Archive | November, 2009

When you ASSume – the excise tax on high cost plans

30 Nov


The following excerpt is from a letter sent to President Obama by 23-noted PhD economist from major US universities.  In that letter, they support the President’s health care reform strategy and comment on several elements including the one below.

Excise tax on high-cost insurance plans. 

The Senate Finance Committee’s bill includes an excise tax on high-cost health insurance plans. Like any tax, the excise tax will raise federal revenues, but it has additional advantages for the health care system that are essential. The excise tax will help curtail the growth of private health insurance premiums by creating incentives to limit the costs of plans to a tax-free amount. In addition, as employers and health plans redesign their benefits to reduce health care premiums, cash wages will increase. Analysis of the Senate Finance Committee’s proposal suggests that the excise tax on high-cost insurance plans would increase workers’ take-home pay by more than $300 billion over the next decade. This provision offers the most promising approach to reducing private-sector health care costs while also giving a much needed raise to the tens of millions of Americans who receive insurance through their employers. 

My first reaction to the above was; what are they smoking?  

I have spent the last forty-seven years designing and managing employer health benefits.  I have never heard of any employer that voluntarily provides an overly generous health benefits program. In addition, those employers in the best position to provide such benefit, that is, the largest employers in the U.S. (including state governments) do not use health insurance; there are no premiums to reduce, as these employers are self-insured. These plans cover about seventy million Americans. 

Indeed, no employer with a so-called Cadillac plan in place will leave it that way and pay a 40% excise tax; they will “redesign” their plans.  And what does that mean, it means that the out of pocket costs for plan participants will increase and it also means that it is unlikely that the individual’s premium contribution will decrease as employers look for ways to lower their costs for health care especially in view of the continued increase in costs at well above general inflation. 

Cash wages will increase?  Employers that find a way to manage health care costs after thirty years of trying are unlikely (to say the least) to transfer those savings into wage increases.  

Will the employers who raise the deductible and increase coinsurance and plan to give those savings back in the form of a wage increase, please raise their hands.

“This provision offers the most promising approach to reducing private-sector health care costs…”  Exactly how does reducing the benefits paid by a health benefits plan reduce health care costs?  Changes in plan design, something employers do on an annual basis we should note, do not do one thing to reduce health care costs, what changes do of course is reduce the payment for health care services made by the plan and shift those costs to the plan participants.  Let us also keep in mind that while this is happening, a new cap of flexible spending accounts squeezes the worker further.

It is highly likely that any plans that reach the proposed limits are state governmental plans, union plans such as the plans in place in the auto industry and plans that are in high cost areas of the country.  In any case, lowering the value of these plans is a lot easier (and a lot easier to assume) than done. 

Just a hundred more pages and I will have this excise tax section nailed

Finally, one has to ask, how many such plans actually exist?  Whatever the number may be it is relatively small after years of cost cutting by employers. 

I guess the old saying still stands, you know what happens when you assume.

Why a public option is still a bad (unnecessary) idea

29 Nov

The New York Times in its Sunday, November 29 editorial argues for even a modest public plan citing again the old story that people need choice and that it will provide competition to the insurance industry and thereby keep a lid on premiums. 

The current proposed versions of Public Option Light call for the option to be self sustaining and to negotiate payments with providers as opposed to the Medicare model. Proponents point to those designs as alleviating the fears of some of us who say that a public option will quickly become an expanded Medicare gradually morphing into a single payer system.

And what is this choice we seek, well it boils down to who is processing the claims and how.  Given the new underwriting mandates in reform legislation and the soon to come required essential benefits packages (one that unnecessarily drives costs higher) what will be the difference between a private plan and a public plan?  The larger question then becomes why do we need a public option in this environment?  The Congressional Budget Office said such a plan would likely charge premiums higher than private insurance simply because of initial adverse selection and the fact it will not manage claims but merely pay them on arrival, exactly the same thing the CBO criticized Medicare for doing.  In other words, there is no claim or cost management which provides some insight into one of the reasons for Medicare’s  financial condition. 

I assure you I have read every word …of the title page

Then there is the ever present danger of Congress tinkering with the public option endlessly until it too becomes too big to fail and to costly to maintain.  Again, I point to Medicare where the major portions of both House and Senate reform legislation deal not with the private sector but with Medicare, expanding benefits, changing this or that…tinkering and adding costs to that program when we have not found a way to keep it solvent.  Simply lowering what the Medicare pays to hospitals and others is not managing costs.  If the private sector tried that, the doctors and hospitals would drop out as participating providers (again a Medicare example).  Medicare gets away with what it does simply because there is a private sector for providers to shift costs to, not because it is well run or more efficient.  Has anyone stopped to think that Medicare’s administrative costs are too low and that is why there is such a high level of fraud and claim costs are out of control?  It is far easier for politicians to point out the generosity of the Medicare payment process when compared to the private sector than to equate that with higher than justified costs.

If Medicare is so good and efficient why not simply allow some Americas to enroll in Medicare as the public option, why do we need another bureaucracy? 

The New York Times and others are obsessed with insurance premiums when they should be obsessed with the costs that make up those premiums.  I have repeatedly made the point that large self-insured plans including the plans of the various states experience cost increases at the same level as insurance premiums simply because the medical claims are what drive the costs.  There is nothing in the pending legislation that addresses the fundamental problems in the system and even the modest attempts at doing so are focused on Medicare, not the 200,000,000 million Americans with private and employer based coverage.

There are those  who say the real test will be to have a trigger, that is no public option unless over a period of some time costs are not controlled. That is absurd because costs are not going to be controlled by either the private sector or Medicare simply because this legislation is designed so that costs will increase.  We seem to forget that the goal stated or otherwise is to expand coverage not to reform the health care delivery and payment system and we certainly do not want to upset the AARP, the AMA,  and other physicians groups or the trial lawyers or the AFL-CIO.

Just as with the financial and housing crisis, we are our own worst enemy.  Getting politicians into the act of “fixing” things and in the process telling us who else to blame is not and never has been the right solution.  They are incapable of telling Americans the truth, they are incapable of seeing the unintended consequences and the interrelationship between all the moving parts or for that matter the human nature reaction to changes they make.

Health care reform taxes Part D rebate-major pact and concern

24 Nov

For employers who elected to continue prescription drug coverage for their retirees upon the introduction of Medicare Part D, pending “reform” legislation contains a timebomb for the employer and retired employees.

Employers who elected to continue this benefit receive a tax free 28% rebate of the claims incurred by retirees. Under pending legislation this rebate becomes taxable.

While at first glance this may appear no big deal, the way the rules work in terms of deferred tax accounting there is an immediate impact on earnings. The impact can be significant. I talked to one employer where 2010 earnings would be wiped out. Another would see earnings drop by five cents a share.

The other major negative is that employers may be inclined to drop or radically change retiree drug benefits, therby raising retiree out of pocket costs and in the process SHIFTING MORE COSTS TO THE FEDERAL GOVERNMENT which is exactly what the rebate was intended to prevent.

And you think Congress won’t change it’s mind when it comes to health care reform.

If there is one thing that may encourage you to get involved and speak to your representatives in Congress this should be it.

Weighting for reform

24 Nov

And you thought this was health care “reform.”

Consider this from the Wall Street Journal “The Health Care Buffet

Hey, I pay my premiums, bug off!

“What’s more, the House legislation specifically bars incentives for Americans to lose weight. The National Association to Advance Fat Acceptance (NAAFA) lobbied against provisions that would help businesses use financial incentives to promote weight loss. The NAAFA also opposed allowing insurers to use a person’s weight or BMI to differentiate rates or deny coverage.”

Never mess with your bookie or your loan shark

23 Nov

Debt can drive a hard bargain. If your bookie or loan shark is not paid there can be serious consequences.

However, even before you get to that point it is fair to say people you owe money to especially people who don’t like you so much, but who you really need, can have considerable influence over your behavior.

Perhaps you don’t say things you would like to say or maybe you avoid taking action that is right but won’t make the loan shark happy. Whatever it is, you are beholding to people who are your creditor.

Think the US deficit doesn’t matter, think again.

Dining out insurance-no guidelines

21 Nov

Not from my wallet

Here’s the deal, I am now offering dining out insurance.  That’s right, you buy my insurance and you will be reimbursed for eating in a restaurant.  Here is how it works.  You can go to any restaurant you like, no one will interfere with your choice or what you and the chef decide to have for dinner.  Appetizers are covered 100%,  no deductible so chow down.  Pick what you like for an entree and we reimburse 80% of the cost.  Desserts cost a bit more, because they are really quite elective there is a 5% surcharge if you have dessert.  But hey this is a pretty good deal, you pay your premium each month and after that there are no questions asked, not even any guidelines to worry about, it is entirely up to you and your waiter and chef what you eat and how much.  Are you interested in a policy?

I want a free piece of pumpkin pie

I’m mad as hell and I can’t take it any more.

Medical guidelines are an interesting thing, we soon forget they are guidelines and we quickly assume that they are only valid when covered by insurance.  We also assume that insurance companies following guidelines  means that we may be denied the test “we need.”  Today it is PAP tests, yesterday mammograms, the week before PSAs and prostate exams.

Republicans see this as an example of bureaucratic interference in our health care, people affected see it as a slap at their quality health care, I say hooray!

Make a list of all the things you cannot afford. Let’s see on that list will be:

  1. Annual flu shot
  2. Mammography
  3. Routine office visit
  4. PSA test
  5. PAP test

What is not likely to be on the list is:

  1. Dinner at Olive Garden
  2. A trip to the nearest casino
  3. A carton of cigarettes
  4. Premium cable TV
  5. Coffee at Starbucks
  6. An oil change for the car or new tires

All that medical stuff is sooooo expensive, well perhaps it would not be if we paid for the basic stuff ourselves and we complained about the cost of the $200 mammogram.  Did you ever stop to think that the medical stuff costs what is does in part because nobody cares what it costs or asks about it?  Have you considered that health insurance premiums are so high because the plans cover so much stuff that should not be insurable?  Well, think about it, we surely cannot count on Congress to do the thinking.

I have been perusing a number of blogs where the debate rages on about the mammogram controversy and in many cases the tone of the comments is that now insurance companies will deny the mammogram and people will have to go without.

Flash, insurance companies do not deny coverage they deny paying for it.  You can spend your own $200 each year for a screening, go to it if it is important to you. Why wouldn’t you spend the $200 and skip a night or two out if you have to?  Why, because we don’t want to spend $200 of our hard earned money on something that does not give us pleasure and a prostate exam or mammogram sure come under that heading, but it is still the same $200 no matter how we spend it.

We have this discussion of health care costs backwards and we keep reinforcing the wrong attitudes.  Pending legislation makes it even worse by mandating that more and more services be reimbursed at 100% and by diluting the value of flexible spending accounts and health savings accounts that help people manage health care spending with their own money.  For Pete’s sake how dumb can we be (I suspect we have a ways to go)?

A few years ago, the wife of an employee called me and wanted to know why Lyme disease vaccinations were not a covered benefit.  I explained they were routine preventative and not covered thus the employee’s responsibility.  She then told me flat out that if one of her children died from the disease she was going to hold me responsible.  I said she was free to have the shots on her own.  “You expect me to pay for the shots, they cost $60.”   I have never forgotten those words because they sum up the general American attitude about health care costs.

PS  Her children were under age 13 and not eligible for the vaccination in any case, but that didn’t seem to matter…damn those guidelines.

You have heard NIMBY, now you have heard of NFMW (not from my wallet).

Not only do each of us approach the purchase of health care wrong, now our government is making one of the biggest mistakes in history and all we seem to do is couch the debate in political terms.  Federal, state and local government spend more on health care for the older population than on education for children and that is today before the baby boomers are well into Medicare.  Shifting some of those costs to the private sector and raising taxes as proposed legislation is doing does not solve the problem, but most of our politicians are more worried about the 2010 elections than truly addressing the issues.

By the way, after a year or so, I suspect my new insurnace company will need some TARP money to get us by.

CBO cost estimates for health care – read the fine print

20 Nov

You are probably reading about the CBO estimates for the Senate health care bill including a net positive effect on the deficit. What you don’t here are things like the increased cost being imposed on the private sector, the costs for the IRS and HHS to run the new bureaucracy that are not part of these calculations, the fact that only 4-5 million Americans will join the public option and that the option’s premiums may be higher than the private sector in part because the government plan will not manage claims (just like Medicare). You probably won’t hear that the new Long Term Care insurance that is added to this bill will generate over $72 billion of the assumed revenue because claims cannot be paid for five years after premiums begin to be paid by Americans.

And you probably won’t here much about what the CBO blog says in the last sentence in this paragraph (I added emphasis):

“Based on the extrapolation described above, CBO expects that Medicare spending under the bill would increase at an average annual rate of roughly 6 percent during the next two decades—well below the roughly 8 percent annual growth rate of the past two decades (excluding the effect of establishing the Medicare prescription drug benefit). Adjusting for inflation, Medicare spending per beneficiary under the bill would increase at an average annual rate of roughly 2 percent during the next two decades—much less than the roughly 4 percent annual growth rate of the past two decades. Whether such a reduction in the growth rate could be achieved through greater efficiencies in the delivery of health care or would reduce access to care or diminish the quality of care is unclear.”

And what about costs imposed on the private sector, here is what the CBO says:  


I'm glad the federal deficit is in good shape

“The total cost of mandates imposed on the private sector, as estimated by CBO and JCT, would greatly exceed the threshold established in UMRA for private entities ($139 million in 2009, adjusted annually for inflation). The most costly mandates would be the new requirements regarding health insurance coverage that apply to the private sector. The legislation would require individuals to obtain acceptable health insurance coverage, as defined in the legislation. The legislation also would penalize medium-sized and large employers that did not offer health insurance to their employees if any of their workers obtained subsidized coverage through the insurance exchanges. The legislation would impose a number of mandates, including requirements on issuers of health insurance, new standards governing health information, and nutrition labeling requirements. CBO estimates that the total cost of intergovernmental mandates would greatly exceed the annual threshold established in UMRA for state, local, and tribal entities ($69 million in 2009, adjusted annually for inflation). The provisions of the legislation that would penalize those entities—if they did not offer health insurance to their employees and any of their workers obtained subsidized coverage through the insurance exchanges—account for most of the mandate costs.”


“Only positive outcome is short-term improved access”

20 Nov

If we stop and take a look at the logic used by Congress in shaping health care, we frequently find there isn’t any.

Consider this, they place a tax on high cost health plans, they then require that there be 100% coverage for many services and no limits on benefits plus want to use co-pays in lieu of coinsurance all of which add to the cost of coverage and push more health plans over the allowed maximum cost before taxation.

They subsidize coverage for people up to 400% of the poverty level, but the difference between the subsidy and the total cost is raised because of all the mandated benefits.

Could I have a little less help from Congress please

We want to control health care cost so we remove more and more of the reason why Americans should be aware of and concerned about health care costs and we further limit personal responsibility…hey, if somebody else is paying the electric bill why turn off the lights when you leave the room?

As one commenter noted, “only positive outcome is short-term improved access. Quality and Cost efficiencies are toast because the system and the process are not the focus.”

So perhaps Congress does have some logic, keep the masses happy by expanding coverage and then take credit for solving the health care problem and the consequences be damned, they are for another Congress to worry about.


Are they real?

19 Nov

The secret is out, the Senate bill reduces the deficit (he related with tongue in cheek), but the real secret is how.

Well, here is something that helps. There is a new 5% tax on cosmetic surgery. That’s right, a sales tax on a nose job, or as was quickly coined a botox.

There appears to be no end to how weird this can get. It’s a good thing our members of Congress are already big boobs, at least they can avoid the tax. Have they just lost the vote of House female liberals?

I bet they think this is another tax on the rich, not true. The typical person who gets cosmetic surgery would not even be subject to the new Medicare tax (oh, did I forget to mention that?)

I wonder where the AARP stands on this one?

Senate Bill

18 Nov

Boy, is this the wrong prescription

In case you would like some light reading, here is the full text of the:

 Senate Health Care Bill

Health care reform now (later, done right)!

18 Nov


I have spent the last 47 years designing, administering, managing and hearing claim appeals for health benefit plans in which nearly 40,000 employees and retirees participate.  Because of that experience I have developed many opinions on health care, what works and doesn’t work and I have learned a great deal about how the average person views health care and the paying of health care costs.   That experience also tells me that the direction of health care reform today is simply wrong, not only will it not work to control costs or improve quality, it will raise costs for everyone.

It is nice to know that despite my lack of academic or political credentials my views are consistent with the “experts.”  November 18 was an especially good day as I read the opinion piece in the Wall Street Journal written by the Dean of the Harvard Medical School.  His main points are that we are not changing the system nor are we controlling costs and down the road there will have to be “draconian” measures taken to cope with costs.  Where have you heard that before?

When I was meeting with legislative aids in Washington a few weeks ago I became embroiled in a somewhat heated discussion (to the extent you can have a discussion with people who already know it all) about the Massachusetts experience.  I was told that I was wrong, that it was in fact, a success and that costs did not go up.  Here is what the Dean has to say about that:

“There are important lessons to be learned from recent experience with reform in Massachusetts. Here, insurance mandates similar to those proposed in the federal legislation succeeded in expanding coverage but—despite initial predictions—increased total spending.

A “Special Commission on the Health Care Payment System” recently declared that the Massachusetts health-care payment system must be changed over the next five years, most likely to one involving “capitated” payments instead of the traditional fee-for-service system. Capitation means that newly created organizations of physicians and other health-care providers will be given limited dollars per patient for all of their care, allowing for shared savings if spending is below the targets. Unfortunately, the details of this massive change—necessitated by skyrocketing costs and a desire to improve quality—are completely unspecified by the commission, although a new Massachusetts state bureaucracy clearly will be required.” 

Hmmm, expanding coverage and costs going up, remember those words the next time you hear Nancy Pelosi or Harry Reid, or Barack Obama speak about health care reform.

Do you see the word “capitated?”  I remember when that was a good word, then a dirty word and today a virtually non-existent word in the world of health benefits.  Use that word with a physician and you mind as well be telling him about the delightful evening you had with his wife (OK, or husband).  The reality of course is that those types of changes in the health care delivery and payment system are necessary as are many other changes that people do not want to hear about and politicians are too cowardly to mention. If you want to fix many of the ills in the delivery system put people into a well run HMO…oops another dirty word from the past (those physicians may even be salaried-OMG).

So where does all this leave us?  Headed over an abyss in my view.  The average American and the average employer better start speaking up before it is too late.  Yes, we need real reform and yes, we need to find a good way to cover all Americans, but neither is what is happening now.  We are on the Polar Express, but this time we won’t make it across the ice.

Contact your Representative and Senators and tell them you want reform but you want it done right even if it takes a few more months to do so.

Health care reform will not pass…okaaaay

18 Nov

Depending on your point of view, this is good or bad news.  But one analyst makes the case that there will be no health care reform because of fighting over controversial issues and because there is waning support among Americans.

Here is the case he builds…..let’s hope.

For what’s it worth, I do not agree.  Something will pass…something.

There are limits to being liked

17 Nov

George Bush may have been a gun slinging arrogant cowboy that offended much of the rest of the world and in the process harmed the image of the US, but is this the image we want?

Can I give them a shine while I'm here?

Respect for others, ok, but if you are a leader be a leader and act like it.  The U.S. is already on a decline on the world scene there is no need to trip over ourselves on the way down. 

It seem to me one can go too far in mending fences and that may lead to others, especially the good times friends, coming to the wrong conclusions.  This isn’t community organizing after all, this is high stakes stuff.  Even in other cultures, a little dignity please, at least he could have had an American flag sticking out of his back pocket.

The future is now

17 Nov

One of the great debates in health care is the rendering of unnecessary health care and the application of correct medical protocols.

So called health care reform will only intensify this debate. You can count on two things. More and more procedures, tests and screenings will come into question and when they do there will be groups ( some with a financial stake) that will strenuously oppose any change. You can also count on the American people siding with those who favor more and more frequent of everything.

The American view is and will remain that more and more expensive is better health care. Changing that point of view is what health care reform should be about.

Here is an example of where we are headed:

New screening suggestions for mammography

No doubt there will be those opponents of reform who will point to this example as an indication of what is to come within a public option, that is, government pointing to such studies and using the information to deny coverage.  Such a position is a big mistake.  As we know, defensive medicine and unnecessary care and testing not only are major drivers of costs, but of harm and discomfort to patients. 

What we need is a trusted, objective way of conducting value, cost/benefit studies to determine how to raise the quality of our health care while assuring the minimum cost possible.  Easy to say, not so easy to do….despite what the members of Congress like to tell us.

Rationing health care by any other name

16 Nov

I previously addressed on these pages the fact that members of congress know that some form of healthcare rationing was going to occur. Now the Wall Street Journal is reporting on a little noticed section of health care reform legislation.

Rationng Health Care

Here is the comment I posted on this article:

“While I was meeting with congressional staffers a few weeks ago they off the record told me they knew some form of rationing would be necessary, but they also knew that the American people could not be trusted with the information. While I don’t want to see bureauocrats making health care decisions, there needs to be some objective review of some medical procedures. The idea that no one should be between the patient and doctor or that we can have any care we want and costs be darn is not sustainable either. Perhaps we should trying being honest with people and let them decide what they want to pay for and how.”

Keep in mind that all this is referring to Medicare, but any public option will of necessity come under the same scrutiny. Where this is all going of course is a two tier medical system. One tier for the majority and a second for those who can afford to buy supplemental coverage or pay for what they want…just like in the UK, Canada and other countries with public systems.

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