Archive | November, 2010

Paul Krugman says “death panels” are coming, guess what, concept-wise he is right (and that is the first time I said that about Krugman)

30 Nov
U.S. Medicare spending per capita

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Paul Krugman has a point. It may not be a death panel, but some form of rationing will be necessary to have any hope of controlling Medicare costs.  We spend too much at the end of life, we spend too much on inefficient health care…we simple spend too much and our children and grandchildren cannot afford it.  

Krugman should have opted for a better choice of words and explained what he meant, but he tells the truth.  The idea that we can have all the health care we want regardless of the cost simply cannot continue.  Great Britain uses panels to determine the cost/benefit of some procedures based on individual circumstances and may not pay for a service, the English love their system. 

The promise of health care reform is false, it cannot provide high quality care and make health care affordable under the current system.  There are many in the U.S. who believe that health care should be “free” at the point of service, and that cost should never be a consideration in providing health care.  That may be the ideal world, but it is not the real world.

What’s the message here?  In part, the message is the health care you want may well be coming directly from your pocket in the years ahead, plan accordingly.

Is Congress exempt from Obama universal health care plan?

29 Nov
President Barack Obama speaks to a joint sessi...

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The internet is an amazing place; it seems I spend half my waking hours doing something with a computer. Unfortunately, the speed and ease of communicating also allows for the broad dissemination of misinformation.  When it comes to health care, I try to find misinformation to let you know the facts. 

Here is the latest example of misleading inaccurate information:






The fact is that all members of Congress and the President are eligible to participate in the Federal Employees Health Benefits Program.  That program offers an array of choices from HMOs to traditional insurance.  For that coverage there is a substantial monthly premium, in some cases several hundred dollars per month.  This program is not unlike the health benefits offered by thousands of employers across the country.  

“Join the universal health care program that the rest of us will be on?”  What program is that, there is no such thing in the health care reform legislation; the American people are not being put on anything.  Somewhere in this uninformed person’s thinking is the issue of a public option and whether Congress would be subject to the public option without other choices.  Well, the public option did not happen and while there are many in Congress (not as many as before November 2) who would still fight for it, the chances of that happening in the next decade are slim to none.

Health care costs remain the three hundred pound gorilla in the room.

28 Nov
Health care systems

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Writing for Bloomberg News on the deficit and proposals to deal with it, “U.S. Deficit Proposal Misses the One Big Gap:” Roger Lowenstein writes in part:

Health-care programs are the biggie, because they are affected by both the number of seniors and the rising cost of care. In total, as a share of the economy, such spending is expected to double. Mother Jones’ website isn’t off base when it calls health care “our only real long-term spending problem.”

Keep in mind this was written long after health care reform was enacted. You may want to pay close attention to these points of view because dealing with this very valid concern (not to mention your non-government sponsored health care costs) is going to have very significant consequences on all aspects of your life from your ability to retire to the type of health care you receive.

Americans have grown up with two invalid assumptions when it comes to health care; high cost equals high quality and more health care is always better health care. Those philosophies are not followed in the rest of the world. While all societies struggle with the rising cost of health care, most provide care less expensively than the US with no adverse health consequences.

Think about this, in Germany if you go to the doctor with back pain your first treatment may be a massage while in the US it may be an MRI or Cat Scan. Which approach would you prefer?

Anyone who tells you that we can continue the health care system we have, even with the changes of PPACA, and call it “affordable” is lying to you.

The Doc Fix and how “savings” disappear before your eyes

26 Nov
Centers for Medicare and Medicaid Services (Me...

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A report on The Hill relates the one month “doc fix” approved by Congress to prevent a Medicare cut in physician payments. Those cuts were originally part of the “savings” paying for health care reform.

“The bill — called the “Physician Payment and Therapy Relief Act of 2010″ — would cost $1 billion over 10 years. This would be offset, according to a summary, by reducing by 20 percent payments for multiple therapy services provided to patients in one day.

The cut to physical therapists is not as steep as a 25 percent cut that the Centers for Medicare and Medicaid Services had already been considering — hence the words “Therapy Relief Act.” But whereas the savings from those therapy cuts were initially supposed to be redistributed to participants in the Medicare Physician Fee Schedule, the Senate proposal would use them instead for the doc fix.”

Call me crazy (or logical), but is there any net savings or are we charging one credit card to pay the bill on another?

I fit the profile, scan me, pat me down, I could use a thrill now and then

25 Nov


You're going to check where for what?

I am 67 years old, my family tree shows my family in the US since at least 1820, my great, great-grandfather served in the Civil War (on the winning side). I am a veteran and I have never been to any country in the Middle East or Asia. I don’t belong to a religion that glorifies Holy War (there is no such thing as a holy war by the way), at least not in the last seven centuries.

Clearly all of the above justifies the German version of TSA taking away a tube of cosmetics from my wife because it was a few millilitres over the prescribed limit. No matter that both my wife and I could each have had a tube of the same substance within the limit but with a combined excess limit. Hey, that stuff they threw away was expensive (or so my wife tells me).

In the future I will be scanned, exposing all my natural self in the quest for airline security. In the process I will be exposed to radiation (minuscule amounts they say – glad I’m not a frequent flyer) and who knows what else. What’s wrong with this picture, no pun intended.

Hold that plane, hold that plane!!

There is a darn good chance that I and a few hundred million other sane people are not security risks. Is it so hard to tell the difference between me and a twenty something, middle eastern traveler who has been to Pakistan in the last two years and attends a religious place of worship led by some guy who thinks it is still the 8th century and who preaches hate and vengeance? 

Apparently, if you are obsessed with offending someone it is hard to distinguish high risk travelers . No matter that millions of others are delayed, inconvenienced or embarrassed.  Besides, the way they squeeze you into an airline seat these days who has room to bring anything bigger than a piece of paper on board with you. 

Let’s stop worrying about political correctness and get this security thing right.  Napolitano needs to spend less time worrying about the ACLU and more time PROFILING (1). How about full and complete checks when you buy a ticket?  Match my data with my passport, there must be a file somewhere on me, I get enough offers for a credit card each week. Have a separate screening process for last-minute ticket buyers where there is no time for a pre-flight check.  

(1) Profiling: the analysis and classification of somebody based on personal information such as ethnicity, shopping habits, or behavioral patterns, used, e.g. in criminal investigations or product advertising 

Ummm, used in criminal investigations, but it’s taboo if used in investigations to prevent a crime (to put it mildly).  Employers are charging employee who smoke or who are obese more for their health insurance premiums, isn’t that profiling given there is no way to tell if a person who is obese or who smokes will actually incur higher health care costs regardless of the validity of overall statistics.

Happy Thanksgiving, here’s to the memories of the past

24 Nov
Cranberry sauce & Gravy
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Happy Thanksgiving (hopefully that is not yet politically incorrect).  No doubt there is a society somewhere for the prevention of cruelty to turkeys, an animal so dumb it can’t be out in the rain because it will look and drown itself.

The older I get the more I think of holidays gone by especially when I was a child and a holiday did not involve any work on my part.  I now know that my mother and grandmother did a lot of work before, during and after each holiday meal – and no dishwasher mind you.  The men watched TV and the women did all the work, and that was the good old days, ah, not so much I’m thinking now.

Nevertheless I still miss those dinners and the tradition.  First thing on Thanksgiving was to watch the parade on television, that was after we got a TV, we switched channels from the parade in Detroit, to Philadelphia and New York with the main objective of seeing Santa three times and avoiding the boring singers from time to time.

Dinner was promptly at 3:00 PM as I remember (and I do mean promptly) with turkey carved at the table by my grandfather, stuffing, two kinds of cranberry sauce, mashed potatoes, creamed onions, peas, sweet potatoes and dishes of olives and celery sticks at each end of the table.  And then there was pumpkin pie, mincemeat pie (no meat in mincemeat by the way) and as I recall someone didn’t eat either so they got an apple pie. 

One of us kids always got into trouble for something, spilling a glass of water that was in my grandmother’s best crystal glass, or eating all the olives before everyone had his or her share.  The great olive caper was an especially notable event which got my grandmother really upset, but given it was totally Doug’s fault I have only a limited memory of the event where we had to run to the store for replacement olives.

We always went to my mother’s, mother’s house for holidays because we had no place else to go. It may have been a routine some would find boring, but one I recall with great fondness.  In many ways they were the good old days, especially for us kids. 

But it’s time for new traditions and new memories and I get to live it all over again through my grandchildren…the good news is they don’t like olives, yet. Come to think of it I don’t think they eat mashed potatoes, stuffing, celery or mincemeat pie.  All I have to do is keep a close eye on the cranberries.

Wait until Christmas, I get the fruitcake all to myself.

Regulations issued for medical loss ratio rules on insurance companies, President claims changes will improve the quality of your health care. As that great short stop said “Holy Cow”

23 Nov

Image by Steve Rhodes via Flickr

According to HHS, the new rules requiring health insurance companies to spend 80 to 85 percent of each premium dollar on medical claims or programs designed to improve health will result in nine million people receiving an average of $164 in the form of a rebate in 2012 from those companies that do not meet the new requirement in 2011.  Isn’t it a bit curious that the push has been for competition and yet we don’t think people are smart enough to select the lowest cost plan, but rather we need to reimburse them for selecting a higher cost plan, assuming of course that the insurance company with a low loss ratio is a higher cost plan.

Coincidentally, today I received an e-mail from the President touting the changes in loss ratio rules.  It is amazing how changes in rules such as this can have such a magnificent impact on your health.  Take a look at what the President says:

Good afternoon,

Over the past few years, many Americans have seen their health insurance premiums skyrocket, while the quality of their health care declined. One of the reasons I pushed so hard to pass health care reform this year was to make sure that American consumers get what they pay for when it comes to their health care. 

Today, we’re launching a new provision of the Affordable Care Act that does exactly that. Next year, insurance companies will be required to spend at least 80 percent of the health insurance premiums you pay on your health care, instead of overhead costs like advertising and executive compensation.  If they don’t, they will be required to give you a rebate or cut your premiums starting in 2012. 

I asked Nancy-Ann DeParle, the Director of the Office of Health Reform here at the White House, to break down what this means for you and why it’s so important:

This new rules will make our health care marketplace more transparent and ensure you get the best value for your premium dollars. And it is just one of the many parts of the Affordable Care Act that are already making our health care system stronger. Here are just a few ways the Affordable Care Act is helping you and your family:

  • This new website helps you find private health insurance coverage that’s right for you and your family and now allows you to compare pricing for the options available to you.  In 2014, there will be many more affordable private plan choices.
  • Patient’s Bill of Rights. Insurance companies can no longer place lifetime limits on your care.  If you’re a young adult under the age of 26, you can stay on your parents’ plan, and if your child has a pre-existing condition, insurance companies can’t deny his or her coverage.
  • Pre-Existing Condition Insurance Plan. If you have a pre-existing condition and are having a problem finding coverage, the Affordable Care Act created a special insurance plan just for you. 
  • Help for Small Businesses. If you’re a small business owner, you may be eligible for tax credits to help provide insurance for your employees.  
  • Free Preventive Care. If you’re purchasing a new plan, you’ll get preventive care like cancer screenings, well-baby and well-child check-ups, and blood pressure or diabetes tests for free.

These aren’t just talking points. These changes are saving people’s lives and saving you money, and we will continue our work to implement this landmark law and make our health care system better for all of us.


President Barack Obama

Did you know that the quality of your health care has declined in recent years (I added the bold to the President’s text so you would be sure to focus on that claim)?  Do you believe that telling insurance companies they must spend a certain amount of premiums on claims will raise the quality of health care you receive?  If you believe that I feel sorry for you.

Don’t hold your breath for your share of the pie, just as is the case with the so-called Cadillac tax on overly generous health plans the tax is unlikely to be paid, it appears likely that rather than subject itself to these rebates insurance companies will simply spend more on the ancillary services permitted under the regulations or cut other costs. Keep in mind that if the relatively few insurers below the required ratio do actually pay the refund it is a whopping $13.66 a month which I guess you can use to talk to your doctor about raising the quality of health care you receive. And yes, it is the doctor you talk to about the quality of your care, not the insurance company.

P.S. Notice also the latest shot taken at executive compensation. Some executives may be paid more than they worth (just like politicians), but the fact is that executive compensation has an insignificant impact on your premiums.

Never underestimate the power of a penny, it is important to you, be kind to pennies

23 Nov

I never pass a penny on the ground, I pick it up, put it in my pocket and later in a bank. I figure I’ve accumulated enough wealth picking up pennies to bail out a street vendor in Washington, DC.

However, my obsession with accumulating such wealth is not why a penny is important to you. A penny is important to you because it can mean loss of your next raise, your 401k match, your employee benefits or even your job.  The next time you are squeezed into an uncomfortable airline seat, forced to cope with a carry on bag because of the high fees for a checked bag, think of a penny or two. It’s not just poor design that causes you to nearly be guillotined when the person in front of you puts their set back while you have your tray down, it’s pennies.

Have you figured out that a gallon of ice cream is no longer a gallon of ice cream, yup it’s that darn penny again.

You don't want to mess with me!

A penny can sink your investments and leave you at the mercy of people who obsess over a penny or two because those pennies mean big bucks to them, really big bucks.

How can this be you say, it’s just a penny. In reality a penny is much more than a hundredth of a dollar when it is part of earnings per share (EPS).

Somewhere an analyst estimates a company will earn fifty-two cents per share. Woe be it if earnings are fifty-one cents. The stock drops, the CFO is apoplectic and the CEO must explain to his wife that his bonus is kaput and her winter in Fiji is history.

And what does it all mean? Not much beyond the perception of traders whose expectations are not met. And who is to say the analyst wasn’t wrong in his projections? If the weatherman says it will be sunny tomorrow and it rains who was wrong?

What possible importance does a penny have to the shareholders of a company? As long as my dividend is paid do I care if the EPS for this quarter or this year is off a penny or two? I do not in the least, but somebody does so the value of my stock drops. I want to know that the company is doing all the right things to make money so it can pay dividends for years to come, and can withstand periodic adversity. Beyond that it is all gambling.  Higher earnings are a good thing over time because they should mean my dividends go up as well.  However,  earnings should come from higher sales and real growth, not from cutting jobs, freezing wages or eliminating retiree medical coverage to meet a short-term EPS goal. 

So you see, in many ways a penny controls your life, be nice to pennies. The next time you see a lowly penny on the sidewalk pick it up, you may need it someday.  And if you work for a company where bonuses are based on an annual earnings per share target, make sure you know the address of the nearest unemployment office.

Raise taxes, save money, lower the deficit…ah, why bother?

22 Nov
United States deficit or surplus percentage 19...

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Will raising taxes help reduce the deficit, not if you find ways to spend the new-found pot of gold.  Conventional wisdom says that more revenue will help lower the deficit, but historically that is not the case. Why, because politicians can’t resist spending every penny they plays well at election time so shame on us.

Updated research shows that there has never been a time when Congress did not spend more than generated by an increase in taxes.

Missing the point, missing the problem, come 2014 the cost of Medicare may be the second biggest problem we face for health care costs

21 Nov
A member of the audience holds a "Thank Y...

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The year is 2014, as a company your organization is doing well, but is still held back by that unsolvable problem of health care costs. You plan your normal strategy to cope, cut benefits and increase the cost sharing for employees (by the way, wellness programs have not worked).

However, this is 2014 with new problems and new opportunities. First, if you increase employee premiums too much you face penalties under PPACA. On the other hand, PPACA presents an opportunity to rid your company of the health care problem permanently, benefit many workers and save money.

Try this for an idea. You drop your health benefits coverage and at the same time give your workers a good raise. When workers purchase coverage through a new health insurance exchange (which you can help them do) many, likely the vast majority, will receive a government subsidy toward the cost of coverage giving the worker a net cost less than their former premium contribution especially for lower paid workers.

Of course, you the employer will pay a penalty for each worker who loses coverage, but that is far less than the total cost of the coverage you provided.

In lieu of a raise for workers, you could provide a lump sum payment each year to be used towards their premium share in the exchange or for out-of-pocket costs, perhaps contribute to an FSA for them. Pretty cool huh?

Employers won’t do this you say, well employers have dropped retiree coverage for people already retired, cut out spouse coverage, raised premiums to unaffordable levels for low-income workers, forced employees into high deductible health plans and all manner of creative things…this one is a no brainer, everybody wins, well, not everybody.

The long-term cost assumptions used by the government to justify health care reform are kaput. The subsidies to people in the exchanges grow beyond predictions and the federal government is left with a fiscal disaster rivaling Medicare (whose problems are not solved by 2014 by the way). Not only does the number of people receiving the subsidy increase, the amount of the increase sky-rockets because nothing has happened to control rising health care costs.

If you think I am crazy, think more about the consequences if I am not.

I asked some employee benefit experts, will the cost of health care go down as the result of the Patient Protection Affordable Care Act

20 Nov

Keeping in mind that one of the key promises of health care reform is affordable health care (or affordable health insurance premiums, take your pick).  I recently asked the question on an employee benefit professionals blog if the experts felt that costs would be controlled as a result of PPACA.  The general consensus was they would not, but one comment I found truly on target.

The current bill will not reduce costs.  The true cost controls will not come for some time and they are not in the current legislation.  In ten years there will be very few employer sponsored plans left.  Most companies will (as the author of the legislation intends) opt to pay the fine of a few thousand dollars instead of spending ten thousand to cover each employee.   While this legislation did not create a single payer system, it will eventually create a single payer system.  Once the government-run plans are covering the majority of the people in the country, they will be able to implement the rationing, behavior modification laws (such as taxing obesity) and other controls that will bring costs (or at least the rise of costs) down. The bad news is that the benefits professional’s job as we know it will not exist, however most firms will offer supplementary plans so it’s not all gloom and doom for our profession. Many firms will use supplementary plans as an attract and retain tool much the way they did with very rich  ”Cadillac” plans.  A friend of mine in the U.K. calls these supplemental plans ”queue jumping” plans which allow people to get better and quicker care than those who are only on the government plan.

All in all the true costs will not go down simply due to the PPACA.

I agree with this assessment although it may take longer than ten years, but not by much.  I added the bold to the above comments, but I want you to focus on this scenario and ask yourself, if some form of rationing or tight control on the provision of health care are not in place, how will health care costs be controlled?

Health care in Germany and why Republicans can’t repeal PPACA.

19 Nov

Word is that Republicans are going to repeal health care reform or make significant changes. Of course they will not repeal anything, and “significant” is in the eye of the beholder.

At the same time there appears a growing movement among employers to embrace the high deductible health plan and healthcare savings account concept. That’s where you get to pay a big chunk of your bills in return for a somewhat lower premium on the theory you will be more prudent in using health care if it’s your money (assuming you have the money of course). If you also place money in a health savings account (HSA) and don’t use it to pay your out-of-pocket costs this year, you can save the money with interest (what’s interest?) to be used for future expenses, perhaps in retirement.

Who says life isn’t fair, now you can save for your own retirement income and health care expenses. Planning to retire at age 55 are you?  I retired at 66 less than a year ago and I am already seeing my fixed income eroded by higher property taxes, higher health insurance premiums and other stuff I can´t control—-plan ahead folks, retirement is not fun without money to spend, but I digress.

Contrast the US to Germany where I happen to be at the moment (ok, so retirement isn`t so bad, at least in the early years). A family of four pays €218 per month for health insurance (more for a larger family). That’s about $300. You can choose your own doctor anywhere in Germany and the doctor is paid by the state. Doctors make more money by having a good reputation and attracting more patients.

There is no out-of-pocket cost to obtain health care or prescription drugs, no deductibles, no co-pays. Taxes may be high in Europe and physician incomes low relative to the US, but it’s hard to find anyone who doesn’t like their system. Of course, as it’s population ages costs are also a concern.

Americans seem puzzled over who should have more power over health care, the patient, the doctor, the insurance company or the government. The quandary is finding some balance between cost and quality (forget this freedom of choice stuff, quality is the real goal and that does not mean you must have high costs-just someone who really cares about costs).

The key to solving the health care problem in the US to the extent that is possible is to place the right incentives on each party within the system. For example, doctors can’t make more money by simply providing more services, hospitals can’t find incentives in buying new expensive duplicative equipment, patients must not be hampered by costs in seeking necessary care or overutilize health care because of low financial risk…simple huh?

One thing is for sure, leaving the system solely in the hands of the patient and the doctor with no involvement by any third-party will get us nowhere in terms of quality or manageable costs. Republicans seeking to reform health care reform should keep this in mind…and so should Rush Limbaugh and Sean Hannity.

Grandma Pelosi likes spoiling the grandkids

17 Nov

The ink is not dry on the Presidents fiscal responsibility commission report and already Representative Nancy Pelosi (D-CA), current Speaker of the House has criticized the report as “simply unacceptable.”  She apparently wants a plan that protects children, the middle class and seniors while lowering the deficit and protecting Social Security. Hey, who doesn’t? I want a forty-foot yacht too, but that is as likely as progressives saving the world with the earnings and accumulated wealth of those who earn over $250,000.

Let me see, I think I have something in here for everyone

Mrs. Pelosi is like a kindly grandmother living on Social Security who cannot resist spoiling her grandchildren regardless of the consequences to her or the grandkids. However, in this case, grandma is not using her Social Security check, she is using yours.

Significant changes in future Social Security benefits are on the table (likely falling off when politicians, unions and the AARP get in the act). Taxing all earned income for Social Security purposes not just up to a certain limit, gradually raising the normal retirement age to 69 and changing benefits for some Americans (higher income of course) are also mentioned.

What really are “simply unacceptable” are politicians who just do not get it. Entitlements must be paid for, entitlements create dependency, entitlements grow because it is politically expedient, and entitlements cannot be paid for simply by taxing the wealthy or the young.

The U.S. is in serious financial trouble and at risk due largely to politicians of both parties meddling in the system while ignoring the unintended and long-term consequences.

Here is the real message to Americans. Your lifestyle is going to change; you better save and save and save. You had better figure a lifestyle based on paying more in all kinds of taxes and fees…and that is the truth.

You can thank irresponsible shortsighted politicians at both the state and federal level for the current fiscal mess. However, many Americans must agree with the progressive agenda of spending, taxing, and expanding entitlements. Somebody reelected Pelosi, Frank and Reid.

Taking care of everyone except the “wealthy” of course is tempting, unaffordable, but very tempting. We have only to look around the world to see the consequences, but no matter the United States of America is different…

Grandma, I want an electric train for Christmas (with federal subsidies).

Why you should care about the funding of high-risk health insurance pools. HHS cuts premiums, but not the cost

15 Nov
Health insurance premiums paid on behalf of wo...

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During the health care debate, there was much talk about insurance company discrimination, especially against people with pre-existing conditions. The President claimed many Americans had been locked out of coverage and with the reforms proposed; they would be able to obtain “quality, affordable healthcare.”  Guaranteeing enrollment in insurance is largely unrelated to the quality of health care provided and “affordable” is a relative term especially if the cost of coverage is rising at 9% a year or more.  Also during the debate, I participated in a Facebook ® group in favor of health care reform as structured by the administration.  I was regularly blasted as being insensitive as the group participants reflected the Presidents rhetoric on this issue.  I repeated the message that many people would be disappointed if they thought guaranteeing coverage was going to make that coverage affordable.

To date the high risk pools have enrolled 8,011 individuals nationwide compared with a prediction of 375,000.  Some observers conclude that the problem of uninsured because of a pre-existing condition was not a large as claimed by proponents.  I do not buy into that as the primary reason for low enrollment. Rather, it is more likely the unaffordable cost even after government subsidies of 65% of the premium or more.  New Jersey banned insurance companies from denying coverage years ago, but that does not make the coverage affordable. Premiums in the individual market for a family range from $9,000 a month to $2,100 a month.  Let’s assume single coverage of only $1,000 per month and a government subsidy of 65%.  That means that this “affordable” health insurance still costs the individual $350 per month or $4,200 per year.  And, according to an AP® report, part of the problem is sticker shock. Premiums vary by state, and can range from $400 to $600 per month or more for people in their 40s and 50s

The government’s answer to the apparent cost problem is to lower premiums by 20% in the pools run by HHS (in 23 states) and improve the benefit options, including adding a health savings account option.  That sounds like underfunding to me.  If the premiums do not reflect the cost of coverage what have we accomplished.  If a private insurer set premiums that way, it would be out of business or up before state regulators for inadequate reserves. 

Why should you care if the government wants to force some level of “affordable” into the high-risk pool? Well because this high-risk pool program expires in 2014 when the insurance exchanges are effective.  At that point, the true cost of the coverage for high-risk individuals will be reflected in the cost of coverage paid by all exchange participants.

Don’t get me wrong, I think high-risk people should have access to coverage, but that is quite different from rhetoric claiming that it can be done in an affordable manner without fundamental changes in the system that generates the cost of coverage.  We were told the devil was insurance companies and yet we find very quickly that government-run programs cannot provide coverage on an affordable basis either. 

For years, the debate on health care in America was focused on the uninsured and that is true in 2010 as well.  In reality the uninsured are a symptom of the cost problem. “Solving” for the symptom without solving the problem is no solution at all.

Claiming health care cost savings from health care reform. Why PPACA will not lower YOUR health care costs.

13 Nov
Medicare & Social Security Deficits Chart

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Before, during and after the health care reform debate the President and his allies in Congress claimed that health care reform would lower health care costs. Many Americans assumed they were talking about measures that would lower their premiums and out-of-pocket costs. Many Americans were wrong.

However, in cases such as adding adult children to coverage, or mandating 100% coverage for preventive services and lifting underwriting rules, the directly affected individuals were right, but forgot that those changes raised premiums for all insured individuals.

The reality is that what the President was talking about was health costs for the federal government not you and me. Attempts at managing the cost curve within PPACA focuses on Medicare and Medicaid.

Following is a list of such measures contained in the law (prepared by Towers Watson consultants). Note that several measures likely result in cost shifting to the private sector. Also, note that “competition” among insurance companies is not the solution. More insurance companies in an area reduces each company´s ability to negotiate lower fees with health care providers because each carrier will have fewer members (patients) and therefore less leverage with doctors and hospitals.

Also, if you are among the seventy-million Americans in self-insured employer plans, there is less to benefit you within PPACA and more to raise your costs.

The ACO mentioned below is similar to the HMO concept that was roundly criticized for providing financial incentives to control costs, not that we do not need to change incentives in the system.

Read the duties and limitations on the Independent Payment Advisory Board and ask yourself, exactly what can it recommend to control costs?

Note the limitations on the much touted comparative effectiveness research for which employer plans and insurers are being charged.

Health care cost savings measures within PPACA.

  1. Create a Center for Medicare and Medicaid Innovation (CMI) to test payment and delivery models while preserving or enhancing quality of care under Medicare, Medicaid and the Children’s Health Insurance Program (CHIP). The initial emphasis will be on populations with poor clinical outcomes and high spending, and on improving coordination, quality and efficiency. The secretary of Health and Human Services (HHS) can expand these demonstration projects nationwide if the Centers for Medicare and Medicaid Services (CMS) actuary determines they can reduce spending.
  2. Have Medicare recognize groups of providers and suppliers who meet certain quality criteria as accountable care organizations (ACOs). ACOs can share in cost savings they achieve for Medicare, even receiving bonuses if the savings are large enough. This program will also be available to pediatric medical groups under Medicaid.
  3. Test an alternative payment methodology for Medicare nationwide in a voluntary pilot program to incent providers to coordinate patient care across the continuum and to manage all care associated with a hospitalization.
  4. Similarly, create demonstration projects under Medicaid to pay bundled payments for episodes of care that include hospitalizations.
  5. Establish other programs to encourage providers and plans to provide more efficient care for certain chronically ill and high-risk Medicare and Medicaid populations.
  6. Establish an Independent Payment Advisory Board to submit proposals to reduce Medicare spending if projected growth rates in Medicare spending per beneficiary exceed target growth rates specified in the law. The board’s proposals take effect automatically unless Congress passes an alternative that achieves the same level of savings. But proposals cannot ration care, raise taxes or Part B premiums, or change benefits, eligibility or cost-sharing standards; and generally they cannot affect inpatient hospital and hospice care or diagnostic lab tests.
  7. Reduce Medicare payments to home health providers. More significantly, Medicare payments to all providers (except physicians, who are governed by different payment rules) will be adjusted by the percentage change in the 10-year moving average of annual private nonfarm business multifactor productivity. The Medicare trustees expect a 1.1% annual reduction. The phased-in adjustment varies by type of provider from 2010 through 2019, and will apply fully and equally thereafter.
  8. Reduce Medicare Advantage (MA) plan benchmarks for payment to roughly the cost of fee-for-service Medicare services — more for low-cost counties and less for high-cost counties. High-quality MA plans get a bonus in their benchmark, while rebates to plans bidding less than the benchmark are generally lowered and are further modified for plan quality and certain coding practices. Plans with low medical loss ratios must remit partial payments to Medicare, and plans with consistently low ratios will be barred entirely.
  9. Shorten the period for submitting Medicare claims.
  10. Physicians ordering durable medical equipment (DME) or home health services must be enrolled in Medicare, and face-to-face encounters with patients are required for such orders.
  11. Adjust Medicare hospital payments based on performance under a value-based purchasing program. These incentives will be funded from the base operating diagnostic-related group payments. The law also reduces payments to acute care hospitals whose rates of hospital-acquired conditions are in the top quartile and those with high readmission rates.
  12. Disproportionate share hospital payments will be reduced significantly, although hospitals dispensing significant amounts of uncompensated care will receive bonuses.
  13. Pay Medicare bonuses to physicians who report quality measures and impose penalties on those who do not.
  14. Reduce Medicare payments for magnetic resonance imaging and bone density tests and expand competitive bidding for DME.
  15. Create an annual wellness visit benefit for Medicare beneficiaries, and eliminate cost-sharing for certain preventive services recommended by the U.S. Preventive Services Task Force (USPSTF). The law blocks payments for preventive services discouraged by the USPSTF, however, and restricts Medicare reimbursement for certain mental health services.
  16. Increase the Medicaid drug rebate (to governments from drug manufacturers) percentage for brand-name drugs.
  17. Require the disclosure of financial relationships between health entities, such as physicians, hospitals, pharmacists, and manufacturers of drugs and devices.
  18. Support comparative effectiveness research by establishing a nonprofit Patient-Centered Outcomes Research Institute to compare the clinical effectiveness of medical treatments. Findings from this research, however, cannot be used to deny coverage or be construed as a guideline.
  19. Award demonstration grants to states to develop alternatives to current medical tort litigation.
  20. Simplify health insurance administration by adopting a single set of operating rules for eligibility verification and claims status, electronic fund transfers and health care payments, health claims and similar processes.
  21. Increase the threshold for itemized deductions for unreimbursed medical expenses from 7.5% to 10% of adjusted gross income.
  22. Limit annual contributions to a flexible spending account for medical expenses to $2,500.
  23. Structure the new health insurance exchanges established by the states for the individual and small group markets to encourage competition among health plans based on price rather than on risk selection and benefit design. This will presumably occur through standardized plans negotiating lower prices from providers, new approaches to eliminate unnecessary utilization and reductions in administrative costs. The framework here, sometimes called managed competition, assumes participants will choose low-cost plans because their government subsidy (discussed below) is fixed. It also assumes competing insurers will cut costs and therefore lower prices.
  24. Impose a 40% excise tax on employer-sponsored health plans to the extent the value exceeds $10,200 for individuals and $27,500 for family coverage, as indexed, effective in 2018. The threshold amounts are somewhat higher for 55- to 64-year-old retirees, and for “high-risk” professions and firms with older workforces. The tax penalty is intended to motivate employers to encourage their employees to choose high-deductible-and-co-pay health plans, such as account-based health plans (ABHPs), perhaps with limited provider choice. These plans, in turn, will encourage participants to make more cost-effective choices of health care goods and services. Alternatively, health maintenance organizations might make a comeback.

So there you have it, this is how health care reform will control health care costs. In the quest to expand coverage and stop insurance companies from their “abuses and discrimination” (the administrations words, not mine) there is a list equally long that adds to health care costs. However, most significant is the fact that this law extends and encourages the notion that health care is not a personal responsibility and that more and more expenses are to be paid by someone else, which means the insurance company and for most Americans it means their employer and their fellow workers.

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