Barack Obama.    

Horace

The federal budget deficit will again exceed $1 trillion this fiscal year, the Congressional Budget Office reported today. That news is sure to trigger another round of condemnations from politicians and pundits who have a political or ideological interest in pinning these deficits on the domestic spending policies of President Barack Obama.

Unfortunately for them, today’s report—along with dozens of other similar CBO reports in recent years—actually proves the opposite—that the current deficit is overwhelmingly the result of two factors: events that occurred before President Obama took office and tax cuts.

In fact, higher spending under Obama accounts for less than 20 percent of this year’s deficit, and nearly half of that was additional defense spending—not domestic spending. Bottom line: The narrative that an “Obama spending spree” caused our deficit problem is utterly false.

Events that occurred before Obama took office and tax cuts, ummmm, so what?  Tax cuts you say? I think you mean the tax rates in effect for more than four years.

Let’s think about this; Mr Obama ran for President knowing full well the state of the economy, all about the Bush bailouts, and the tax rates in effect then and now. He still promised hope and change.

For the last two years of the Bush Administration and the first two years of the Obama Administration Mr Obama’s party controlled the Congress providing ample opportunity for both hope and change (the good kind).

Knowing the tax rates and the state of the economy, it is no magical leap to estimate federal revenue thereby allowing a prudent manager to adjust spending accordingly if there is any goal to reduce or at least not increase the deficit. Instead the President spent most of his time with failed attempts to stimulate the economy and seeking out scapegoats from successful Americans to insurance companies and even the Supreme Court.

Are we to believe that the President of the United States, a man who seeks and accepts the most difficult job in the world is not responsible for dealing with events that occurred before he took office?  Bush increased the deficit, we get it. Obama increased it even more, we get that too. I haven’t received a raise in three years, to cope I watch my spending closely, and do not increase my debt, most Americans get that.

The view that taxes being too low is the cause of the deficit has got to be a reflection of the ass backwards thinking of the generation now in charge of our country.  A generation that grew up thinking uncontrolled spending and little saving had no consequences.
If an executive seeks a potentially lucrative CEO position with a company heading for bankruptcy and fails to turn the company around claiming that events leading to the bankruptcy occurred before his tenure caused his failure, he gets fired.  The buck stops with the person in charge.  Need I say more.

Where is Harry Truman when you need him?

Pretty as a picture across the landscape

Let me get this right, natural gas prices are at near all time lows, supplies are over the top, there are ample domestic reserves, natural gas is clean energy — and we are focused on building more horrendous  looking, noisy wind farms on and offshore that take up hundreds, if not thousands of acres of land.

If our goal is to reduce dependency on oil and build our stable of domestic energy resources why wouldn’t we be finding quick, creative and realistic ways to do that?  For example, why not provide interest free loans (or even tax credits for middle and lower income Americans) so households can convert home heating from oil to natural gas?

That lowers their costs, is less polluting, stimulates work for many people and can be done quickly using existing established companies.

I know, home heating is only a small portion of our oil consumption, but it’s a start and makes as much sense as paying me to buy a new car or upgrade my air conditioning … and it is a long-term strategic move; something sorely lacking from our political agenda.

Conversion incentives have been used in the past, mostly by local utilities, but now is a golden opportunity to try it on a larger scale … perhaps we can even get Joe Kennedy to stop telling us about his good friends in Venezuela who provide free heating oil to Americans.

P.S. There is even a plus for our friends on the left, natural gas heating is supplied to homes via REGULATED utilities unlike heating oil.

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Why do Americans have such a difficult time structuring a system for every citizen?  Is the rest of the world just smarter than we are or do Americans simply have unrealistic, we can have it all, expectations?

I have a strange hobby, I visit other countries and ask people how their health care works and if they like it.  In my most recent post on the Health Insurance Illuminated blog I report some of my findings

Take a look at what people in different countries have told me.

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Read more on Health Insurance Illuminated.

Health Accounts Continue to Grow in Numbers, Assets

WASHINGTON—Account-based health plans continued to grow in 2011, increasing to $12.4 billion in assets among 8.4 million accounts, according to the latest survey by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates (MGA). That’s up more than 55 percent in the number of accounts and almost 70 percent in assets since 2010.

This growth comes after a leveling-off of account balances during the recession years of 2008 and 2009, and a slight decline in 2010. The average health account balance was $1,490 in 2011, up 9 percent from 2010.

These and other findings are based on the results of the 2011 EBRI/MGA Consumer Engagement in Health Care Survey, published in the January 2012 EBRI Issue Brief, “Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006–2011,” online here. 

Employers first started offering account-based health plans in 2001, when a handful of employers began to offer health reimbursement arrangements (HRAs), employer-funded health plans that reimburse workers for qualified medical expenses. In 2004, employers were able to start offering health plans with health savings accounts (HSAs), tax-exempt trusts or custodial accounts that individuals can use to pay for health care expenses. The theory behind these accounts is that by giving individuals more control over funds allocated for health care services, they will spend the money more responsibly, especially once they become more educated about the actual price of health services.

The EBRI report notes that by 2010, 16 percent of employers with 10–499 workers and 23 percent of those with 500 or more workers offered either an HRA or HSA-eligible plan. As a result, these plans covered about 21 million people in 2011, representing about 12 percent of the privately insured market.

“As the number of people with account-based plans grows, total assets in these plans can be expected to grow as well,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and author of the report.

Other findings in the EBRI/MGA survey on health accounts:

Rollovers increase: After declining to $1,029 in 2010, the average amount being rolled over from one year to the next increased to $1,208 in 2011. Total assets being rolled over increased as well: $6.7 billion was rolled over in 2011, up from $3.7 billion in 2010.

Differences in rollover amounts: Men rolled over more money than women, and older individuals had higher rollover amounts than younger individuals. Rollover amounts increased with household income and education, and individuals with single coverage rolled over a slightly higher amount than those with family coverage.

Healthy behavior does not mean higher account balances: Individuals who smoke have more money in their accounts than those who do not smoke. In contrast, obese individuals have less money in their accounts than the nonobese. There is very little difference in account balances by level of exercise. Very small differences were found in account balances and rollover amounts between individuals who used cost or quality information, compared with those who did not use such information. However, next to no relationship was found between either account balance or rollover amounts and various cost-conscious behaviors. When a difference was found, those exhibiting the cost-conscious behavior were found to have lower account balances and rollover amounts.

The Employee Benefit Research Institute is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.

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Read more about this in my post on Health Insurance Illuminated

The following is from a newspaper in Massachusetts.  I guess what MA has already done is insufficient. A State representative has introduced legislation for a single-payer system. Throwing out a few platitudes about quality and affordability sounds good and gets some people excited, but it is hardly effective management of the health care system. There is no evidence that a single payer system makes health care affordable, improves quality or reduces costs (especially without numerous unintended consequences). With regard to Massachusetts, their current system has yet to prove itself beyond expanding coverage – much like the Affordable Care Act.

As I have said many times, when a politician makes outrageous promises, make sure you ask exactly how they will be met.

Last update Dec 31, 2011 @ 04:51 PM

Touting dramatic reductions in health care costs, improved access to health care for all residents and a boost to local businesses, state Sen. Jamie Eldridge, D-Acton, has filed a bill that would create a single-payer health care system for Massachusetts. The bill, heard by the Joint Committee on Health Care Finance, would establish a universal public insurance plan covering all medically necessary care. This plan would function for residents younger than 65 much the way Medicare does for residents 65 and older, but without premiums or co-payments, according to Eldridge’s office. “If Massachusetts is serious about reducing health care costs for families, businesses and state and local governments, we need to stop tinkering at the edges of a broken system and enact a single-payer healthcare system,” Eldridge said. “It’s the only reform that would truly reduce costs in a substantial way, eliminating medical debt and bankruptcies while guaranteeing access to quality, affordable health care as a right for all residents of the Commonwealth.”

The reality is that while we hear lots of rhetoric about debt and deficits, what really matters is long term liabilities. If you don’t believe me consider what happened with General Motors and it’s liabilities to retirees mostly with regard to health benefits. The latest example is Kodak filing bankruptcy during which the promise of retiree health benefits is likely to disappear along with some pension promises for higher paid workers who are affected by income limits on pension funding. Losing a substantial portion of your pension after you have already retired sounds like more than ones fair share to me ( and we are not talking about CEOs).

If you want more examples of this liability thing causing trouble just look to the various states that have agreed to unrealistic pension and health benefit commitments to state workers. And then you look at the results of all this. In Wisconsin the unions have gotten 1,000,000 signatures to force a recall election of the governor who did the right, albeit painful, thing to correct the State’s problems.

What is the most significant problem affecting the U.S., it is the same as I have just described above; long term liabilities for health care first and pensions second. That means Medicare, Medicaid and Social Security, but mostly Medicare.

So now the question is what will you do for the politician who tells you the truth (assuming you can find one)? Chances are you won’t vote for him because it is far easier to ignore a long term problem than deal with it. It is more abstract to believe foreign aid is the culprit than something that affects you directly. It is less stressful to agree with a politician who claims to have a solution while leaving Medicare and Social Security untouched.

The difficult part is accepting the truth. The U.S. has made open ended, demographic based commitments that it can’t control and can’t pay for. Twenty to thirty years from now there will be hell to pay. The longer it takes to implement corrective action the worse it will be… and that’s the truth like it or not

If you look at the release below you will see a rate cut for Anthem Blue Cross in Connecticut. However, when you go to the HHS link in the press release you find this:

Connecticut Rate Review

The Rate Review program began September 1, 2011. No insurers in Connecticut have proposed rate increases of 10% or more since that time. Check back regularly for updates.

Then we have the following hype.  HHS is incapable of preparing a press release containing just facts, but rather must include more and more spin and unsubstantiated claims.

“The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.”

In fact only rate review has been implemented, the efforts at coordinated care are focused on Medicare, preventive disease programs have been used by employers for many years with no measurable results and the state-based marketplace is two years away.

News Release

Affordable Care Act holding insurers accountable for premium hikes.  Health insurance premium increases in five states have been deemed “unreasonable” by the U.S. Department of Health and Human Services, HHS Secretary Kathleen Sebelius announced today.

After independent expert review, HHS determined that Trustmark Life Insurance Company has proposed unreasonable health insurance premium increases in five states—Alabama, Arizona, Pennsylvania, Virginia, and Wyoming.  The excessive rate hikes would affect nearly 10,000 residents across these five states.

To make these determinations, HHS used its “rate review” authority from the Affordable Care Act (the health care law of 2010) to determine whether premium increases of over 10 percent are reasonable.

“Before the Affordable Care Act, consumers were in the dark about their health insurance premiums because there was no nationwide transparency or accountability,” said Secretary Kathleen Sebelius.  ”Now, insurance companies are required to disclose rate increases over 10 percent and justify these increases.  It’s time for Trustmark to immediately rescind the rates, issue refunds to consumers or publicly explain their refusal to do so.”

In these five states, Trustmark has raised rates by 13 percent.  For small businesses in Alabama and Arizona, when combined with other rate hikes made over the last 12 months, rates have increased by 27.2 percent and 18.1 percent, respectively.  These increases were reviewed by independent experts to determine whether they are reasonable.  In this case, HHS determined that the rate increases were unreasonable because the insurer would be spending a low percent of premium dollars on actual medical care and quality improvements, and because the justifications were based on unreasonable assumptions.

In addition to the review of rate increases, many states have the authority to reject unreasonable premium increases.  Since the passage of the health care reform law, the number of states with this authority increased from 30 to 37, with several states extending existing “prior authority” to new markets.

Examples of how states have used this authority include:

In New Mexico, the state insurance division denied a request from Presbyterian Healthcare for a 9.7 percent rate hike, lowering it to 4.7 percent;In Connecticut, the state stopped Anthem Blue Cross Blue Shield, the state’s largest insurer, from hiking rates by a proposed 12.9 percent, instead limiting it to a 3.9 percent increase;In Oregon, the state denied a proposed 22.1 percent rate hike by Regence, limiting it to 12.8 percent.In New York, the state denied rate increases from Emblem, Oxford, and Aetna that averaged 12.7 percent, instead holding them to an 8.2 percent increase.In Rhode Island, the state denied rate hikes from United Healthcare of New England ranging from 18 to 20.1 percent, instead seeing them cut to 9.6 to 10.6 percent.In Pennsylvania, the state held Highmark to rate hikes ranging from 4.9 to 8.3 percent, down from 9.9 percent.

Today’s announcement comes the same week that a report showed that health care spending has grown at remarkably low rates.  According to an analysis done each year by the Centers for Medicare & Medicaid Services, U.S. health care spending experienced historically low rates of growth in 2009 and 2010.  A recent study released by Mercer Consulting also showed a slow-down in the average employee health benefit cost to businesses.

The Affordable Care Act includes several policies, including rate review, to continue this slow growth.  By fighting fraud, better coordinating care, preventing disease and illness before they happen and creating a new state-based insurance marketplace, it helps keep health care cost growth low.

For more information on the specific determinations made today, please visit http://companyprofiles.healthcare.gov/

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Some of this trend has to do with the turmoil and misinformation about where health care reform is going and whose ox is going to get gored. In times of uncertainty health care providers hunker down to keep a lower profile.

This time things may be much worse when the cycle changes again. Millions more Americans will have coverage under very comprehensive benefits, most will be heavily subsidized for their premium costs, the mentality of “free” services to consumers is stronger because of the Affordable Care Act. In addition, there is pent-up demand that will be released soon after the start of 2014 and perhaps before.

I'm still not optimistic

In some cases, especially with employer based coverage, more and more expenses will move to employees because of cost shifting. So while the employer premiums and costs are moderated, that is only part of the story. Keep in mind also that the new mandates within the Affordable Care Act have already added 3% + – to insurance costs. 

Finally, there are the hidden new costs imposed by the Affordable Care Act. New taxes and fees on medical equipment manufacturers, pharmaceutical companies, insurers and employers will eventually find their way into premiums and out of consumer’s pockets.  America may have slowed for the curve, but it has not hit the brakes.

There are some signs of serious efforts to fundamentally change the health care system and the way care is provided and paid for. However, how well patients will accept those changes is unknown, even if they are in their best interest.  Nevertheless, significant positive affects of such changes are years in the future. 

There is no joy in Mudville yet; mighty Casey is still looking for his bat.

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From an Arthur Laffer commentary in the January 11, 2012 Wall Street Journal:

Incidentally, I’m not the first to question Mr. Buffett’s commitment to “shared sacrifice” in balancing the federal budget. In a 2007 CNBC interview, when asked why he shelters his money through tax-free strategies rather than writing big checks to Uncle Sam, Mr. Buffett responded: “I think that on balance the Gates Foundation, my daughter’s foundation, my two sons’ foundations will do a better job with lower administrative costs and better selection of beneficiaries than the government.”

Amen, Mr. Buffet, I agree. I think my (and many others) modest monthly contributions to the Link Community School in Newark, NJ does a better job helping inner city minority children get a good education and better chance at the American dream than any government program. Such a program is a combination of the efforts of families who care, children who are motivated, dedicated educators and private contributors who care about effective use of their money .

That’s a lot different from government grants thrown at bureaucrats down the line who are largely unaccountable except perhaps to the politicians who want to be seen as caring for the downtrodden.

Mr. Buffet and the super wealthy like him on the left of our society must find it easy to promote higher taxes when no amount of taxation will impact them. However, it is mind-boggling that these really smart, savvy people think filtering more and more of American’s income through a massive, politically motivated, inefficient government bureaucracy is the most efficient or fairest way to raise the quality of life for us all. “War on poverty you say.”

First target

One of the criticisms of the Affordable Care Act has been that few people actually know what is contained in the Act.  Having spent untold hours reading the Act along with various independent assessments of the Act, I can testify to its immense complexity.   

For example, in order to pay for the expansion of subsidized health insurance to millions of Americans, the Affordable Care Act adds numerous new fees and taxes on individuals’, employers and the health insurance industry.  In 2010, there was a new tax on indoor tanning facilities (ok, so that is not a big deal, anyone who uses one of those deserves to be taxed). In 2014 there are new fees on employers and insurance companies, all of which have the potential of being passed along to consumers.  In 2012 pharmaceutical companies that sell to the federal government are assessed what is called an annual fee (excise tax). 

The various fees and taxes contained in the Act are among the few elements that are reasonably quantifiable.  Other elements of the Act that are to reduce costs rely on assumptions of long-term success for well-meaning, but untried programs generally related to Medicare.  To be successful, hospitals, physicians, other health care providers and Medicare beneficiaries must all work in a coordinated effort under new paradigms for providing health care.

Taking billions of dollars each year in new taxes impacts these organizations which then must find ways to mitigate this loss.  It is tempting to simply dismiss such taxes as justified on highly profitable organizations.  However, we should never forget that everything we do is connected to something else and every action has its consequences (think housing crisis).  Generating revenue for some means a loss for others, a savings here means less revenue there and in some cases that may mean a loss of jobs, less invested in research or simply passing costs along to another party. When additional costs are imposed on employers, especially related to health benefits, it generally means greater cost sharing for employees and a shift in compensation from cash to employee benefit programs.  Good benefits are valuable, but they don’t buy groceries or pay college tuition.

The following is excerpted from the IRS regulations with regard to the new fees on drug manufacturers (a very small sample of the hundreds of thousands, ultimately millions, of pages of regulations implementing the Affordable Care Act). 

The aggregate fee amount each year for all covered entities (referred to as the applicable amount) is $2.5 billion for fee year 2011; $2.8 billion for fee years 2012 and 2013; $3 billion for fee years 2014 through 2016; $4 billion for fee year 2017; $4.1 billion for fee year 2018; and $2.8 billion for fee year 2019 and thereafter. The applicable amount for each year is allocated, using a specified formula, among covered entities with aggregate branded prescription drug sales of over $5 million to specified government programs or pursuant to coverage under such programs.

The specified government programs are the Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program (collectively, the Programs).

The annual fee for each covered entity is calculated by determining the ratio of (i) the covered entity’s branded prescription drug sales taken into account during the preceding calendar year to (ii) the aggregate branded prescription drug sales taken into account for all covered entities during the same year, and applying this ratio to the applicable amount. Sales taken into account means branded prescription drug sales after the application of the percentage adjustment table.

Soooooo, now it’s your turn. Visit Health Insurance Illuminated, read my latest post and add your ideas for controlling health care costs. Who better than patients and consumers to help solve this problem?

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