Archive | July, 2009

Ear infections will bankrupt us

31 Jul

My wife had a ear infection a few weeks ago, she went immediately to a ENT specialist who charged her $260 for an office visit.  He gave her some drops to see if that would work, it didn’t so she returned and he then examined both ears with some type of high tech device and gave her a hearing test.  The charge for this check of her ears was $750 for each ear.

He then recommend that a drain be inserted in her ear (just like they do with small children who have repeated ear infections), because she was reluctant to have general anesthesia, she tried more medication first, but it did not work and the minor surgery was done.  When I say minor it was ten minutes start to finish and done in an out-patient surgical center.  The doctor charged $550 for the ten minutes, actually not too bad these days (but remember he had already received over $1700 for what did not work). The anesthesia was $900

Today I received the explanation of benefits from our plan administrator for the surgical center.  The center charged $13,300 for the total of one and half hours that my wife was in the building.  You should also know that the facility is owned by fifty doctors. A nurse at the facility told me they do 40-50 procedures as day.  If that is correct we are talking in the neighborhood of a half a million dollars a day.

So, if you want to talk about health care reform talk about it in the context of what is really wrong, the cost, the cost, the cost.

That will be $750 please
That will be $750 please

There is nothing in the pending “reform” legislation that will change any of the above, in fact, I have yet to hear any discussion about costs in this context.  There is nothing in the above story that can be blamed on the “insurance company” 

Let’s say we do extend coverage to the 47 million Americans without it and we subsidize those who earn up to $88,000 a year as proposed and now we have a much larger pool of people with coverage and with a minimal financial stake in the cost of the care they receive and what if they all get an ear infection?


Now, we take the “bad guys” to task, but who really pays?

29 Jul


The President is on the road again to push for his version of health care reform only this time he is trying to hit a sore point with Americans, the big bad insurance companies.  Employers should listen to this message because for the seventy million workers with self-insured coverage through their employer employees will make no distinction between those plans and individual insurance.

Here are the health insurance reforms the President wants:

  1. No pre-existing conditions
  2. No excessive out of pocket expenses
  3. No out of pocket expense for preventive health care
  4. No dropping coverage for seriously ill people
  5. No gender discrimination
  6. No annual or lifetime coverage limits
  7. More coverage for uninsured or underinsured young adults (presumably via parents coverage)
  8. Guaranteed renewal

panicing manIt is hard to argue with some of these points, especially if you want to expand coverage. However, at the same time, it is clear that these changes will add cost to the coverage for everyone with health insurance.  That’s ok too if the President and the politicians will explain the impact of the changes they seek.  Here we are not talking about the federal government’s costs; we are talking about the cost of coverage for the 160 million Americans with employer-based coverage and all those with individual coverage.  Massachusetts is finding out the obvious that if you eliminate the barriers to coverage people will simply wait until they need the coverage to buy it knowing they cannot be denied and in the process have saved themselves health insurance premiums (at the expense of all of the other insured people).  Let’s hope they get the rules right the first time in Washington because Massachusetts has both an employer and individual mandate and still is suffering from adverse selection.

It is easy to point at the insurance companies and hold them accountable, but the reality is that underwriting is common and necessary in all forms of insurance to keep the cost of coverage affordable for the entire pool of insured people.  And there is the rub, we are now at a point where coverage for health care related expenses is no longer insurance in any sense of the word.  While we appear to be striving to make coverage very affordable at the point of service for the individual, we may be missing the big picture of what is affordable in premiums and direct costs to the federal government.  As we drive up the cost of the coverage, we increase the need for subsidies, and the demand for more not less employer contribution toward that cost.

Items number 2, 3, 6 and 7 have the potential for a significant impact on employer plans and on the covered employees who pay a portion of the cost of that coverage.  I would be especially concerned with number 2 “non excessive out of pocket expenses” because excessive is in the eye of the beholder and in this case, the beholder is the federal government bureaucracy.

What do we teach our children?

28 Jul


I was in a children’s museum with my granddaughter the other day and I spotted a book about American holidays.  At first glance, it looked like something I would like to share with her.  However, as I scanned the book I was stopped in my tracks when I got to the page on Memorial Day.  I have heard of political correctness and even revisionist history, but this one smacked me right in the face.  Here is what the page said.


NIce people and noble Americans, but...

NIce people and noble Americans, but...

In fact, Memorial Day began during the Civil War when women left decorations on confederate graves; it was officially recognized in 1868 and gradually spread among the states.  The purpose of Memorial Day is to honor those who gave their lives in the service of the country.  In other words, fallen soldiers.

I understand the message may have to be tempered for small children, but this seems a bit much.  None of the above individuals in this picture meets the Memorial Day criterion.

A Government Plan is Needed for Innovation?

28 Jul


In an editorial in the July 28th Washington Post, Jacob S. Hacker writes in part, “In fact, such a plan (government run health plan), empowered to work with Medicare, is Congress’s single most powerful lever for reforming the way care is paid for and delivered.  With appropriate authority, it can encourage private plans to develop innovations in payment and care coordination that could spread through the private sector, as have past public-sector innovations”

I don’t know what public-sector innovations he is talking about, but I do know that a report from the CBO points out the inefficiency in Medicare and the lack of any management while it notes, Medicare just processes claims. It is true that years ago the federal government tried to jump start the HMO concept, but most of the federally funded plans failed, mainly because the people running them had no idea what they were doing.  I know that first hand, as I sat on the Boards of four such plans all of which eventually went under and none that met the goal of an HMO concept.  The Feds handed out money like drunken sailors and got nothing for it.

In reality, it is large employer plans that have tried every type of innovation in providing health care coverage and paying for care (who killed capitation?) and employer plans that have been frustrated by costs in part because of the arbitrary fee setting practices of Medicare.  Many employers have gone beyond merely tweaking the benefits, but have become heavily involved in disease management, case management, patient advocacy and of course health and wellness efforts. Some observers, including myself, have questioned if employers have gone too far intervening in the health care of workers. Nevertheless, employers have taken these steps because they are frustrated with the escalating cost of health care.

I continue to be amazed at the people who think health care reform is centered on what Medicare pays physicians and hospitals and thus there is a demonstration of the efficiency of that system.  This is presented under the guise of affordable health care and yet, with a modestly close look one sees little of an affordability factor.  Affordable health care is comprised of the premiums one pays and the out of pocket costs that are part of the plan.  The current plans from Congress move money from here to there, claim to lower costs (for the federal government) and yet in the final analysis there is much to drive up the premiums for the private sector, encouragement to shift costs to employees and nothing to lower the rate of health care inflation.  But who am I, a recent report from the White House Council of Economic Advisors claims that government can lower health care spending by 15% over the next ten years, by providing fewer services, not by lowering payments or the quality of health care.  Sound like the “R “word to me.

On the other hand, there are some very good ideas in the report and very clearly identified steps that need to be taken to actually control health care costs.  Read it for yourself, it is worth the time

The real problem is that health care reform as currently constituted is more about expanding the current system than changing it and the American people are unaware of the type of change that is necessary (and apparently so is the AMA).

Ask yourself, does it all add up?

28 Jul

It is important for employers and every American to understand what it means when the President and other politicians talk about paying for health care and reducing costs.  To put it simply they are talking about lowering the net cost to the Federal government for expanding health insurance.  The major ways they plan to do this are to lower payments to Medicare and Medicaid providers, and in one form of the other to raise revenue for the Federal government, that means higher taxes or lost tax benefits now in place.  The 160 million Americans with employer-based coverage mainly enjoy those benefits.

flying pigsOn the other hand, the various legislative proposals will raise the cost of health insurance and health care. Some of these proposals are necessary to expand coverage to individuals, other changes are not necessary and questionable at best, things like providing certain preventive services with no out of pocket cost. But even without specific legislative language, cutting payments to Medicare providers means cost shifting to the private sector.

So, now you have to ask yourself, how does all this add up?  The answer is that it does not add up.  Some Americans will gain coverage and have the cost subsidized, but most Americans with coverage, including Medicare, are very likely to pay more for that coverage, have some benefits lessened and see no change in the medical inflation trend which continues to be several times general inflation.  Moreover, while all this is going on, the problems of Social Security and Medicare are still with us.

Do you think it all adds up to better health care for America?

Things We All Know

26 Jul


I doubt that there is an American completely satisfied with our health care system.  Even those of us fortunate to have good employer coverage are likely unhappy with the cost and seeing the employer chip away at the benefits because of those costs. Beyond insurance is the system itself.  I for one fear entering the system even for a minor illness because I know once I do I will lose all control.  I know that my doctor will not appreciate me asking questions or challenging his recommendations and may even resent it.  I know that I may be subjected to tests driven mainly by an overly cautious provider rather than good medicine.  I also know that if I do have some sort of a scan or procedure there is a good chance that my physician or some group of physicians has a financial stake in the facility.  I have no confidence that I am getting the best or most appropriate care because I know there are wide variations across the Country. I have no way of knowing whether my doctor is the best at what he does or even if he is fully competent and frankly, that scares me. I do not understand why an initial office visit for a specialist cost $260 or looking in my ear cost $760 per.

I am aware that underwriting practices make obtaining health insurance impossible for many people and unaffordable for many more.  However, I also know that doing away with those procedures will raise costs for all insured Americans.  How quickly would Americans accept higher homeowner’s insurance premiums if the insurers were forced to cover people with already existing flood or other damage to their home?

I know that the health habits and life styles of Americans are a major contributing factor to current and future health care costs.  Many, if not most large employers invest millions of dollars each year trying to correct this portion of the problem, but with minimal success to date because of the long term ROI.

I know that the entire administrative system supporting health care is broken, too complex and too expensive.  There is far too little coordination and uniform processing of claims and other processes that physicians have to deal with; little or no coordination of medical care or records.  The idea of negotiated fees and provider networks is out of date and merely shifts costs around.

What this all means of course is that America has a serious cost and quality problem with its health care system.  This is no revelation to most people; we hear this all the time in the press, study upon study supports these observations.

Given what we all know, and here I have to include the members of Congress, I am dumbfounded that despite what we all know that Congress still focuses on expanding this broken system to more people while concurrently telling Americans the objective is to control health care costs, make it affordable if you will. 

Do we yet know if we are trying to reform the health care delivery system or the health insurance system?  The health insurance system may need a strong dose of administrative efficiency and coordination, but many of today’s perceived problems and costs are a reflection of the broken health care delivery system.

Most of the cost for the current health care reform effort goes toward expanding coverage and subsidizing the health insurance premiums for millions of Americans.  Proposals require Americans to obtain health insurance.  In other words we are forcing another fifty million people into a broken system thereby increasing the demand for services, eliminating cost control measures by insurance companies, expanding the scope of required coverage, creating a huge new bureaucracy and calling it “reform” and essential to controlling the federal deficit. 

And we thought Bernie Madoff had chutzpah.

Getting ready for the Tsunami

24 Jul


As much as I hate to admit it, I am old enough to remember the implementation of ERISA.  In fact, I was working in employee benefits for thirteen years before ERISA was enacted.

That's how you are going to feel in a few months, I think they call that one the Obama

That's how you are going to feel in a few months, I think they call that one the Obama

Back in the prehistoric times, we did not have access to online updates or even reports and files and I remember spending endless hours wading through pages of the Federal Register, attending scores of meetings on various aspects of ERISA and then years of doing the same as regulations were issued, and reissued.  I worked for months creating SPDs, amending plans and communicating to employees as the world of employee benefits was turned upside down.  I remember most listening to government wiz kids explaining their rationale for one decision or another and thinking, “Do they have a clue?”  One meeting I remember in particular, I even remember it was held at the Washington Hilton.  I do not recall the exact context of the discussion but I do recall an IRS staffer in his twenties standing and declaring, “We don’t consider paying for college a financial hardship.”  I stood up (I just could not resist) and said, “Have you asked your parents about that?”  That was the last time I was called on during the Q&A.  There were a number of meetings during those years where I was only allowed to ask one question.

So, why should you care about ERISA? Because the ERISA of health benefits is on the way.  Forget what “reform” may do to control the cost of health care, you better be thinking what it will do to your administrative costs.  The good news is that under any scenario you will have time to prepare (and convince your management you are going to need lots of help (and money for outside counsel and consultants).

I can just see it all now, “We do not consider access to a specialist as medically necessary.” Or, “the minimum requirement for inpatient maternity care will be triplets.”  How about, “We know employers offer overly generous health plans simply because their employees are not taxed on the value so the new regulations will eliminate coverage for ED medication,” again a twenty-something knows it all.

If you look through the various drafts of proposed legislation, you will find the making of new government filings, testing for plan qualification, transferring employer contributions to state connectors, new options for employees to select, extended COBRA administration for years, administration of new taxes on either the employee, employer or both, perhaps retiree mandates and much more.

The point is now is the time to start looking beyond the effective date of the new law whenever that comes.  Those of us who remember ERISA know that you are looking at years of dealing with regulations, sore butts from attending meetings and conferences and scores of rubber chicken dinners to go with it.

Have fun and make sure you put some meeting travel in your budgets for the next several years. In addition, you may want to mention to your members in Congress that these costs are not calculated by the CBO. 

Does all this meet the requirement for economic stimulus?  I bet your boss doesn’t think you are too big to fail.

In the days of old it was “insurance”

24 Jul

I recently retired after working in corporate employee benefits for over 47 years, much of that time spent managing, designing and administering employee health benefits.

Like many employers in the US, my company first offered health benefits in the 1940s, back then it was hospitalization and medical surgical coverage.  It pretty much stayed that way until 1961 when the idea of major medical coverage was first introduced.

The hospitalization provided full coverage up to a limited number of days.  Medical-surgical coverage paid for physician services rendered in the hospital, but the fees were based on a fixed schedule.  I recall when my first child was born the allowable fee was $350 for the obstetrician.  The basic coverage also provided limited and fixed benefits for x-rays and a whopping $25 for laboratory work.  There was no financial incentive to run test after test and the patent had a clear stake in the cost.  Hey, it was “insurance” after all. On the other hand, there was also a strong incentive to provide services in the hospital (unintended consequences).  We became a bit smarter and later provided basic coverage for outpatient services.

With the introduction of major medical coverage with a deductible of $100 (which should be $712.10 in 2008 general inflation dollars), the plan paid 80% of charges up to an annual out of pocket maximum of $10,000.  Coverage expanded to include office visits, services not covered or limited under basic coverage, medical supplies and prescription drugs.  Note, no co-pay for prescriptions, just part of the overall mix. While an office visit was only $5.00 back in 1961 (which would be $35.61 in 2008 applying general inflation), utilizing co-insurance made sure that the patient had a stake in the cost.  Not maintaining the deductible in parity with inflation resulted in other unintended consequence, but even back then the typical viewpoint was that health care bills were someone else’s responsibility (an idea that is even stronger in 2009).

Health and Wellness 101

Health and Wellness 101

In 1970s, we (and I use the word “we” collectively for much of the employer community) made the biggest mistake of all; we moved from a fee schedule for physician services to what then were called reasonable and customary fees.  Most plans paid at the 80th or 90th percentile meaning that eight or nine out of ten physicians billed within what was allowed.  Of course, that also meant that since there was no fee schedule the increase in allowable fees was in the hands of the health care providers.  Another unintended consequence of trying to insulate patients from costs.

We then moved into HMOs in the late 1970s.  The idea was appealing, better coverage in exchange for better control and management over the costs and services provided.  The problem was that the choice of provider was limited and telling Americans they cannot have something always means it must be bad.  The idea was to have limited networks of participating providers to control costs and better manage the services rendered.  In response to the lack of choice, HMOs essentially stopped screening providers and everyone was allowed into the pool.  We were left with a high level of benefits and virtually no management of the health care services.  The HMO concept morphed into open access plans and into the Point of Service (POS) plan with both in and out of network services.  Once again, we experienced the unintended consequences of watering down management of health care services; management of health care is something Americans seem to abhor. Instead we encouraged health plans to negotiate the best fees possible with physicians and hospitals, an idea that merely shifts costs around the system and does nothing to control utilization, dare I say unintended consequences (I bet you are tired of hearing that).

Along this journey from the 1960s we tried pushing second opinions for elective surgery, flexible benefits, outpatient services, health and wellness programs, pre-admission testing and much more and yet health care as a percentage of the economy continues to grow.  Ummmm?

Considering all of the above, look at the pending “reform” legislation and see if you can find anything that will actually control the overall cost of health care in America.

Today we appear to think that the government will provide unlimited health care with no management of services but with cost control.  It has not worked in the past (consider Medicare) and it will not work in the future. On the other hand, the new catch phrase in Washington and elsewhere is “accountable” health plans and the concept of physician capitation for payment and a primary care coordinator, which sounds a great deal like an HMO.  Stand by for the implications of this one.

Do we wonder why health care costs have gotten out of control?  We have moved from a system of “insurance” with a financial stake in the process for patients to total entitlement.  Today Congress debates a new health care system and yet we appear to ignore lessons learned.  The guidance in the pending House legislation to the Secretary of HHS is to try to avoid coinsurance in designing the required benefits package going forward in favor of co-payments.  This is exactly the kind of thinking that got us into this mess.  Pending legislation states and the message to Americans is that medical decisions are between the patient and the doctor.  That may be fine when you are buying a TV, but in health care with all its variables and misdirected incentives, it simply does not work.

What’s in a name?

23 Jul

So now it is health insurance reform, the President changed his words last night no doubt in an attempt to tap into the anti insurance company message.  He also pointed out that the cost of Medicare is a drag on the economy.  He is right about that, but unfortunately, the reform proposals do not control costs, at best, they shift them around.

The President’s focus is on spending by the federal government, not the overall economy.  They are missing the point in all this, it is that simple.  Saving money on Medicare by shifting costs to the private sector whether it is via health care or in taxes does not solve the problem.

To save money, we must reduce the per unit cost of services, reduce the number of services provided and reduce the services provided to the least intensive and costly possible.  The President alluded to that, but I doubt Americans get the message of what that all means.

If ignorance is bliss, there must be a number of happy people in Congress

21 Jul


There appears to be a mindset in Congress that employers offer rich health benefit plans just because they are generous folks.  As a consequence, Sen. Kerry of Massachusetts wants to help pay for health care “reform” by adding a premium tax to insurance companies and self-funded employer plans that are expensive.

According to an article in the Boston Globe, Such a tax would also have important side benefits. It would discourage the overuse of healthcare services, because employers would have an incentive to buy cheaper, less generous healthcare plans for employees, to avoid the levy. It would also put pressure on insurers to reduce premium prices, the source said.

The tax, whose rate has not been specified, would only apply to the most expensive insurance products.”

Is there any employer in the United States that needs an additional tax as an incentive to buy a cheaper plan?  What happens if less generous healthcare plans are offered to employees?  Well, here is news for you, it means that the affordability of health care just went up for those employees because to offer a less generous plan it means higher deductibles, higher coinsurance and co-pays and less coverage for certain services.

Moreover, as for reduced premiums, it would seem to me that employers are putting sufficient pressure on insurers to reduce premiums to the extent that no additional tax will have any effect.

Oh, this is embarrassing. What will they think in 2010?

Oh, this is embarrassing. What will they think in 2010?

Has anyone thought about the fact that an expensive plan for an employer could also be a reflection of the health status and needs of the workforce?  Has anyone considered that such a tax would also translate into higher premiums for workers?  Has anyone thought about the bureaucracy that would be needed to put this all in operation?

The outright ignorance about the health care system by our policy makers is starting to become quite scary.

PS Kerry had a similar idea in 1994.

And you thought Billy Mays had died

21 Jul
Buy one and get absolutely nothing free

Buy one and get absolutely nothing free


President Obama is either in denial, is being misinformed, does not understand health care, is looking only for a political victory or is outright lying to the American people.  Frankly, I don’t know which is the right answer, but I do know that I am getting tired of hearing the same old sales pitch every fifteen minutes.  Selling Americans on a new health care system that does not address the fundamental problems of the current system is like selling us a new gadget that doesn’t work and then giving us another one of the same thing for free. 

Mr. Obama has to be smarter than his sales pitch makes him out to be.  The 150 million Americans with employer based coverage will get little more than the opportunity to pay more for health care and more in taxes.  Employers who provide coverage are faced with greater regulation, higher benefit costs and likely higher taxes in one or more forms.

Americans who do receive health care under these proposals will find that it will quickly become unaffordable (although that may fall on taxpayers rather than those being subsidized) as the rate of increase and the increased demand for health care services increase premiums.

Reforming the health care system may sound fine on the campaign trail, it may even sound fine in interviews and speeches, but it is not so good if it only means expanding coverage under the current delivery system.  And guess what, the vast majority of Americans, right or wrong, like the current delivery system.  Who is going to sell them on the idea that the current system can’t last if costs are truly going to be controlled.   Where is poor Billy when you need him?

Worse still is the possibility that the administration’s sales pitch will result in passage of “reform” under some combination of the current draft legislation and America is left with ten years of nothing but growing costs and a bigger liability.  There is a great deal that can be done to truly reform the delivery of health care and the way we pay for it, it may not garner the AMA’s support and Americans may come to the realization that high cost is not high quality and that more care is not better care, but that is “reform.” 

As many of us warned at the start of this journey, the problem is cost, not the uninsured.  Change your sales pitch Mr. President.

Stimulus – the signs

21 Jul


In my town streets are being re paved like never before.  All across America the same scenario is playing out. We are stimulating the economy for asphalt makers, machine operators, laborers and the related jobs but those folks are not the true beneficiaries.

My Uncle comes through again

My Uncle comes through again

Who then you ask with great anticipation? It is very simple, sign makers. If the government is behind something you can be sure they will let you know, usually with a big orange or green sign giving credit to a government agency or a specific politician. It’s like they are spending their own money in dispensing such benevolence.  I have it on good authority that if we limited the sign business, we would get the federal budget in good shape even before the first ten years after health care reform.

The latest ideas on health care reform from Senate committees

20 Jul


Things are moving fast in the world of health reform (oh, how I love that word). Here is some of the latest coming from the Senate Committees:

A proposed ERISA waiver for states that set up a single payer system, here you go, while we are supposedly trying to simplify the system, consideration is being given to having employers again comply with a myriad of state laws if they have employees in more than one state.

And the nay's better forget it.

And the nay's better forget it.

Over the counter drugs may be gone from the FSA, the HAS and HRA. Only a few years ago eligibility for these products was added to the FSA which made sense, now Congress wants them gone presumably in some convoluted quest for money which of course will not occur if people put the same amount in their FSA and spend it on something else.

Here is one employers will like, extending COBRA beyond the normal 18 months all the way until the new health care exchanges are in place sometime in 2013 or beyond.

Here is very special goodie for employers to help pay for reform, a new premium tax. What is the big deal you say, self-funded employers are not subject to premium taxes, they will be subject to this one if passed. By gosh, you thought health care reform meant saving money. What it means is finding a way to pay for the subsidy to families earning up to $88,000 per year.  So, is the problem the cost of coverage or the availability of coverage?

 And one we can all live with, extension of the tax-free status of benefits to enrolled domestic partners, if a plan provides such coverage.

The Theory of Similarity

20 Jul

Sometimes I think about things that have no special relevance to anything, just random thoughts that seep into my mind when I am doing something of equal irrelevance.

Today is one of those days and I have consequently developed a most relevant theory.  I will call it the theory of similarity.  My theory is quite simple, some things are so similar there is no differentiation and if that is the case, they must all come from the same source.

Not sure what it is, but for sure you have seen it before

Not sure what it is, but for sure you have seen it before

The prime example is Chinese food.  You walk into a Chinese takeout and there are pictures over the counter.  It matters not if you are in San Francisco, New York or Milwaukee, the pictures are the same, the food is the same and hence there is no Chinese restaurant in the world that cooks its own food.  My theory prevails because there must be a giant Chinese kitchen somewhere in America that prepares all Chinese food and ships it to every restaurant in the US. 

Not convinced, here is another example, clam chowder.  Living part time on Cape Cod I see myself as somewhat of an expert, but clam chowder is made in one giant kitchen and shipped in large plastic bags to every restaurant claiming to have the best chowda in the country.

Now given that I have proved with my theory you would also think that Dunkin Donuts are similarly made in one place.  I know that is not true because no blasted shop has the same size donuts or bagels for that matter.

The Big Shuffle

20 Jul


The closer we get to the House and Senate passing health care “reform” the faster the deals are made. The AMA made a deal as have pharma and the hospitals. Next will be maneuvering budget items from one place to another. Is not cutting Medicare payments to doctors part of health reform or just adding to unfunded Medicare? Can we tweak our assumptions so savings are larger? Are savings for the federal government, a savings for Americans in general?  Revenue portions of the legislation are effective immediately while benefits are delayed several years, thus the claim of no additional cost in tens years may be true, but without regard to the future costs.

Stand by, change is on the way and we will not know the true unintended consequences for years to come.

It is a real shame that the process of reform is little more than political expediency. There is a heavy price to pay and NOBODY knows what it is.

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