Archive | September, 2011

Medicare premiums, a Part B surcharge, Medicare cuts and our favorite; fraud and waste

30 Sep

No doubt the President’s proposals for deficit reduction will start rumors about Medicare cuts, but keep in mind that so far what he is talking about is for future beneficiaries starting six years from now – long enough for Congress to mess things up again. Less than two years ago Congress expanded Medicare in several ways while claiming to reduce costs, now we are talking about cuts in Medicare to reduce the deficit. During the health care debate cutting fraud and waste was going to save Medicare, now cutting fraud and waste again is going to save the country.

Exactly how much fraud and waste is there? And by the way, who designed this massive bureaucracy that apparently is unable to manage fraud and waste in the course of doing its business? Politicians are proposing new laws to accomplish what we have been paying people to do since 1965. If this was the real world people would be fired rather than making political hay out of this great fraud revelation.

The truth is Medicare needs to operate more like insurance companies rather than forcing insurers to act more like a government bureaucracy.

To add more logic to the mix, the President will not consider any cuts affecting the middle class unless the wealthy pay their fair share. How does having a billionaire paying more in taxes thereby allowing cuts for the middle class help the middle class? Politicians surely have their own logic and language.

What we are seeing is more of the same piecemeal approach to taxation and budgets rather than stepping back and doing a complete tax overhaul that does assure fairness. In fact, what has been proposed will make the entire system more complex and costly to administer. Take this idea for example.

“A surcharge on Medicare Part B premiums equivalent to about 15 percent of the average Medigap premium for new beneficiaries that purchase Medigap policies with particularly low cost-sharing requirements, starting in 2017. This proposal will save approximately $2.5 billion over 10 years.”

Although the savings are speculative, this simply means that if you buy supplemental coverage for Medicare that insulates you from most cost sharing (deductibles and coinsurance) thereby eliminating your incentive to care about costs and driving up your demand for services, you pay more. Okay, Medicare beneficiaries should not lower their out-of-pocket costs just because they turn 65. I’ve written about that concept before. If you had a deductible and coinsurance before being enrolled in Medicare, why not after becoming a Medicare beneficiary? Actually, taking all things into consideration, such coverage is probably not in most seniors best interest anyway.

However, the point is rather than a complex surcharge system why not simply prescribe the type of Medigap that can be sold and thereby address the problem. This is only the start of the debate of course, but simple, logical solutions are in short supply.

The President’s proposal also seeks to freeze the income thresholds where higher Part B premiums begin. The freeze would be extended until 25 percent of beneficiaries pay higher premiums based on higher gross income. Remember the good old Alternative Minimum Tax that was implement because 200 people escaped paying income tax? Now because of no inflation adjustments the ATM affects millions of middle class Americans, here we go again. Twenty-five percent of Americans who are on Medicare is a lot of people, probably including you.

Nobody is going to escape the pain of all this, but it would be nice to hear the truth. It would also be nice to see a broad strategy addressing the fundamental problems rather than piecemeal changes designed more for November 2012 maneuvering than problem solving and true fairness.

Congressional committee looks at consolidation in the healthcare industry, surprise, surprise

29 Sep

The House Ways and Means Health subcommittee held a hearing on consolidation in the health care industry. Chairman Wally Herger (R-Calif.) said in a statement.  “In some circumstances, consolidation produces desirable results like improved efficiency and quality,” ”However, we must ensure that consolidation is not simply used as a tool to increase revenues by driving up Medicare spending and the cost of private health insurance.”

How about consolidation being used for survival?  If members of Congress had read the content of the Affordable Care Act they might understand that there are strong incentives to consolidate as a defensive measure in part to cope with new fees and taxes, cuts in payments, mandated benefits, limits on earnings., etc.  What would you do if your business faced with the same factors?  Never mind increasing revenue, how about preserving revenue (and jobs)? 

On top of all that, this health care thing is a game of leverage, the more leverage you have the better able you are to negotiate for higher or lower fees.  Consolidation among health care providers puts the insurers at a disadvantage in negotiating fees with network providers.  Consolidation among insurers gives them more clout in an area to demand lower fees from providers…and would you believe that translates into lower premiums.

While spouting rhetoric about more competition in health care and among insurers politicians created exactly the opposite incentives in the Affordable Care Act, not to mention that more competition among insurers in an area is not what you want anyway.

P.S. How would consolidation drive up Medicare spending when physician fees are supposed to be cut by 23% and PPACA contains scores of new programs to lower Medicare costs, just asking.

What does it cost to fly? Holy crap, what don’t they charge extra for?

28 Sep
Stewardess in a Swiss flight filling orangejui...

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Okay, I’m flying from Newark to London and I am expecting a surcharge to be added to my ticket cost if we actually want to land, there will be an extra fee if you want to land near a gate that is reasonably close to your connecting flight. 

That will be $27.00 please.

One airline is planning on doing away with flight attendants and rather leave you to fight your way on the plane and find a good seat.  Another is offering a personal assistant fee in case you actually want some service as minuscule as it may be.  Hey, I made that up but who knows with the idiots running airlines these days.

Does marketing matter at all, are we  just so many sides of beef to be loaded and unloaded?  Here is a clue for someone who is smart, set up an all-inclusive fare, no extras for nuttin, just the price of the damn ticket.  Something like a resort with all-inclusive room rates.  Oh wait, that’s a retro concept isn’t it?

Remember those seats over the wing with extra room they used to give out at the last-minute, I just paid an extra $98.00 for one.  Why you ask, because I don’t want the moron in front of me to spring back his seat and cut off my breathing.  Fifty pounds of luggage you say, go over that by a pound on Continental/United and you get whacked for $200…no kidding.  Free drinks; long gone, they even charge for water on some flights.  International flights last year still gave you a glass of wine; no more.  They charge you to check a bag, limit it to 50 pounds and then allow 40 pounds in a carry on.  That makes a lot of sense, wasn’t is hard enough dealing with all the trunk size carry on people used to try to cram into the over head compartments before all this nonsense?  Compartments by the way that are getting smaller.  

I’m thinking this is a stimulus package in disguise.  All you will be able to bring with you is a set of underwear and a tooth-brush and then be forced to buy all your clothes at your arrival destination.  If you are going to China, that’s no problem, your clothes are there already.

Why do we put up with this, why oh why?  If there was ever a disregard for the customer, this is it and the airlines get away with it.

Why government shouldn’t run health care

26 Sep

I am in York, England watching the morning news. They are doing a story about their National Health Service’s attempt to computerize all sixty-two million patient records. The project began in 2002 with an estimated cost of £2.2 billion pounds. After nine years and spending over £12 billion ($18.8 billion) the system does not work and is about to be scraped. The reporters are asking where all the money went and why the project was not a success.

In 1993 President Clinton stood before Congress and held up a mock universal health insurance card illustrating the goal of each American having such a card with health records embedded so that this vital information would be available to all the patient’s health care providers. That dream is still unfilled eighteen years later.

We can’t seem to get it right or affordable in the public sector and yet within thirty seconds of a transaction I can receive this type of message from my bank.

This is an Alert to help you manage your credit card account ending in XXXX.

As you requested, we are notifying you of an international charge. This charge of ($USD) 47.23 was authorized at SIOPAU PORTMEIRION on 09/20/2011 8:42:16 AM EDT.

Wherever you come down on the health care debate, this simple example should tell you something about the ability of a large, politically controlled bureaucracy to get much done efficiently. The political promises and hype we see today are indeed tempting because they promise what we all want, but the reality is much different. Politicians are never aware of the law of unintended consequences. In addition, it is impossible for any long-term strategy to actually be followed. As in the example of banking, there is strong motivation in the private sector to be efficient and to meet customer expectations. That all may result in big bonuses for some executives, but so what? Efficiency and convenience is realized and competitiveness enhanced, can you ever say that about government?

The big government crowd may have genuine even noble goals, but they cannot be reached [look at the track record] and sustained through wealth transfer and government bureaucracy. bureaucracy is contrary to motivation and innovation.

PS: If you talk to Britons they overwhelmingly like their National Health Service. What’s not to like, there is virtually no out-of-pocket cost at the point of service. The entire cost is hidden in income taxes (20 to 50%), in the Value Added Tax (VAT) 20% on what they buy and on payroll taxes. On the other hand, the NHS budget is in trouble and they are trying to trim £20 billion according to the news reports.

In my view the perception that something is “free” because there is no direct and visible cost is the greatest danger created by government entitlement programs. There is, in fact, a tremendous cost which governments around the world are now realizing. When no one cares about the cost, everyone eventually pays dearly.

Remember what the economists predict

25 Sep
Charts depicting US federal debt (nominal and ...

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Here is a quote from one economist assessing the potential impact of the President’s jobs initiative.  Not all economists agree of course; what’s new!   Remember this, 2% added to GDP, 1.9 million  jobs created and lower unemployment by 1%. No mention of adding to the deficit or adding to the troubles of the Social Security Trust Fund, but hey, all that is a long-term worry, right?  Don’t you just wonder how they know all this?  There is one glaring flaw in their economic models though, they can’t factor human behavior and apparently ignore past actions and results. 

The weatherman says clear and cool ten days from now, eh!

“The U.S. is on the cusp of a recession,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “The plan would go a long way toward stabilizing confidence, forestalling another recession and jump-starting a self-sustaining economic expansion.”

The proposal, which would raise infrastructure spending and cut in half payroll taxes paid by workers and small businesses, would add 2 percent to next year’s GDP, create 1.9 million jobs and lower the unemployment rate by one percentage point compared with current policy, Zandi said.

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A simple solution to re-mortgaging home loans

24 Sep

In 1987 I purchased a house for $159,000 putting 15% down and taking a thirty-year fixed rate mortgage at 9.45% (yikes). Just before we were to close the (small local) bank called and said they wanted more of a down payment. “Hey, we had a deal and if I put more down I will wipe out all my available cash and I am not going to do that,” I said. When I told my wife of the call she called the bank president and said if we didn’t get the mortgage as originally agreed she would call every real estate firm in the area and tell them how his bank did business … a few days later we had the original mortgage.

Fast forward a few years; since 1987 was the height of another housing bubble, for the next ten years or so our house was not worth what we paid for it and we had no equity or as the saying goes today, we were under water.

During that period interest rates dropped significantly. What to do; re-mortgage of course. We called the bank holding the in-house mortgage about refinancing and were met with an entire application process, fees, approval process, etc. Wait a minute, what do you need to approve, you know we have paid on time for the last ten years, you know we are a good risk, you know what the house is worth, you know everything. If you are going to put a long time customer through all this, we will look around at other banks.

What to do, tell your wife to make a call of course.

She calls the mortgage officer and relates our story going back to 1987. He tells her that the lending committee is meeting the following Wednesday and he will see what can be done.

The following Thursday we receive a call, they are dropping the interest rate on our current mortgage to the extent our payment drops by $300 per month, no application, no fees, no nothin, just a letter a week later modifying our loan and telling us our new payment.

There are a few lessons here:

Sometimes the old ways of doing business work
Sometimes smaller is better than larger
Common sense can prevail
Sometimes it is easy to solve a simple problem in a simple way
You don’t always need government agencies, rules and regulations and someone elses money to swim to the surface … and most of all

marry the right women if you want an affordable house!

Health care cost increases moderating-trend or blip?

23 Sep

You will hear press reports of moderating increases in health insurance premiums. Don’t become too excited, it’s not a trend but rather a cycle.

There are several things going on here. First, anytime there has been talk or action on reforming healthcare, costs have (temporarily) moderated. This reaction goes back decades. Second, the recession and the accompanying squeeze on personal resources moderates demand for services. Third, employers continue to raise deductibles, co-payments and the employee share of premiums.

All these factors impact the use and cost of services. However, at some point the maximum impact is reached and costs will rise again at more than the rate of inflation. Nothing substantive has changed and in fact the PPACA has added costs for the private sector.

One million young adults gain health insurance – but who is paying the bill?

23 Sep

Now we know that about one million young adults up to age 26 were added to those Americans with health insurance as a result of the Affordable Care Act. These may be married, employed and not dependent on their parents, it doesn’t matter.

No doubt supporters of this legislation will see it as a success and if you measure expansion of coverage in one dimension perhaps it is successful. However, most of these individuals could have obtained coverage long before the legislation was enacted, but either it was not affordable or they chose not to spend their money on health insurance.

So what changed? What changed is that employers who must now accept this liability are paying more for health benefits as are other employees who share in the group premiums.

The idea of claiming success by looking at only one dimension of a problem seems epidemic these days. Ask the people who used home equity to live a “successful” lifestyle about that or perhaps the people in foreclosure because owning a house did not mean being able to afford a house.

Health care reform is based on many such one-dimensional success assumptions. It is only a matter of time until more and more become apparent as they are today with both Social Security and Medicare.

Ask your doctor about practicing health care in America

22 Sep

Whenever I have the opportunity I like to speak with doctors about health care, unfortunately I have a lot of opportunities these days.

Today I asked a doctor which health plan was the worst to deal with. He named the insurer and I was not surprised as I had dealings with them myself. Today’s issue was obtaining approval for surgery. The insurer had given him 48 hours to provide information. Unfortunately, the doctor was on vacation at the time and was unable to reply that quickly. Now the insurer says it will take 90 days to decide on approving the surgery. Clearly I heard only one side of the story, but such bureaucracy is not uncommon.

WhIch plan was the easiest to deal with I also asked. “Medicare, that’s why they are in so much trouble.” That’s not the first time I heard that point of view.

He then volunteered the opinion that we will eventually get to rationing. He was frustrated by family attitudes about end of life care. He related the story if a 94-year-old women, bed ridden, suffering from bed sores with no recognition of her family and yet the family wanted everything done to keep her alive. He understood the families inability to make another decision, but he also knew the cost and the effect such use of resources has on others. He also felt he had no choice but to comply with the family’s wishes to sustain this existence. “We need some relief from the worry of being sued for every decision.”

He asked my wife if she had the tests he recommended. She had, but results had not been sent to him by the other doctor (in the same building). “That’s also a problem,” he said. “I always write letters about my treatment to your other doctors.” “Having to write letters to share this information seems like another problem to me,” I said. “You’re right, it is,” was the response.

So in a five-minute conversation with a person who operates within the system we hear about:

Unnecessary bureaucracy, lack of prudent oversight, the need for a better way to deal with end of life care, concern over malpractice liability and it’s impact on costs, lack of coordination within the system and a dire need for better information technology.

If you read these pages regularly you have heard it all before.

The next time you have the chance, ask your doctor about practicing health care in America (and tell him to read quinnscommentary.com).

And you thought the problem was insurance premiums. LOL

Medicare eligibility to age 67; yet another proposal – Obama would consider

21 Sep

Raising Medicare eligibility to age 67 keeps popping up. This time the Washington-based Healthcare Leadership Council included the recommendation with others such as making people earning more than $150,000 pay for the full cost of the program’s premiums. Lets hope they are only talking Part B and D or retirement will be a dream for these folks too. The group is made up of CEOs of healthcare companies. By the way, paying that full premium means nearly $12,000 a year for that couple earning $150,000.

I guess some people think we are solving a problem here, but let’s think about what it means. That extra two years without Medicare means most of these people will be enrolled through the new health insurance exchanges where they will be heavily subsidized by the government. That means we are putting money in one pocket and taking it from another. Now consider that the Medicare expense is incurred when claims are incurred, but with the exchange the expense is guaranteed to be incurred because it subsidizes premiums regardless if the beneficiary incurs claim costs. In other words, who knows what this will cost.

Some studies have shown that the very existence of the exchanges will cause employers to drop coverage for workers. As this is already happening for early retirees the number of such people will grow if Medicare is delayed. More unplanned government costs?

So by shifting people from Medicare to who knows where, are we solving any problem? Their health care expenses will still exist and by shifting from Medicare to the private sector we are losing the value of the tight fee limits imposed by Medicare. Ya pays yur money and takes yur choice.

In later news it appears Obama does not want to consider Medicare at age 67, but rather changes to Medigap coverage. Stand by and hold on to your seat.

Legislation introduced to reverse limitations on FSAs and HSAs imposed by PPACA

20 Sep
Senator Kay Bailey Hutchison of Texas

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The following information has been released by the American Benefits Council (see link to their website). This will come as welcome news for millions of Americans trying to manage their personal health care expenses.

Lawmakers in the U.S. Senate and House of Representatives have introduced the Patients’ Freedom to Choose Act, which is legislation to repeal the eligibility limitations on Health Savings Accounts (HSAs) and Flexible Spending Arrangements (FSAs) that were enacted as part of the Patient Protection and Affordable Care Act (PPACA). The Senate legislation (S. 312) was introduced by Senator Kay Bailey Hutchison (R-TX) and the House bill (H.R. 605) was introduced by Representative Erik Paulsen (R-MN).
 
On January 1, 2011, a provision in PPACA took effect that prohibited individuals from using funds from either Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs) to purchase over-the-counter medication without a prescription from their doctor. Starting in 2013, PPACA institutes a $2,500 federal cap for all FSA contributions.
 
S. 312/H.R. 605 repeals the new cap on FSA contributions by striking the $2,500 restriction and it also repeals the provision that requires patients using HSAs or FSAs to have a prescription from their doctor before they purchase over-the-counter medication.

Note: These changes made by PPACA were estimated to save the government $18 billion over ten years (and take it from workers).  While those estimates are highly questionable, the $18 billion additional expense is very likely to be raised in any discussion about this legislation.

Social Security unmasked; Roosevelt was a crafty politician indeed

19 Sep

I don’t know if Franklin Roosevelt was a smart man, but he certainly was a smart politician. If you think about Social Security, one of the most massive entitlements ever conceived, Roosevelt crafted it so that it would be virtually impossible to repeal or significantly modify, except to improve it as Congress has done over the last seventy-five years. Not only has Congress improved it, it has set improvements on automatic via the COLA.

Whenever I write about modifying Social Security to make it sustainable I get comments like “I earned those benefits.” “I paid in my whole life, that’s my money you’re talking about.” Seniors tend to forget that their employer paid as much as they did in taxes. Therein lies the genius of Roosevelt. By including what started as a very modest payroll tax he provided Americans with a sense of paying for their own entitlement and if that is the case, how can any current politician take away what was earned? No matter that the tax payments one makes are recouped in only a few years after starting benefits.

If Social Security were not a welfare program (or more accurately a Ponzi arrangement) disguised as a participant paid insurance plan then it would be perfectly feasible for each of us to save 6.2% of our earnings and live off the accumulated assets starting at age 66. Of course that is a myth, as is the notion that we paid for our own Social Security.

If we are paying for our own benefit, how can the already insufficient tax rate be trimmed under the guise of job creation? If we are concerned about the stability of our self funded entitlement how can we so quickly put it in greater jeopardy for a possible short-term gain? Why isn’t the AARP protesting the reduction in Social Security funding as loudly as it does when someone talks about adjusting the COLA formula?

Given we are already at the point where incoming payroll taxes from working Americans are insufficient to pay current beneficiaries, it will become increasingly apparent that general tax revenue is providing this entitlement.

But wait, even as we argue that all Americans earned at least some benefit from their contributions, there are calls for means testing. The great recession has unmasked this charade so some openly see a new solution, take from the well off who have contributed during their entire working lives and give to the less well off who have also contributed relative to their income. However, let us not forget as we mangle this monster that some people pay income tax on up to 85% of their Social Security benefit and others on much less of the benefit.

It will be the extraordinary political leader who can overcome the genius of Roosevelt. But I suspect even Roosevelt would be appalled at what has happened to his grand safety net Hey, we’re all entitled are we not?

A simple lack of courage and integrity – Obama doesn’t want to touch Social Security or Medicare

17 Sep

I suppose we would all like to go merrily on our way believing that neither Social Security nor Medicare play much of a role in the federal budget or deficit and thus there is no reason they can’t be left as is. The White House seems to believe that by now saying both are off the table in deficit talks. Nobody wants to hear about adjusting the Social Security COLA methodology previously considered an option with very modest consequences for individuals.

Double talk is quite common in Washington. General revenue is to be used to offset the proposed reduction in the Social Security payroll tax used to stimulate employment; but the budget and Social Security are not connected?

Where is it ordained that because you are 65 you are automatically entitled to a pay increase each year? Why is a senior so favored over a young family struggling to get by while attempting to save for their future?

The White House is said to favor cutting payments under Medicare and raising premiums for the “wealthy.” Cuts to Medicare providers were supposed to fund health care reform and later were removed from the legislation but are still assumed when the Trustees project Medicare costs. The cuts have not happened and likely never will. Are we now talking about more cuts in payments in addition to those already promised and ignored? What are the consequences of cutting and cutting payments to Medicare providers?

This President ran on a platform to eliminate the influence of special interest groups and lobbyists and yet he has not one ounce of courage to do the right thing for the Country and future generations. His focus is on positioning himself with voters, to out maneuver the Republicans and to win a second term.

Neither the President nor Democrats are unique with this reprehensible behavior to be sure, Republicans are no better, but someone needs to take the high ground and just do what is right, it would seem to me that should start with the leader of the Country, the President.

CPI-W for August indicates Social Security increase for 2012

17 Sep

The August 2011 CPI-W is reported at 223.326, higher than July at 222.686. These numbers continue to indicate a COLA for Social Security recipients of about 3.5% for 2012. The CPI-W for September is the final number needed to determine the three-month average for July, August and September 2011. That average will be compared with the same three months in 2008. The percent change between the two periods will determine the Social Security COLA for 2012.

The debate rages over HHS rules to implement the Affordable Care Act

16 Sep

Kaiser Health News has a very interesting article about satisfaction and dissatisfaction over the rules being released by HHS to implement various provisions of PPACA. Too tough, to easy on insurers, allows insurers to participate, excludes them, etc.

The anti insurer rhetoric certainly had a lasting impact. In some individuals minds these organizations (made up of people just like you and me) are out only to wrongly deny claims and encourage poor health care.

I sat on boards hearing claim appeals for both public and private organizations for many years. Appeals went both ways and many times giving the benefit of the doubt to the participant. Seventy million Americans in employer plans have been covered under ERISA claim appeal rules for the last thirty-six years and now suddenly appeal organizations are not sufficiently independent, and insurers should be excluded from many processes because they are the enemy.

We are headed for higher costs because of the expectations created by this administration and members of Congress. Not every procedure ordered is or should be covered, not every appeal should be approved, not every charge is reasonable and not everything suggested by a doctor is medically necessary.  Of course, those who don’t get everything they want will never be happy.

Pushing this scale out of balance heavily in favor of consumers is a recipe for disaster, be careful what you ask for, you may get it. Regulation by horror story has long been a prescription for waste and unnecessary expense.

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