Archive | September, 2009

More Muddied Waters-employer voucher program

30 Sep


An amendment to the Senate Finance Committee bill from Senator Ron Wyden (D-OR) would start the demise of the employer based health care system through a voucher system that employers would offer so that their employees could opt out of the employer plan into an exchange option.  In addition, employers would be required to offer at least two choices of health plans and if the employee elected the lower cost plan, the employee gets to keep the difference.   

Aside from the obvious potential for adverse selection as employees who need less coverage opt for the cash by going to an exchange plan, the administrative nightmare this will create is truly overwhelming. 

If the path we seem to be on did not have the potential for destroying portions of our health care system that work, it would be comical….but it is definitely not. 

I urge you to read this proposed amendment closely.   (more…)

Overuse of Medicare services…who knew?

30 Sep

A new report released by the Senate Finance Committee and conducted by the Government Accountability Office says many Medicare services are being overused. Imagine that.

Senate Committee  Press Release

Interesting that the press release comes from the Senate Finance Committee just hours after it rejected a public option within it’s health care reform bill.

The good news is that such revelation may also point out the real problems with health care in America.

Pssst, that groan you hear is coming from the AARP office. Yikes, they’re going to cut health care for seniors.

Evil health insurance company profits

30 Sep

As you well know, the rallying cry for health care reform has been the evil insurance companies, someone everybody loves to hate, even the 70 million Americans with employer based self-funded health plans.  The fundamental problem of course is we have lost sight of the fact that it is health INSURANCE just like any other form of insurance.

Nevertheless, we all know about the obscene profits…or do we.    I stumbled upon this, so you can judge for yourself.

Evil health insurance company profits

What really caused the banking crisis?

29 Sep
This is where I want my money

This is where I want my money


Credit swaps, derivatives, high bonuses, risk taking; all have been blamed for the banking crisis, but are they the real causes?  No! 

It’s quite simple, it’s the bank itself, and yes I mean the building.  Remember when a bank was a real bank, a large building with lots of marble, impressive columns, a solid, stable structure that just oozed strength. The name of the bank was carved into the stone edifice, they weren’t going anywhere. Inside it was quite formal, with 30 foot high ceilings, large wood desks that would make Louis XVI proud.  There was a long cashier counter with people actually standing in each space and there was no darn drive up window, you walked in the bank, stood in line and did your business which meant you handed them a passbook and saw your money entered right on the pages. 

All that is gone, today you can’t tell a bank (which seems to be on every corner in every community) from the Burger King.   Do I want my money surrounded by glass and plastic, no I want strength, I want my bank too big and strong and covered in marble and granite to fail.  I want to see my bank standing 2,000 years from now like a brothel in Pompeii. 

penny arcadeMoney is serious business, it may be fine to put a McDonald’s in a hopsital (yes they do and so much for the wellness initiative), but I want my bank to make me feel inadequate if I don’t enter wearing a suit and tie.

And that’s why we have a banking crisis.

Finance Committee Rejects Public Option

29 Sep


About one hour ago the Senate Finance Committee voted against a public option as part of health care reform legislation.  Some of the supporters of the public option vowed to continue to fight for it as the legislation goes to the full Senate and then to conference before a full vote by both houses of Congress.

The debate rages on

29 Sep

As you read this the Senate Finance Committee is debating health care reform especially the public option. It all comes down to the following argument (which is taken from the New York Times live blog).

One has to wonder what the motivation in all this may be as the classic argument for a public option is bogus.

” A Democrat steps in… | 11:47 a.m. Senator Robert Menendez, Democrat of New Jersey, is allowed to speak out of turn because he has a pressing engagement elsewhere. He strongly backs Mr. Rockefeller’s proposal and says if that fails, he’s for Mr. Schumer’s. He makes pretty much the generic arguments on behalf of a public option, saying it will provide competition, will keep insurers “honest” and will drive down costs. “

We have to ask, just like Medicare has driven down costs by paying less than market fees? Well, at least he didn’t say it will improve the quality of health care.

But here is more of our political logic IT WILL SAVE TAXPAYERS MONEY. forgive me, but where will that money come from? Oh, I know from hospitals and doctors and no doubt they will absorb all of the additional losses.

“Support from Ms. Stabenow | 1:06 p.m. Senator Debbie Stabenow, Democrat of Michigan, strongly supports a public option. She says one difficulty is that the United States has multiple systems: one for the armed forces and veterans that is wholly government-run; Medicare, which is single-payer and government-run, and one that is employer-based.

She calls the public option offered by Senators Rockefeller and Schumer “the grand compromise” that will give people more choice. About 25 percent of Americans who do not have insurance today will probably choose the public option, according to the Congressional Budget Office, and that won’t bring down the system.

“I don’t know what all the fuss is about,” she says, noting that CBO says it would save $50 billion for taxpayers over 10 years.”

Saving money via a public option

28 Sep


Oops, sorry, I meant to take it from another pocket

Oops, sorry, I meant to take it from another pocket

According to many members of Congress, we need a public option to compete with private insurers. Compete is an interesting word especially when it comes to a government run option that pays what it wants to pay.  However, being able to do that saves money, at least for the government.  The quest for affordable health care seems to stop at the Beltway with all the excesses tossed to the rest of the country. Consider the impact of Medicare rates on the public option proposals. 

Then again consider the impact of Medicare reimbursements on the health care providers and of course indirectly on all of us.   Hey, I’m no fan of what physician’s charge and we all know health care does cost too much but we don’t need to make it worse by endless cost shifting. What we need to do is address the fundamental causes, not the fees.

Finally, there is the impact of the government strategy for payment of health care that affects the individual.  Today, that is the folks on Medicare, tomorrow if we follow the strategy being heavily promoted by most of the House and many Senators, who knows. 

The law of unintended consequences is alive and well!

You have to be for something

28 Sep


As we enter the final phase of the debate on health care reform, we seem no closer to consensus than we were in the 1980s.  I have also concluded that I could make the case for any approach from a total government program to the status quo, but that helps no one.   

If a government run program, an individual mandate, an employer mandate are all wrong, what is right?   Before you answer that question, remember that this is one big pool of money.  No matter how you slice it up we are all paying for all the health care provided in America today.  It’s like a motorcycle helmet law; some people would argue that they should not be required to wear a helmet because it is their right not to do so.  Okay, fine, but should you have an accident, be prepared to lie in the street with your brains all over the pavement until the rain washes you away because no part of society is going to be harmed by your foolishness. 

Let’s not forget too that the main reason people do not buy health insurance is because it cost too much and they would rather spend what they have on a more pleasant experience.  You can’t get a mortgage without have your home insured, you can’t drive a car in many states without having auto insurance, what’s the big deal here?  It is not your right to live in America without protection against forms of risk that result in society as a whole paying for your stupidity. 

In the process of trying to solve the health care problem you can’t be against everything.  The way all the bills in Congress are constructed at present means that people with health insurance and employers will pay more, while that is counter to the quest for “affordable” health care, let’s just tell people the truth and the consequences. 

A public plan will lead to well; eventually it will lead to forms of rationing to control costs.  That’s the simple truth and the people working on such a plan know that.  A public plan will also end up like all other such plans do, that is over budget and under funded.  You want examples of government run programs where the benefits keep exploding in successive Congresses without consideration for long term costs or the ability to pay them, Social Security and Medicare come to mind. 

An individual or employer mandate with the penalty for non-compliance so low a third grader could do the math and conclude the better deal is to pay a fine is pure nonsense.  Employers who oppose a mandate on them should think twice because they may get what they want.  Employers of any reasonable size are better off providing health coverage and other benefits than turning it over to a government agency (or even the individual).  They have more control over the expense, they can use their benefits in attracting and retaining good talent and when the distraction of medical care and bills affect worker productivity they can intervene to help solve problems.  Any employer that thinks it will have a better deal somehow by getting out of the health benefits business should think twice.  

What we need (aside from addressing the fundamental cost of health care) are better ways to spread the risk among medium and small employers, better pools and breaking down the barriers and constraints imposed by 50 different insurance commissions and we need to bar state mandates on health care benefits. 

I am not sure why we are even having a debate over a new public option.  If there is a group of Americans that will fall between the cracks of an individual or employer mandate, such as the unemployed, or the very poor, don’t we already have a public option in place that could provide coverage on an interim basis?  As I recall it is called Medicare.  The idea that a new public option with all of its added bureaucracy is needed to compete with private insurance is nuts especially when you consider the pending underwriting changes, pooling, a minimum benefits package and removing the obstacles caused by state based insurance regulation.  Unless you believe that profit has no place in health care (tell that to hospitals, doctors, and others) in any form, private insurance and self-funded employers are better positioned to both manage costs and innovate within the system.  The flaw in all this, of course, is the American people who believe that more and more costly health care is better health care and that no matter what their doctor orders it should be covered and reimbursed.  That means we simply ignore the tenants of medical necessity or reasonable and customary health care.  Is that what we want? 

So, along with the goal of understanding and managing the basic cost of health care (I am still trying to figure out why my wife’s ear infection cost over $18,000), we should focus on assuring that all Americans receive the appropriate health care, no more, no less.  Needless to say there is great disagreement on just what that may be, but one thing is for sure, we can do a lot better than we do today where the care provided is uncoordinated, often driven by perverse financial incentives or defensive medicine. 

It’s time to get everyone into the pool.

Americans are soft on the butt

27 Sep


I you have ever been to Europe one of your likely memories is the toilet paper.  To be more precise, the stiff, rather hard nature of such convenience (you may also remember that in some countries there are no toilet seats but that’s another story).  It turns out that there is good reason for this. A story in the September 24, 2009 issue of The Washington Post reports that Americans are under attack from environmentalists for the plush nature of our toilet paper.   Americans often are criticized for being soft in the head and now it appears we are destroying the environment by being soft on the butt as well. 

See, it grows on treesIn case you were wondering, toilet paper and the equally soft tissues make up 5% of the US Forest products industry, but environmentalists say that is too much.  The difference between our luxury product and the old standard in Europe is recycling. In the US our soft paper comes from new wood cut from diminishing forests, in Europe they use recycled paper thus resulting in the somewhat less than soft product.   

It appears that there is no part of the human body that does not cause environmental concerns, we are just polluting machines, but of course we all knew that.  The problem is that there are now too many of us (and our butts).  Of course, the obvious solution to our problem is to figure out a way to recycle people.  Reincarnation may be one option, but then you have the chance of ending up as a tree frog in the Amazon.   

The paper manufacturers have no problem using recycled paper; it’s us who demand soft serve. Blame it on those damn bears in the woods who are so concerned about their rear ends.   Hey, I’m on board, I hardly noticed the difference in France; I was more annoyed that I could not get a cracker to go with my cheese. 

Just in case you don’t buy into the need for plush toilet paper, I suggest you take the Quilted Northern “Plush Comfort Challenge.”  According to their website you can try their product and if you are not delighted, they will give you your money back.  Somehow I never thought of putting the word “delighted” in the same sentence as whipping my butt. 

As long as I am not reduced to using yesterdays Wall Street Journal (I might make an exception for the New York Times), I’m ok with helping the environment.  I have bigger pains in the butt to worry about.

When you assume you make an a..

26 Sep


Money and the government presents an interesting phenomenon. There appears no problem taking complex issues with scores of variables and predicting the cost and savings over an extended period. Based on all that, taxes are raised, obligations created and promises made. How do they do that, I can’t predict my 401k balance two days in advance.rollingeyes

Here is a good example. Under the Senate Finance Committee version of health care reform there is a provision to tax the value of benefit plans over a prescribed limit. This is estimated to generate $205 billion in revenue over ten years. To come up with this number one must assume employers and insurers will pay this excise tax rather than lower the value of the benefits. Well they are not going to do that, they are going to make sure the plan value stays under the limit. But wait, congressional planners have taken that into consideration as well, they further assume that when the employer trims the plan design it will make the loss up to employees by raising their pay and thus create more taxable income and hence tax revenue.

Sounds perfectly reasonable to me.

The traveler

26 Sep

Going on a group tour is an interesting experience and it does not depend on where you go. No matter where you travel there are people and they usually make for most of the entertainment.

The old saying there is always “one” in the crowd is never more true than on a tour where that “one” invariably shows up. This is the person who is always late for the bus, who asks a question that was just answered or is inclined to wander off on his or her own leaving the tour group to contemplate it’s next move. Which should be to let the errant fellow or gal live out their days among the ruins of Pompeii or the among the trees of the Black Forest.

I have been on this tour for five days. It is a river cruise with a small ship holding 120 people. I woman just asked at the desk how to get outside to the upper deck (after five days on board mind you).

And then there is the language barrier, did you know that most non English speaking people will understand you as long as you speak  s  l  o  w and LOUD. Try it, find someone who speaks Russian and tell them to speak to you  s l o w and LOUD and see if you don’t understand their every word.

Then we have the tipper. No matter what country they are in they tip in dollars which no doubt is appreciated by the locals who now must go to a bank and convert seventy-five cents. Of course by the time they get to the bank the dollar is worth 20% less than when they got it.

tourOn this trip they give you wine with dinner. Needless to say it is rather modest table wine. None the less one women wants to see the box. I am hoping she means the box containing the bottles and not a box the wine comes in. Given I am in France I refuse to believe they would serve us boxed wine. Where does the wine come from she demands.  She is told from the border area near Germany. What’s the name of it? I don’t know the Steward says. It’s just table wine. Why can’t I go into the refrigerator to see it she demands. Not allowed he replies.  This is starting to turn into the wine war. 

Following directions…it’s a dream. Here we go. “Are there any “red” group people on this bus?” You are supposed to be on the middle bus with me. “Put all your luggage outside your door before you go to breakfast. That includes your airplane carry on luggage.”  “Ah, where do I put this carry on, it won’t fit on the bus?”   ”I can’t hear you.”  Did you set your headset to channel “4″ (as I instructed you four times now). 

As I have often said, these people vote.  Now I admit the average age of these travelers is more than 70, but I refuse to attribute this scary behavior to just age, taking 10 minutes to get on the bus perhaps, but having ones head up ones butt is not unique to the elderly.

Where the money comes from

25 Sep

One of the largest problems facing health care reform is paying for the expansion of coverage. Here is a look at where and how the Senate Finance Committee hopes to raise revenue.

It remains to be seen if the assumptions are correct and consider the likely reaction by employers and others. For example, it is hard to imagine that any organization will continue a plan that subjects it to the excise tax.

Revenue Sources:

Excise tax on high cost coverage – $205 billion

Taxation of retiree drug subsidy paid to employers – $4 billion

Annual fees on insurers, drug companies, and medical device companies – $93 billion

Limit FSA contributions – $14.6 billion

Remove OTC drugs from FSA eligibility – $5.4 billion

Raise medical expense income tax deduction hurdle to 10 percent – $28 billion

Increase the HSA non-qualified use penalty – $1.3 billion

Senate Finance Committee actually considering a change that helps employers

24 Sep

The following change was made to the Finance Committee markup yesterday.  If it remains in any final legislation, there could be a significant benefit for employers offering retiree coverage.  It may also mean an immediate positive impact on an employers FAS106 expense.

Hey, if they have another $5 billion to throw around, why not give it to the good guys?

To Modify the Chairman’s Mark

On page 13 of the Mark:To Accept with Modification Kerry-Stabenow Amendment #C7:AmendTitle I, Subtitle A to add $5 billion to reinsurance program to apply to employer-sponsored retiree coverage. The program would reimburse any eligible employers or insurers 80 percent of claims between $15,000 and ends at $90,000. The thresholds would rise each year based on the Medical Care Component of the CPI-U, rounded to the nearest multiple of $1,000. It would reinsure only the claims for individual between the ages 55 to 64 year old who are not active workers or dependents of active workers and who are not Medicare eligible. Eligible employers are those offering coverage that is appropriate for a mature population between 55 and 64, offers preventive benefits, has demonstrated programs to generate cost savings for those with chronic and high-cost conditions, and can show actual cost of medical claims.

– Change the effective date for this subtitle to July 1, 2013 unless otherwise indicated.



Cost is the number one problem…duh

24 Sep

Someone should tell our members of Congress that the issue they should be dealing with is health care costs.  Apparently Americans know this.  According to some recent Gallup polls cost is the main issue for Americans.  In an open-ended question, Americans are most likely to say cost (38%) is the biggest problem with healthcare in the United States today, followed by too many uninsured (15%), and insurance companies (13%). According to the poll, 85% of Americans with health insurance coverage are broadly satisfied with the quality of medical care they receive and with their healthcare costs. 

The bad news is that Americans tend to look at health care costs from their little corner of the world defining health care costs as they apply to their own health insurance.  That is, they are worried about reductions in their own benefits, and they have little idea of what health care really costs beyond their deductible and co-payments  Of course, that is to be expected, but it is just another indicator that our leadership needs to focus the discussion on the real and broad issues for America and stop the rhetoric demonizing insurance companies and claiming to be reforming health care when what is really happening is expanding coverage and perpetuating the myth that the road to our salvation in health care is wellness programs.  

While many employers are seeing costs skyrocket with double digit percentage increases for 2010, members of the Senate Finance Committee debate whether employers can offer a 30% or 50% discount to employees who participate in a wellness program.

Time for incentive compensation to go..even for Congress

22 Sep


I never was a big fan of incentive compensation even though I have benefited from it significantly over the years. My objection has always been based on what I see as two flaws in such a process.   If you provide an incentive that will result in more pay, people will usually work toward that goal and in some cases at all cost.  That means cheating, fudging the numbers or in the case of our economy taking undue risk.  It may also result in such focus on the goals associated with the reward that other opportunities are missed.  In large measure incentive compensation is a joke, meaning that the rewards are disproportionate to the goals and measures of success.  People are rewarded based on non objective or non-quantifiable criteria in many cases.  Also, the farther down the corporate rung one goes the less line of site to any goals or measures there is. 

moneytreeThe reason incentives don’t work is because incentives work…and we are unable to figure out how to make the working part align fairly with our true objectives. 

The reward resulting from an incentive is generally money or some form of it.  In the case of politicians it is re-election and ongoing status and power.  We are in a period where incentive compensation is under attack, partially for good reason and partially because doing so is an incentive for politicians.  There is a simple solution for all this, eliminate incentives altogether.  Pay a fair salary for doing a good, pay a better salary for doing a better job and pay an after the fact (non-targeted) cash bonus for doing a great job when the true results are known.  By results I mean overall results, I don’t mean only the earnings target or the ROI for the year, and I don’t mean just what an individual did but what the entire organization or division or group did this year and how it implemented long term strategies. 

Incentive compensation should be paid for what is accomplished that is not part of the base pay associated with doing ones job.  I have yet to see a job description that does not include what we pay for a second time via incentive compensation.   

Human beings will be human beings, we all respond to incentives of one kind or the other, since we have yet to find a way to apply that strictly for the common good and likely never will, it is time to get back to basics with our compensation philosophy, it worked well for many years, why not in the years ahead? 

There is something ironic in the current flap over incentive pay.  Bankers are attacked for their pay and the ignoring of risk.  At the same time our politicians play free and lose with our future by responding to their own incentives with irresponsible spending and certainly helping us all incur far greater future economic risk than we want.  Last March Congress passed a spending bill that increased domestic discretionary spending by 8% and included over 8,000 earmarks, pet projects added by individual members of Congress to curry favor with constituents.  Frankly, I am as worried about that kind of incentive as I am the pay of a trader for a big bank.

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