers, but the biggest winner will be the American people as a nation. 

I think America made another big mistake last November and that was giving absolute power to the politicians of one party.  That is never a good idea in my view. We cannot get rid of the politicians but we can provide a balance between two parties and we blew it.

We face a political view that sees the answer to budget problems in raising taxes and borrowing more as opposed to managing spending. We have uncontrolled debt, government into more and more aspects of the economy with much of this driven by pie in the sky assumptions that any reasonable person knows are guesses at best, hopefully with some education behind them.  We rationalize every penny spent, just as Americans can rationalize the need for a flat screen TV or a trip to Disneyworld; hey, it only increases our monthly payment by $50.00.

We were sold a stimulus package to get us out of a recession. Much of that was necessary, but much of it was also irresponsible spending to win favor with constituents or political allies. To date the bulk of the money has merely been transferred to the states, which is the worst place to expect prudent spending. Irresponsible spending under the guise of stimulating the economy will burden future generations and may well place the United States at a competitive disadvantage in the world markets.  We are a debtor nation dependent on other governments for our survival.  When we find savings in one entitlement (estimated of course), we quickly spend those savings on something new rather than lower our spending and debt.  The American government operates as if there is a never-ending supply of cash and credit.  This is exactly the mentality that got many Americans in trouble in the last two years and yet we see no problem with our government doing the same thing.  There is no fundamental difference.

We are rushing to change the environment, the health care system and who knows what else.  That rush means we cannot possibly know all the consequences and it means that many of the assumptions are flawed.

The more Americans become dependent on government entitlement programs and less inclined to personal responsibility, the more average we all become. What may be intended as a safety net instead becomes the sole source of a personal need as is the case all too often with Social Security. 

Government meddling in market forces always leads to unintended consequences, and yet we repeat this mistake continuously and when things go wrong, the blame is placed somewhere else.  The housing and mortgage crisis are good examples.

In ten years when we look at America what will we see? Will we see a country with greatly diminished world influence, with high tax rates, with slow economic growth, with tremendous debt, with disincentives to take risk and innovate and with a population so accustomed to being provided for it demands more and more and in the process becomes satisfied with merely being one of the world crowd?

Should employer sponsored health benefits be taxed?

9 Jul

 

Finding ways to pay for health care reform and greatly expanded health coverage for Americans is not easy.  First, nobody knows what the real cost will be. Second, some assumed savings are in realty generous guesses. Third, the unintended consequences of some of the revenue generating schemes are clearly unknown.

Among those under consideration is taxing employer provided health benefit coverage.  In addition, capping or eliminating the tax advantages of flexible spending accounts is also under consideration.  Most recently the House is looking at a surtax on the “wealthy.”  Wealthy in this case appears to be an income in excess of $250,000, just like Warren, Bill and Donald.

The argument for taxing health benefits is that they are available only to working Americans who have such coverage, about 150 million workers and their families or roughly half of all Americans.  Some experts claim that the tax advantage of employer based health benefits encourages generous benefits and therefore employers and workers do not care what health benefits cost.  Anyone involved in employee health benefits knows how absurd that claim is. The employee does not determine the extent of benefits and for the employer it is like saying it does not care about any deductible business expense.  I doubt there is a worker left in North America who does not care very much about the cost of health care albeit in many cases that concern is limited to the amount of the payroll deduction.

The tax status of employee benefits goes back many years and while there are some limits on the tax-free status such as with group life insurance, for the most part the tax policy for

I'm smiling because I know where your wallet is.

I'm smiling because I know where your wallet is.

benefits is there to encourage offering such programs as an offset to the need for more public programs.  What did I just say?  Congress at one time saw tax policy as a way of providing social welfare programs to workers in America.  Call me crazy, but are do we seem to be reversing direction these days?

Utilizing the private sector via tax policy to provide most Americans with financial and other security needs simply makes sense.  It is more efficient and it stimulates competition not to mention helping to support a massive industry employing millions of people. Private pensions and now 401(k) plans allow Americans to retire with a reasonable income.  Should we scrap the tax benefits of 401(k) plans or IRAs to expand Social Security?  Is that the mentality pervasive in Washington these days?  (I had better not say that too loudly, I will give a congressional staffer an idea).

Frankly, I fear it is and I fear most the unintended consequences.

Long Term Care Insurance-Kennedy Proposal in Senate Committee Bill

8 Jul

 

If you thought automatic enrollment means enrolling in a 401(k) plan in a few years you may be wrong.   

The Senate Health, Education, Labor and Pensions (HELP) Committee approved the creation of a new national long-term care insurance program. This provision was previously introduced in the Senate as the Community Living Assistance Services and Supports (CLASS) Act (S. 697), sponsored by HELP Chairman Edward Kennedy (D-MA). An identical bill was also introduced earlier this year in the House of Representatives (H.R. 1721).  

Under the program, employees are automatically enrolled using the same process as under a 401(k) or similar plan.  Employers are responsible for collecting the premium payments, initially capped at $65 per month, but both the premium and the maximum benefit of $50.00 per day would be periodically adjusted for inflation. There is also a provision for collecting premiums on behalf of a spouse of an employee although enrollment would not be automatic which begs an interesting administrative issue for employers.  “I didn’t want coverage, get my money back.”  You forgot to take the deduction for my spouse.”  While the program may be “voluntary,” the government and private sector administrative costs are not.  

Given the lack of stellar performance for enrollment in the limited number of group LTC plans that exist, one can only wonder where a government run program is headed. 

Chances of this provision remaining in any final health care legislation seem pretty good given there is no measurable government cost and there is the Kennedy factor, but it is just another example of government creating more bureaucracy.   Dare we ask if the cost /benefit is there?  The fact is that if a person wants LTC coverage they can buy it now and if they buy it at an early age it is quite inexpensive, less than $65 per month in fact.  With the initial premium capped under the legislation at $65 per month it is a fair bet that the older the worker the more likely he or she is to retain the coverage which of course can lead to adverse selection.  The redeeming feature is that to collect a benefit premiums must have been paid for five years and the individual working for at least three of those five years. 

 

Bottom line, more administrative costs for employers with questionable overall benefits.

Giveth Here and Taketh Away There-Making the Numbers Work

8 Jul

 

On top of the announcement that the drug industry would lower its prices over the next ten years, we now hear of a deal between the government and the hospitals whereby hospitals will accept $155 less in payments over the next decade.  This deal assumes that there will be fewer uninsured and thus the hospitals will see less of a loss for uncompensated care than currently is the case.  In effect, someone is paying the hospitals more from one pot so that the other pot can claim savings.  Now if the pot helping the uninsured become insured is the same pot that is saving the money by lowering its payments to the hospitals then the pot of the first pot is not really saving much at all and the hospital pot is not really giving up anything.

If that is all too convoluted for you, fear not.  It is all perfectly clear to the politicians seeking to reform our health care system.  The name of the game is simply to make the numbers work.  Think of it this way, you have a budget at work and the word goes out that to make the earnings target you must reduce budgets by 10%.  However, one person who has a pet project, albeit a worthwhile one, comes up with the brilliant idea of using the savings generated by another department to pay for the project.  Is there a total reduction in the budget?   Umm, not exactly.   Here is another example, you do your five-year plan and project that your company’s health care benefits will increase by 7% a year for the next five years because that is needed to make the numbers work.  What are your chances of actually achieving that?  Well, they are about the same as the government knowing for sure what is saved in all deals being made.  In other words, the chance is zero.

However, in the scheme of things neither matter much and in both cases, nothing much can be done to make either plan work.

Risk Takers

6 Jul

 

Reckless risk takers, that is how we describe today’s bankers and Wall Street moguls and in the process we make the apparent easy leap to blaming them for all the economic woes we face. We are also keen on defining two categories of Americans, the taken advantage of Americans who are faced with unaffordable mortgages, credit card debt, and the “wealthy” who still take advantage of Americans and the system.  As unemployment approaches 10% and perhaps beyond, we seem to forget about the other 90% and the unknown percentage of Americans who do not have thousands in credit card debt, or mortgages they should never have taken.  Granted the growing number of unemployed is also contributing to mortgage foreclosures and that is very unfortunate, but let us not forget that is not how we got into this mess.

Americans lining up for food

Americans lining up for food

There may be reckless risk takers on Wall Street, but there are many more on Main Street.  Every American who took a mortgage geared more to keeping up with the Jones than common sense or to fulfill dreams that required more practical consideration were reckless risk takers. Every politician who pushed for rules that are more liberal on mortgages under the belief that home ownership was a right was a risk taker because he or she did not understand or care about the unintended consequences.

Now there are calls for additional stimulus as if we can buy our way out of this with more debt.  More borrowing to stimulate the economy when only 10%

Surplus shoes for the needy

Surplus shoes for the needy

of the already authorized stimulus has been used?  I do not know where that stimulus has gone, but I sure know there is a heck of a lot of road construction and if that is the stimulus, we appear to be affecting mostly state workers and contractors while the majority of Americans still are unaffected. While the overall unemployment rate is nearing 10% the unemployment rate for college graduates is about half of that which should tell America something, mainly the future is not in manufacturing.  How often do people need to get beat up before they realize that the future is not unskilled work or even in skilled manufacturing.  Certainly, we will need those people, but they will always be at greater risk in poor economic times.  Instead of making headlines, we need to make fundamental changes in our education system from the ground up. We need to adapt when the economy changes, we need to add courses in basic money and household management and we need to link the education system with the employers and the world economy. 

We did this to ourselves; there is no question about that.  Moreover, there should be no question that mortgaging of the economic security of future generations of Americans is not the way to our recovery.

A Sorry State of Affairs

6 Jul

 

A well-known story of the current recession is the terrible fiscal shape of the various states.  Revenue is down and they cannot meet their budgets.  Revenue may be down, but the real cause is the states thinking that they can continue unabated to support more and more spending.

An example I am familiar with and by far only one of many is the employee benefits structure for state workers.  States are the last bastion of defined benefit plans.  Only Alaska has replaced a defined benefit plan with a defined contribution plan.  Don’t get me wrong, I think the demise of the DB plan is a major mistake in America but that is another question. States treat workers not as employees but with a welfare mentality and in the process build large costs and even larger long-term liabilities.  For example, in New Jersey, pension plan participants can take a loan from the plan at 4% interest when the return assumption for the trust is around 8%.  On top of that, the loan can continue to be paid even after the employee retires. 

The unintended consequences caused by short term and special interest thinking are amazing.  In California, they are facing a potential shortage of electricity because of requirements to shift to renewable sources at the expense of expanding traditional sources needed to meet growing demand.  Simply requiring that this percentage or that percentage of energy come from a renewable source does not mean there are not adverse consequences like higher prices, less reliable supplies and inadequate supplies when renewable sources cannot increase sufficiently to meet demand.  The problem dealing with this is that it appears logical to set a noble goal for energy and it all sounds good on paper (generally in the form of legislation), but the practical implementation is often quite different.

A "Challenge" beyond budgets

A "Challenge" beyond budgets

Now, the states have gone too far in trying to meet budget needs.  Take away my gas-generated electricity, increase my property taxes, but never toy with my potty break. Rest areas are under stress from budget cuts and are starting to disappear according to a July 3, 2009 Wall Street Journal article.  Virginia is closing nearly half its rest stops to save money.  I can just see it now, mommy I have to go potty.  Sorry son, there is no place for forty miles and then we have to get off the highway and find a McDonalds.  In Rhode Island and Massachusetts, you had better not have to “go” after 6:00 PM because that is when they close the rest areas.  Before we know it, hundreds of thousands of Americans will be wandering our highways and byways in search of a friendly fast food outlet or a motel that will welcome a caravan of cars to use their guest restrooms.  In addition, dare I mention the wasted gasoline in such quests?  No matter they will be driving in electric cars re-charged by wind generated power.

We talk about health care as a basic right, but what can be more basic than, well you know.  Have they no respect for us aging males?  Rest areas are obsolete we are told, pardon my French but I am pissed off.  In Italy, every restaurant is supposed to allow anyone to use the toilet, try that in Manhattan.  On the other hand, there are no toilet seats in Italy, but at least you have a place to squat.  While you may pay twenty-five cents or so to use one, you can at least find a public rest room in Europe, even in Russia they have well maintained private enterprise Port a Johns near Red Square.

Maybe we can get them to install rest rooms in the base of those wind turbines; there should be plenty of them all over the landscape in the next few years.

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