There are lots of problems with the Medicare program, but here's another one (beyond the entitlement mentality baggage, and the ease of committing fraud against it). The program is currently designed to pay out MORE to you in benefits than you put into it...
An interesting AP article (picked up here by Forbes) points out this fatal flaw. The quote from the article -
"Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.
But they can expect to receive medical services - from prescriptions to hospital care - worth $355,000, or about three times what they put in."
FOR COMPARISON
"The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back."
Much of the problem is the rapidly rise in healthcare costs. According to the study referred to in the AP article, an average woman, who earned an average wage who retired in 1980 could have expected to have $74,800 in healthcare expenses between retirement and passing through the Ivory Gates (keeping a positive outlook here). Same woman retiring in 2010 will likely see $181,000 (both numbers are 2010 dollars, so overall inflation is not a factor here).
To me, that's staggerring. Granted, healthcare has come a long way since 1980, but that represents more than a doubling of per-retiree healthcare costs in 30 years...
And the reality is, Medicare was NOT built to cover that. In the next 20 years, the number of Medicare recipients will almost double, and the ratio of people paying in to those receiving benefits will drop from 3.5 today to closer to 2.3.
Read the full article here. Not a rosy picture. Seems we probably should have focused some more effort on cost savings during healthcare reform, at least for Medicare.
Thursday, December 30, 2010
Boy Smacked Who Won't Turn Off Cell Phone
According to this CNN report, an Idaho man was arrested for slapping/hitting a teenager who refused to listen to crew member instructions about turning off his phone while a Southwest jet was taxing in Las Vegas, heading for Boise, ID. According to the report, the man claimed to have smacked the boy with the back of his hand to get his attention, though it apparently left a mark on the boys shoulder. The man is quoted to have said he "felt he was protecting the entire plane and its occupants."
So, the boy was certainly wrong for refusing to turn off his phone. In fact, I was under the impression it was illegal to fail to comply with crewmember instructions. And while I suspect the chances of a phone truly interfering with airliner operations/communications (I've seen it happen, and in fact once left my phone on the whole flight, which I forgot was still on), the negative impacts could be cataclismic for passengers and crew if it were to truly occur.
But, did the man do the right thing? Was this a worthy event to lay a hand upon another person, especially someone under the age of majority? Depends on your perspective? Protective parent? Nope - wrong thing. Absolutely unacceptable. Passenger concerned about your personal welfare? Tougher call...
In any event, I hope this event continues to get coverage. I'd be interested in listening to flight experts debate the safety impacts of cellphone use during taxi, take-off, flight and landing.
So, the boy was certainly wrong for refusing to turn off his phone. In fact, I was under the impression it was illegal to fail to comply with crewmember instructions. And while I suspect the chances of a phone truly interfering with airliner operations/communications (I've seen it happen, and in fact once left my phone on the whole flight, which I forgot was still on), the negative impacts could be cataclismic for passengers and crew if it were to truly occur.
But, did the man do the right thing? Was this a worthy event to lay a hand upon another person, especially someone under the age of majority? Depends on your perspective? Protective parent? Nope - wrong thing. Absolutely unacceptable. Passenger concerned about your personal welfare? Tougher call...
In any event, I hope this event continues to get coverage. I'd be interested in listening to flight experts debate the safety impacts of cellphone use during taxi, take-off, flight and landing.
Limited Prescription Transfers in Ohio - Unfair Advantage for Chains?
I’m originally from Ohio (and hope to someday get back there and build a house on the family “homestead”). I even maintain my license to practice pharmacy in Ohio (though I’ve resisted the urge to reciprocate and get multiple state licenses as I’ve moved about the Midwest in non-dispensing roles). So, I tend to try to keep an eye on the goings-on in Ohio related to pharmacy.
Effective Jan 1, 2011, a new rule, promulgated by the Ohio State Board of Pharmacy, will restrict patients to a single transfer of a prescription. The DEA already restricts the transfer of controlled substance prescriptions (those substances that fall under the Controlled Substance Act) to a single transfer, but this will expand the reach of that particular restriction to all prescriptions that are filled within the State of Ohio.
The DEA restricts the transfers of controlled substances in order to help control or prevent potential diversion and/or abuse. The State Board in Ohio is apparently concerned with patient safety (as they should be), as there is an increased risk of errors when a prescription is transferred.
Here is the scenario –
Ms. A goes to her local (potentially independent) pharmacy, and has her prescription for Lasix (actually furosemide) filled (using an example product that is rarely “abused”, except by thoroughbred racehorses, but that’s a different story). She happily pays her $4 (very inexpensive generic drug, and this price likely includes a 300+% margin), is dispensed her medication, and departs. 25 days later, Ms A is reading the Sunday paper, and planning her week, which includes a refill of her medication (which her pharmacist instructed her to take in the AM, to avoid troublesome interruptions to her sleep visiting the toilet), when she spies a coupon in an advertising circular (could be a traditional drug store chain, a mass merchandiser, or a grocery chain, all of whom use this technique). The coupon offers her a “gift card” (of varying value, depending on the competitiveness of the geography in which she resides) in exchange for transferring a prescription to their pharmacy. “Hmmm” she says to herself. “My prescription is only $4, which is less than the gift card. I could make money on this deal!”
So, throwing caution and loyalty to the wind, she takes her almost empty pill bottle into said chain store, and asks to have the prescription transferred. Depending on the store, she could be told anywhere from a 15 minute to a 2 day wait. But, in any event, at some point, the pharmacist from the recipient store calls the pharmacist at the pharmacy losing the script and requests a transfer. The pharmacists exchange the prescription information, the receiving pharmacist reducing the information to writing, and upon completion of the transfer of information, treats the record as a new prescription (retaining the original written date, as well as maintaining (hopefully) the accuracy of the number of remaining refills, and other pertinent information) and fills it. When dispensed, Ms. A receives a gift card of somewhere between $4 and $50 (some may only go as high as the value of the medication dispensed) and goes on her merry way, at minimum getting her drugs basically for free.
So, you may say to yourself – what’s wrong with that? Lasix is not an abused drug (so the DEA style restriction doesn’t apply), and isn’t this benefiting the patient (financially at least)? Aren’t medications already overpriced? Why shouldn’t people be able to leverage the system to get what amounts to a discount as the free market of pharmacy tries to gain share?
According to the Ohio State Board of Pharmacy, the manual transfer of that prescription information is where the concern lies. Pharmacists are human, after all, and because of thinning profit margins (it happens everywhere, by the way – not just in pharmacy, though this is a favorite complaint of pharmacists and pharmacy owners – both chains and independents) the volume of prescriptions that must be filled by the same staff is increasing (just to maintain a steady net profit). So, pharmacists are busier and busier, and the error rate in this situation is likely NOT to go down. Apparently in an effort to reduce the potential for errors, the Board has determined that you can only transfer once, and then you’re done.
EXCEPT – if the prescription is “maintained within a real-time online pharmacy system.” It would appear that the Board was swayed to believe that a real-time online pharmacy system (where pharmacies are connected electronically and can potentially transfer the prescription between stores electronically without requiring a manual, verbal transfer of information between pharmacists) removes the potential for error in the transfer of the information, and should not be limited by this rule.
Objectively, it actually make sense – you take the human factor out (at least out of the transfer of the information) and you’ve reduced the risk.
Some in Ohio (specifically independent pharmacies) are arguing that this unfairly advantages chain pharmacies, and disadvantages independents, as chains already maintain these systems, and can easily do so since they are centrally owned. Independently owned pharmacies are extremely unlikely to use such a system.
So, in today’s world (2010) Ms. A can transfer her Lasix to the chain/mass/grocery pharmacy, get her gift card and then transfer it back to her original pharmacy next month. In tomorrow’s world (2011) Ms. A can transfer the prescription to the chain/mass/grocery pharmacy, get her gift card, and then has to continue to fill the prescription at that pharmacy (or one of their other locations if they use a real-time online pharmacy system) until refills run out, or she has her prescriber write a new prescription, which she can take anywhere she wants.
Does this advantage chains? A little, though chains already maintain many advantages in the marketplace, from purchasing power to convenience. Does this add to it? Yes, a little. Is it unfair? That’s the question. Some would like to say that the Board is bowing to the wishes of the large pharmacy chains, but I would argue that the Board is bowing to reason. If you’re attacking errors (which the Board should) then you have no good argument against the “real-time online pharmacy system” allowance. If you’re attacking the competitive advantage of chain pharmacies, then you have a beef – but that’s not the role of the Board of Pharmacy.
Some independent pharmacy owners may think the Board of Pharmacy should be on “their side.” But, the Board of Pharmacy should be impartial, and should be concerned with the safety and welfare of the public as it relates to the practice of pharmacy – not the competitiveness of pharmacy marketplace.
Independents cannot stop the commoditizing of the dispensing service, its happening (or you could argue already happened). What they can do is offer services chains won’t, or offer the same services at a higher level (which the chains can’t or don’t care to). Medication Therapy Management, for example (see part of my previous post on pharmacy reimbursements).
The Board in Ohio may, in other cases, have unfairly given advantages to chains (not sure and certainly not debating here), but in this case, I think they allowed a reasonable exception, because of the goal they were working to accomplish.
Effective Jan 1, 2011, a new rule, promulgated by the Ohio State Board of Pharmacy, will restrict patients to a single transfer of a prescription. The DEA already restricts the transfer of controlled substance prescriptions (those substances that fall under the Controlled Substance Act) to a single transfer, but this will expand the reach of that particular restriction to all prescriptions that are filled within the State of Ohio.
The DEA restricts the transfers of controlled substances in order to help control or prevent potential diversion and/or abuse. The State Board in Ohio is apparently concerned with patient safety (as they should be), as there is an increased risk of errors when a prescription is transferred.
Here is the scenario –
Ms. A goes to her local (potentially independent) pharmacy, and has her prescription for Lasix (actually furosemide) filled (using an example product that is rarely “abused”, except by thoroughbred racehorses, but that’s a different story). She happily pays her $4 (very inexpensive generic drug, and this price likely includes a 300+% margin), is dispensed her medication, and departs. 25 days later, Ms A is reading the Sunday paper, and planning her week, which includes a refill of her medication (which her pharmacist instructed her to take in the AM, to avoid troublesome interruptions to her sleep visiting the toilet), when she spies a coupon in an advertising circular (could be a traditional drug store chain, a mass merchandiser, or a grocery chain, all of whom use this technique). The coupon offers her a “gift card” (of varying value, depending on the competitiveness of the geography in which she resides) in exchange for transferring a prescription to their pharmacy. “Hmmm” she says to herself. “My prescription is only $4, which is less than the gift card. I could make money on this deal!”
So, throwing caution and loyalty to the wind, she takes her almost empty pill bottle into said chain store, and asks to have the prescription transferred. Depending on the store, she could be told anywhere from a 15 minute to a 2 day wait. But, in any event, at some point, the pharmacist from the recipient store calls the pharmacist at the pharmacy losing the script and requests a transfer. The pharmacists exchange the prescription information, the receiving pharmacist reducing the information to writing, and upon completion of the transfer of information, treats the record as a new prescription (retaining the original written date, as well as maintaining (hopefully) the accuracy of the number of remaining refills, and other pertinent information) and fills it. When dispensed, Ms. A receives a gift card of somewhere between $4 and $50 (some may only go as high as the value of the medication dispensed) and goes on her merry way, at minimum getting her drugs basically for free.
So, you may say to yourself – what’s wrong with that? Lasix is not an abused drug (so the DEA style restriction doesn’t apply), and isn’t this benefiting the patient (financially at least)? Aren’t medications already overpriced? Why shouldn’t people be able to leverage the system to get what amounts to a discount as the free market of pharmacy tries to gain share?
According to the Ohio State Board of Pharmacy, the manual transfer of that prescription information is where the concern lies. Pharmacists are human, after all, and because of thinning profit margins (it happens everywhere, by the way – not just in pharmacy, though this is a favorite complaint of pharmacists and pharmacy owners – both chains and independents) the volume of prescriptions that must be filled by the same staff is increasing (just to maintain a steady net profit). So, pharmacists are busier and busier, and the error rate in this situation is likely NOT to go down. Apparently in an effort to reduce the potential for errors, the Board has determined that you can only transfer once, and then you’re done.
EXCEPT – if the prescription is “maintained within a real-time online pharmacy system.” It would appear that the Board was swayed to believe that a real-time online pharmacy system (where pharmacies are connected electronically and can potentially transfer the prescription between stores electronically without requiring a manual, verbal transfer of information between pharmacists) removes the potential for error in the transfer of the information, and should not be limited by this rule.
Objectively, it actually make sense – you take the human factor out (at least out of the transfer of the information) and you’ve reduced the risk.
Some in Ohio (specifically independent pharmacies) are arguing that this unfairly advantages chain pharmacies, and disadvantages independents, as chains already maintain these systems, and can easily do so since they are centrally owned. Independently owned pharmacies are extremely unlikely to use such a system.
So, in today’s world (2010) Ms. A can transfer her Lasix to the chain/mass/grocery pharmacy, get her gift card and then transfer it back to her original pharmacy next month. In tomorrow’s world (2011) Ms. A can transfer the prescription to the chain/mass/grocery pharmacy, get her gift card, and then has to continue to fill the prescription at that pharmacy (or one of their other locations if they use a real-time online pharmacy system) until refills run out, or she has her prescriber write a new prescription, which she can take anywhere she wants.
Does this advantage chains? A little, though chains already maintain many advantages in the marketplace, from purchasing power to convenience. Does this add to it? Yes, a little. Is it unfair? That’s the question. Some would like to say that the Board is bowing to the wishes of the large pharmacy chains, but I would argue that the Board is bowing to reason. If you’re attacking errors (which the Board should) then you have no good argument against the “real-time online pharmacy system” allowance. If you’re attacking the competitive advantage of chain pharmacies, then you have a beef – but that’s not the role of the Board of Pharmacy.
Some independent pharmacy owners may think the Board of Pharmacy should be on “their side.” But, the Board of Pharmacy should be impartial, and should be concerned with the safety and welfare of the public as it relates to the practice of pharmacy – not the competitiveness of pharmacy marketplace.
Independents cannot stop the commoditizing of the dispensing service, its happening (or you could argue already happened). What they can do is offer services chains won’t, or offer the same services at a higher level (which the chains can’t or don’t care to). Medication Therapy Management, for example (see part of my previous post on pharmacy reimbursements).
The Board in Ohio may, in other cases, have unfairly given advantages to chains (not sure and certainly not debating here), but in this case, I think they allowed a reasonable exception, because of the goal they were working to accomplish.
Monday, December 13, 2010
Obamatrition
Nutrition is important. Few would argue that point. Obesity is a foe America is battling - and for the most part, obesity is winning. So, any weapon against this enemy is worth using, right?
Today, President Obama signed the Healthy, Hunger-Free Kids Act of 2010 into law. He joked, prior to signing it, that he would have had to sleep on the couch if he didn't sign it. Unless you've been under a rock, you already know that childhood obesity is a major focus for the First Lady. Childhood obesity is to Michelle Obama as recreational drug use (Just Say No) was to Nancy Regan.
Along with getting enough exercise, making healthy food selections is a main tactic for obesity avoidance - and teaching healthy eating at a young age is arguably (and I agree) critical for life-long health.
On top of that, it's also pretty easy to see that - in order to grow - kids gotta eat. I see it daily at the table at my house - and boy do they eat... Without access to food, it certainly does make it hard for kids to "grow up healthy and strong." Not a tough sell.
And so, the Healthy, Hunger-Free Kids Act of 2010 is hard to argue against. It's got all the important ingredients for a can't fail bill - Health and Kids - and it combines them for a winning combination.
But the bill does a couple things we should probably consider - 1) increases access to school lunch programs and 2) expands the control the United States Department of Argiculture (USDA) will have over the selection of food available in school cafeterias, vending machines, and a'la carte menus. And not just the food paid for by the federal government through the school lunch program - it means all food sold in a school.
I'm all for school lunch fundings - I don't want to see kids go hungry. At the same time, more than half of the children at our elementary school get reduced price or free lunches. I'm sure there are those who need access to the program, and have a hard time getting it - somewhere... But apparently not at our local school. Perhaps making it easier is not the best answer, but making sure those who really need it get it. Making the application process easier or just increasing the pool of people eligible, in the name of making sure no-one who might need it gets it, seems a little bit like watering the ocean to make sure no fish are thirsty.
As for expanding the USDA authority to control food selections in schools, I'm not sure I'm really on board. In the end, nutrition starts in the home - and a group of homes make up a community, and a community should determine the best things for their children. I'm having a hard time with government agents determining the menu at local schools. Maybe it's just me.
In the end, I think it's just really sad that Washington, DC has to legislate school lunch menus. The fact that we, as parents, apparently can't shape the diets of our children is truly sad. Or, perhaps we can (and are)... But I'm sure a beaurocrat can do it better.
Today, President Obama signed the Healthy, Hunger-Free Kids Act of 2010 into law. He joked, prior to signing it, that he would have had to sleep on the couch if he didn't sign it. Unless you've been under a rock, you already know that childhood obesity is a major focus for the First Lady. Childhood obesity is to Michelle Obama as recreational drug use (Just Say No) was to Nancy Regan.
Along with getting enough exercise, making healthy food selections is a main tactic for obesity avoidance - and teaching healthy eating at a young age is arguably (and I agree) critical for life-long health.
On top of that, it's also pretty easy to see that - in order to grow - kids gotta eat. I see it daily at the table at my house - and boy do they eat... Without access to food, it certainly does make it hard for kids to "grow up healthy and strong." Not a tough sell.
And so, the Healthy, Hunger-Free Kids Act of 2010 is hard to argue against. It's got all the important ingredients for a can't fail bill - Health and Kids - and it combines them for a winning combination.
But the bill does a couple things we should probably consider - 1) increases access to school lunch programs and 2) expands the control the United States Department of Argiculture (USDA) will have over the selection of food available in school cafeterias, vending machines, and a'la carte menus. And not just the food paid for by the federal government through the school lunch program - it means all food sold in a school.
I'm all for school lunch fundings - I don't want to see kids go hungry. At the same time, more than half of the children at our elementary school get reduced price or free lunches. I'm sure there are those who need access to the program, and have a hard time getting it - somewhere... But apparently not at our local school. Perhaps making it easier is not the best answer, but making sure those who really need it get it. Making the application process easier or just increasing the pool of people eligible, in the name of making sure no-one who might need it gets it, seems a little bit like watering the ocean to make sure no fish are thirsty.
As for expanding the USDA authority to control food selections in schools, I'm not sure I'm really on board. In the end, nutrition starts in the home - and a group of homes make up a community, and a community should determine the best things for their children. I'm having a hard time with government agents determining the menu at local schools. Maybe it's just me.
In the end, I think it's just really sad that Washington, DC has to legislate school lunch menus. The fact that we, as parents, apparently can't shape the diets of our children is truly sad. Or, perhaps we can (and are)... But I'm sure a beaurocrat can do it better.
Saturday, December 11, 2010
Short Cycle Dispensing - A Prediction - Will Fail to Deliver Net Cost Savings
Last night I posted an "opinion" on an age old complaint in the pharmacy industry about dispensing fees being too low to truly pay for the costs associated with dispensing (inlcuding some clinical-type interventions). In light of the impending Part D changes in the long-term-care (LTC) pharmacy industry, I thought I would expand upon my thoughts about short cycle dispensing (see a previous post explaining the short cycle dispensing proposed rule) and talk a little about what could happen with LTC dispensing fees with the short cycle dispensing changes.
A base assumption of the short cycle dispensing initiative (which some, like LTCPA, have argued is greatly flawed) is that reduced waste of unused medications will overcome increased cost of dispensing fees. The commentary that accompanied the proposed CMS rule reinforced the fact that CMS cannot get involved in the negotiations between pharmacies and Part D plan sponsors that determine ingredient costs and dispensing fees - these are trading partner discussions. CMS did, however, stir the pot a bit, and make comments about their understanding that current dispensing fee arrangements would need to be altered to account for increased work pharmacies would need to undertake to remain compliant with the short cycle requirements.
On the surface, one could argue that changing from 30-day dispensing to 7-day dispensing will increase the cost to dispense approximately four fold. This is both (somewhat) true and misleading. Some costs associate with dispensing will go up close to four fold. Packaging costs (assuming blister-cards and no cost savings from reducing from 30-day pack sizes to 7-day pack sizes) will likely increase dramatically. If you assume no new technology leveraging by a pharmacy, and manual processes are used, labor costs to put the medications in the packaging would also increase (though likely not in direct proportion to volume). A pharmacy servicing LTC facilities are likely already delivering to most facilities on a daily basis already, so delivery costs will likely not be impacted much, if at all. So, some costs increase, and others are the same (or inflate more normally over time). The biggest expense (beyond ingredient cost, which I am excluding from this discussion) is labor, so this is likely the most impactful change that would need to be accounted for.
The specific impacts to labor costs are dependent upon what technology is being used by the pharmacy. The more technology being deployed, likely the less the labor impact. So, pharmacies have to make a decision on if they want to put $$ into labor, or into technology. The options for pharmacies are numerous, and it is likely that technology suppliers will expand their offerrings in light of this new mandate.
Another dynamic here is the endorsement, by CMS, of some very specific technology options for dispensing in the LTC space, as the most efficient options. "Automated Remote Dispensing" is a technology that has appeared in recent years, which allows commonly used medications to be housed on-site in the LTC facility, with ultimate control on dispensing still residing with a pharmacy via a remote connection between the pharmacy's dispensing system and the software that runs the machine in the facility. This setup lets the pharmacy "dispense" the medication to the patient (via a nurse using the machine, requesting the meds) dose by dose. In this way, there is nearly no lost medications due to changes in therapy or change in status of the patient, because the medications don't become the patient's until the time of administration.
This technology is likely the most expensive to implement, and has additional challenges like facility design (and available space). On top of that, you're talking about investing in a machine for each facility serviced (if nor more than one per facility) by a pharmacy. The costs could be enormous.
And so we come back to CMS, and their colorful commentary. In the proposed rule, CMS went as far as to state that they believe it appropriate for dispensing fees to include $$ to help pay for technology investment... In fact they propose to change the definition of dispensing fee to include the costs associated with acquisition and maintenance of technology to maintain reasonable costs...
And this is why I say CMS has basically endorsed automated remote dispensing. In combining a recognition that remote dispensing is the most efficient methodology (with least waste) and giving the negotiating parties direction to consider technology costs in the negotiations that determine the dispensing fee, they have set the stage for variable dispensing fees, with higher fees to be paid for certain technologies - specifically automated remote dispensing technologies.
The ballpark estimation for the CMS-expected adjustment to dispensing fees is an increase between 50 and 100%, with remote dispensing coming in near the 100% increase, and other less technology based methodologies coming in on the lower end. This range of dispensing fee increase would likely eat up at least half of the expected ingredient cost savings. The higher the actuals come in, the less $ saved...
Realistically, with some costs associated with dispensing using current methodologies increasing up to 4 fold, and others increasing dramatically, even if not 4 fold, I truly can't see pharmacies agreeing to dispensing fee increases of only 50%. This will be a problem for Part D sponsors, as sponsors need LTC pharmacies in their network to provide access to medications for LTC residents who are their members... and it should be completely expected that pharmacies will terminate their participation within a payer's network if the dispensing fee discussion does not yield agreement at a level that covers their costs. The fight will be on.
So, the dispensing fee discussion is going to get ugly. And if the net impact to dispensing fees come in closer to 200-300% increase in fees, the savings booked in the health reform legislation will never come to pass (shocker there, BTW).
And in the end, much blood, sweat and tears will be shed, an industry will be shaken by a monumental change, and costs savings will be minimal (if not turning to an increase in cost). Put me down... That's my bet. Anyone want to bet the other way?
A base assumption of the short cycle dispensing initiative (which some, like LTCPA, have argued is greatly flawed) is that reduced waste of unused medications will overcome increased cost of dispensing fees. The commentary that accompanied the proposed CMS rule reinforced the fact that CMS cannot get involved in the negotiations between pharmacies and Part D plan sponsors that determine ingredient costs and dispensing fees - these are trading partner discussions. CMS did, however, stir the pot a bit, and make comments about their understanding that current dispensing fee arrangements would need to be altered to account for increased work pharmacies would need to undertake to remain compliant with the short cycle requirements.
On the surface, one could argue that changing from 30-day dispensing to 7-day dispensing will increase the cost to dispense approximately four fold. This is both (somewhat) true and misleading. Some costs associate with dispensing will go up close to four fold. Packaging costs (assuming blister-cards and no cost savings from reducing from 30-day pack sizes to 7-day pack sizes) will likely increase dramatically. If you assume no new technology leveraging by a pharmacy, and manual processes are used, labor costs to put the medications in the packaging would also increase (though likely not in direct proportion to volume). A pharmacy servicing LTC facilities are likely already delivering to most facilities on a daily basis already, so delivery costs will likely not be impacted much, if at all. So, some costs increase, and others are the same (or inflate more normally over time). The biggest expense (beyond ingredient cost, which I am excluding from this discussion) is labor, so this is likely the most impactful change that would need to be accounted for.
The specific impacts to labor costs are dependent upon what technology is being used by the pharmacy. The more technology being deployed, likely the less the labor impact. So, pharmacies have to make a decision on if they want to put $$ into labor, or into technology. The options for pharmacies are numerous, and it is likely that technology suppliers will expand their offerrings in light of this new mandate.
Another dynamic here is the endorsement, by CMS, of some very specific technology options for dispensing in the LTC space, as the most efficient options. "Automated Remote Dispensing" is a technology that has appeared in recent years, which allows commonly used medications to be housed on-site in the LTC facility, with ultimate control on dispensing still residing with a pharmacy via a remote connection between the pharmacy's dispensing system and the software that runs the machine in the facility. This setup lets the pharmacy "dispense" the medication to the patient (via a nurse using the machine, requesting the meds) dose by dose. In this way, there is nearly no lost medications due to changes in therapy or change in status of the patient, because the medications don't become the patient's until the time of administration.
This technology is likely the most expensive to implement, and has additional challenges like facility design (and available space). On top of that, you're talking about investing in a machine for each facility serviced (if nor more than one per facility) by a pharmacy. The costs could be enormous.
And so we come back to CMS, and their colorful commentary. In the proposed rule, CMS went as far as to state that they believe it appropriate for dispensing fees to include $$ to help pay for technology investment... In fact they propose to change the definition of dispensing fee to include the costs associated with acquisition and maintenance of technology to maintain reasonable costs...
And this is why I say CMS has basically endorsed automated remote dispensing. In combining a recognition that remote dispensing is the most efficient methodology (with least waste) and giving the negotiating parties direction to consider technology costs in the negotiations that determine the dispensing fee, they have set the stage for variable dispensing fees, with higher fees to be paid for certain technologies - specifically automated remote dispensing technologies.
The ballpark estimation for the CMS-expected adjustment to dispensing fees is an increase between 50 and 100%, with remote dispensing coming in near the 100% increase, and other less technology based methodologies coming in on the lower end. This range of dispensing fee increase would likely eat up at least half of the expected ingredient cost savings. The higher the actuals come in, the less $ saved...
Realistically, with some costs associated with dispensing using current methodologies increasing up to 4 fold, and others increasing dramatically, even if not 4 fold, I truly can't see pharmacies agreeing to dispensing fee increases of only 50%. This will be a problem for Part D sponsors, as sponsors need LTC pharmacies in their network to provide access to medications for LTC residents who are their members... and it should be completely expected that pharmacies will terminate their participation within a payer's network if the dispensing fee discussion does not yield agreement at a level that covers their costs. The fight will be on.
So, the dispensing fee discussion is going to get ugly. And if the net impact to dispensing fees come in closer to 200-300% increase in fees, the savings booked in the health reform legislation will never come to pass (shocker there, BTW).
And in the end, much blood, sweat and tears will be shed, an industry will be shaken by a monumental change, and costs savings will be minimal (if not turning to an increase in cost). Put me down... That's my bet. Anyone want to bet the other way?
Friday, December 10, 2010
Pharmacy Reimbursement - A Common Argument
If you have been involved in the retail pharmacy industry for more than a fees seconds, you've heard the argument that goes something like this...
"Dispensing fees are a joke. They are too low to cover the cost to dispense medications and provide all the wonderful clinical service and interventions pharmacists do every day. The act of dispensing and clinical services should be separated and pharmacists paid for their work."
I admit that I used to subscribe to such a theory. However, over time and through my own professional experiences I've come to a different thought process.
First, the current level of dispensing fees were not designed to cover the cost to dispense. Most who know the going industry level of retail dispensing fees might agree that it may cover the cost of the vial and label, and perhaps a technician's time to count the drug, but little else. The fact is that historically speaking most other costs were accounted for in the "ingredient cost." Let me illustrate with this formula:
Payment = Benchmark Price +/- % + Dispensing Fee
The total payment a pharmacy receives when dispensing a medication is based upon a markup or markdown of a "benchmark" price for the drug being dispensed plus a set fee. The secret (not well kept actually) in all this is that the benchmark price is actually bogus... And all of the pharmacy's margin is hidden in there. If you want to learn more on the fallacy of AWP (as an example benchmark that is very commonly used) just google it, or perhaps I can write another post to explain more.
Suffice it to say that the cost to dispense is not covered by the dispensing fee, and never has been. So, no, dispensing fees are not sufficient, but that's because the ingredient cost reimbursement has been inflated. It varies by product, but it can be extremely high on things like recently introduced generics, and is generally pretty steady on higher-cost brands, because there is less variance on those products between their true acquisition cost and their benchmark prices. Sure there has been cost pressure on drug prices, and payers have negotiated deeper discounts on ingredient costs, but that's because there was room to negotiate for the pharmacies - because there was margin being made...
But let's not ignore another little part of the above common argument about pharmacy payments... The cost of clinical services and interventions. Now, I was a retail pharmacist, and I know that pharmacists do some wonderful and sometimes life-saving things... Just not on every prescription. Whether you knew it or not, pharmacists are supposed to do a Drug Utilization Review every time you fill a prescription. Reality is, the computer does it, and pushes "alerts" to the pharmacy staff, which can easily be overridden. These automated systems are often very inflexible in their sensitivity, and often generate so many false positives that it can lead to all warnings sounding like noise - and I'm sure some valid warnings get missed. But, the point is that unless you happen to have a pharmacist who is truly conducting these reviews on a regular basis, and is invoking their clinical knowledge and judgement, there is truly little "costly" investment of time that would dictate a big fee for the service. Realistically, the biggest thing a retail pharmacist does (besides provide the license to allow the pharmacy to be open) is validate the right drug is in the bottle. (which is important, don't get me wrong)
So, why do pharmacists go to school for so long? Why would a pharmacist need all that training and knowledge? Well, it truly CAN be used for betterment of patients. And guess what... Interventions and reviews of medication therapy have been theorized (and even shown in some cases) to improve outcomes and lower costs. And so was born Medication Therapy Management (MTM). MTM is a Medicare service that pharmacists can participate in that allows payment of fees for time spent working with Medicare Part D patients on their medications. Part D payers are required to offer such programs, though not all do it through pharmacists.
However, those that DO offer these revenue streams to pharmacists have seen disappointing results, given the universal level of interest in such payment for services. Statistics related to actual consults conducted compared to those offered or available are not considered public, but the ones I've been privy to are nowhere near a level that would indicate pharmacists are truly taking advantage of the opportunity. The offer of $ for services has been made, but the $ are largely still on the table untouched.
So, sure, if you're doing work, and someone is benefiting (especially if they benefit financially), the person doing the work should likely be compensated. That extends to pharmacy and pharmacists. But, I say don't complain about low dispensing fees, unless you're willing to get reimbursed true drug acquisition cost. (you pass on true cost without built-in margin, and your costs SHOULD be covered, plus a little profit, through a dispensing fee) Also, I believe in the value of pharmacist activity in the health care space, but don't complain about not being paid for services you're not really doing (most of the time) and when you're being offered $ to do similar (though more in-depth) work, and you're not taking advantage.
"Dispensing fees are a joke. They are too low to cover the cost to dispense medications and provide all the wonderful clinical service and interventions pharmacists do every day. The act of dispensing and clinical services should be separated and pharmacists paid for their work."
I admit that I used to subscribe to such a theory. However, over time and through my own professional experiences I've come to a different thought process.
First, the current level of dispensing fees were not designed to cover the cost to dispense. Most who know the going industry level of retail dispensing fees might agree that it may cover the cost of the vial and label, and perhaps a technician's time to count the drug, but little else. The fact is that historically speaking most other costs were accounted for in the "ingredient cost." Let me illustrate with this formula:
Payment = Benchmark Price +/- % + Dispensing Fee
The total payment a pharmacy receives when dispensing a medication is based upon a markup or markdown of a "benchmark" price for the drug being dispensed plus a set fee. The secret (not well kept actually) in all this is that the benchmark price is actually bogus... And all of the pharmacy's margin is hidden in there. If you want to learn more on the fallacy of AWP (as an example benchmark that is very commonly used) just google it, or perhaps I can write another post to explain more.
Suffice it to say that the cost to dispense is not covered by the dispensing fee, and never has been. So, no, dispensing fees are not sufficient, but that's because the ingredient cost reimbursement has been inflated. It varies by product, but it can be extremely high on things like recently introduced generics, and is generally pretty steady on higher-cost brands, because there is less variance on those products between their true acquisition cost and their benchmark prices. Sure there has been cost pressure on drug prices, and payers have negotiated deeper discounts on ingredient costs, but that's because there was room to negotiate for the pharmacies - because there was margin being made...
But let's not ignore another little part of the above common argument about pharmacy payments... The cost of clinical services and interventions. Now, I was a retail pharmacist, and I know that pharmacists do some wonderful and sometimes life-saving things... Just not on every prescription. Whether you knew it or not, pharmacists are supposed to do a Drug Utilization Review every time you fill a prescription. Reality is, the computer does it, and pushes "alerts" to the pharmacy staff, which can easily be overridden. These automated systems are often very inflexible in their sensitivity, and often generate so many false positives that it can lead to all warnings sounding like noise - and I'm sure some valid warnings get missed. But, the point is that unless you happen to have a pharmacist who is truly conducting these reviews on a regular basis, and is invoking their clinical knowledge and judgement, there is truly little "costly" investment of time that would dictate a big fee for the service. Realistically, the biggest thing a retail pharmacist does (besides provide the license to allow the pharmacy to be open) is validate the right drug is in the bottle. (which is important, don't get me wrong)
So, why do pharmacists go to school for so long? Why would a pharmacist need all that training and knowledge? Well, it truly CAN be used for betterment of patients. And guess what... Interventions and reviews of medication therapy have been theorized (and even shown in some cases) to improve outcomes and lower costs. And so was born Medication Therapy Management (MTM). MTM is a Medicare service that pharmacists can participate in that allows payment of fees for time spent working with Medicare Part D patients on their medications. Part D payers are required to offer such programs, though not all do it through pharmacists.
However, those that DO offer these revenue streams to pharmacists have seen disappointing results, given the universal level of interest in such payment for services. Statistics related to actual consults conducted compared to those offered or available are not considered public, but the ones I've been privy to are nowhere near a level that would indicate pharmacists are truly taking advantage of the opportunity. The offer of $ for services has been made, but the $ are largely still on the table untouched.
So, sure, if you're doing work, and someone is benefiting (especially if they benefit financially), the person doing the work should likely be compensated. That extends to pharmacy and pharmacists. But, I say don't complain about low dispensing fees, unless you're willing to get reimbursed true drug acquisition cost. (you pass on true cost without built-in margin, and your costs SHOULD be covered, plus a little profit, through a dispensing fee) Also, I believe in the value of pharmacist activity in the health care space, but don't complain about not being paid for services you're not really doing (most of the time) and when you're being offered $ to do similar (though more in-depth) work, and you're not taking advantage.
Monday, November 29, 2010
Support the Fiscal Commission
If you live in MT, CA, MI, OK, ND, ID, IL, NH, TX, WI or SC, look at the list below:
Sen. Max Baucus (D-MT) Rep. Xavier Becerra (D-CA 31) Rep. Dave Camp (R-MI 4) Sen. Tom Coburn (R-OK) Sen. Kent Conrad (D-ND) Sen. Mike Crapo (R-ID) Sen. Richard Durbin (D-IL) Sen. Judd Gregg (R-NH) Rep. Jeb Hensarling (R-TX 5) Rep. Paul Ryan (R-WI 1) Rep. Jan Schakowsky (D-IL 9) Rep. John Spratt (D-SC 5)
These are the names of the elected lawmakers who sit on the National Commision on Fiscal Responsibility and Reform. There are also non-elected members, to round out the members to 18 total. Looming is a Dec 1, 2010 deadline for the commission to have 14 of the 18 support the commission's recommendation to the President. If the commission cannot get support from 14 of the 18 members, a formal report will not be released.
If the commission can make formal recommendations, it will be much harder for our lovely politicians in Washington DC to continue to avoid this hot potato issue.
See two other posts I've written about the commission and their draft recommendations:
Shared Sacrifice 11/14/2010
Well, It's a Start 11/29/2010
Even if you don't like the commission's recommendations (which no fiscal responsibility initiatives are ever going to be wildly popular) I urge you to voice support for the commission to release a formal report. If you live in one of the states above, please contact your Senator or Congressman to tell them to support the commission report.
We need candid and aggressive discussions and debate to come to a set of solutions for our deficit. We need to act now, and stop ignoring the elephant in the room.
These are the names of the elected lawmakers who sit on the National Commision on Fiscal Responsibility and Reform. There are also non-elected members, to round out the members to 18 total. Looming is a Dec 1, 2010 deadline for the commission to have 14 of the 18 support the commission's recommendation to the President. If the commission cannot get support from 14 of the 18 members, a formal report will not be released.
If the commission can make formal recommendations, it will be much harder for our lovely politicians in Washington DC to continue to avoid this hot potato issue.
See two other posts I've written about the commission and their draft recommendations:
Shared Sacrifice 11/14/2010
Well, It's a Start 11/29/2010
Even if you don't like the commission's recommendations (which no fiscal responsibility initiatives are ever going to be wildly popular) I urge you to voice support for the commission to release a formal report. If you live in one of the states above, please contact your Senator or Congressman to tell them to support the commission report.
We need candid and aggressive discussions and debate to come to a set of solutions for our deficit. We need to act now, and stop ignoring the elephant in the room.
Well, It's a Start
Today the President announced a proposal to freeze salaries for non-defense civilian federal employees for 2 years, beginning with 2011. The announcement came as a bit of a shock to liberals, and a slap in the face unions, historically strong Democratic supporters.
The idea is not a new one, as short-lived salary freezes are used commonly during times of financial stress in the private sector. And arguably the private sector has been under a "salary freeze" if not a "salary decrease" cycle since the start of the Great Recession.
The idea is also not truly the President's either. Almost 3 weeks ago, the chairs of the President's Fiscal Commission (Alan Simpson and Erskine Bowles) released their draft plan for deficit and debt reduction, which included the idea the President advocated today, as well as many others, aimed at reducing the federal deficit, and the growth of the federal debt. I summarized previously - take a look.
Despite the President's near alignment with what most people would categorize as a Republican position, even Republicans were not without complaint today. Politico, in an article published today, quoted a Repulican aid as saying "If he wanted to work together, he could’ve called up and did something jointly.
The idea is not a new one, as short-lived salary freezes are used commonly during times of financial stress in the private sector. And arguably the private sector has been under a "salary freeze" if not a "salary decrease" cycle since the start of the Great Recession.
The idea is also not truly the President's either. Almost 3 weeks ago, the chairs of the President's Fiscal Commission (Alan Simpson and Erskine Bowles) released their draft plan for deficit and debt reduction, which included the idea the President advocated today, as well as many others, aimed at reducing the federal deficit, and the growth of the federal debt. I summarized previously - take a look.
Despite the President's near alignment with what most people would categorize as a Republican position, even Republicans were not without complaint today. Politico, in an article published today, quoted a Repulican aid as saying "If he wanted to work together, he could’ve called up and did something jointly.
Saturday, November 27, 2010
GOP Health Care Mandate?
A recent poll, conducted by McClatchy is being headlined as follows: New Poll undercuts GOP claims of midterm mandate. This appears to be a reaction to the posturing the speaker-of-the-house-to-be John Boehner and other GOP leaders have been doing since successfully recapturing the House majority in the mid-term election. I've touched on the impact of the GOP House results before.
Here are the top 3-reported results in a graphical presentation:
I'll focus on the health care reform portion of the poll. Overall, not incredibly insightful results. 810 registered voters were involved, and the stated margin of error is +/-3.5%. Assuming the health care "unsure" group stays the same as reported (which 5% of everyone seems to be unsure or uneducated in almost every poll, no matter the subject involved), it would appear the keep and repeal groups are basically the same size, given the margin of error.
The release goes on to claim that voters want to keep the more "popular" parts of health care reform, like barring insurers from denying coverage for pre-existing conditions (59% in favor, 36% against), extending child coverage to age 26 (68% in favor, 29% against), and closing the Medicare Part D "donut hole" (for my previous explanation of this point, click here). Those analyzing the poll results also claim voters don't like some other parts of the law, like an individual health care insurance mandate (65% claiming it is unconstitutional, 29% in favor). For purposes of this discussion, we'll assume that someone who responded in the "unconstitutional" category was "against" the mandate from a personal opinion perspective, though technically someone could personally support the mandate from a policy perspective but also believe it technically unconstitutional.
So, if you boil it down, those polled apparently, at a rate of 2-to-1, want to have their cake and eat it too. All of the "popular" aspects of the law (costs) are supported, while the parts of the law that (arguably) make it work financially are opposed. Specifically, the individual mandate (which helps ensure that people don't wait until they're sick to seek coverage) is necessary to attempt to balance the acceptance of individuals without pre-existing coverage restrictions. Realistically, you can't have one without the other, but the poll results appear to show that Americans are more interested in an ala carte approach. Seems the majority of those polled would like to skip their vegetables and fill up instead on fat and sugar-filled dessert. Given the state of health in our country, this seems to fit.
As I've stated in a previous blog post, it's extremely unlikely, despite the posturing of the GOP leadership, that the health care reform law will be repealed in full. With a divided Congress, and an Obama White House, wholesale repeal is not a realistic or achievable goal for the GOP. However, I believe it is dangerous to consider partial repeal or weakening of these less popular aspects fo the law, while leaving the more popular aspects unchanged or strengthened. In the end, the health care law was about cost (as is almost everything Congress involves itself in) and if Congress were to bend to the popular opinion, we would further endanger our country financially, undermining other efforts underway to find ways to improve the long-term financial stability of our country. (not to mention that such changes would destabilize and destroy current health insurance)
As for the question of a mandate for the Republicans in Congress, I fail to see any aspect of a mandate for the GOP. Republicans captured only the House, and the Senate remains in Democratic control. I would say we instead saw a mobilization of portions of the Republican base (and a lack of inspiration for the Democratic base) mixed with a healthy dose of general dissatisfaction with the slow economic recovery orchestrated by the Democrat-weighted Congress.. A Republican claim of a mandate is purely posturing. So, despite a lack of hiding partisan bias in the presentation of the poll results, the McClatchy headline is, I suppose, technically correct...
Here are the top 3-reported results in a graphical presentation:
I'll focus on the health care reform portion of the poll. Overall, not incredibly insightful results. 810 registered voters were involved, and the stated margin of error is +/-3.5%. Assuming the health care "unsure" group stays the same as reported (which 5% of everyone seems to be unsure or uneducated in almost every poll, no matter the subject involved), it would appear the keep and repeal groups are basically the same size, given the margin of error.
The release goes on to claim that voters want to keep the more "popular" parts of health care reform, like barring insurers from denying coverage for pre-existing conditions (59% in favor, 36% against), extending child coverage to age 26 (68% in favor, 29% against), and closing the Medicare Part D "donut hole" (for my previous explanation of this point, click here). Those analyzing the poll results also claim voters don't like some other parts of the law, like an individual health care insurance mandate (65% claiming it is unconstitutional, 29% in favor). For purposes of this discussion, we'll assume that someone who responded in the "unconstitutional" category was "against" the mandate from a personal opinion perspective, though technically someone could personally support the mandate from a policy perspective but also believe it technically unconstitutional.
So, if you boil it down, those polled apparently, at a rate of 2-to-1, want to have their cake and eat it too. All of the "popular" aspects of the law (costs) are supported, while the parts of the law that (arguably) make it work financially are opposed. Specifically, the individual mandate (which helps ensure that people don't wait until they're sick to seek coverage) is necessary to attempt to balance the acceptance of individuals without pre-existing coverage restrictions. Realistically, you can't have one without the other, but the poll results appear to show that Americans are more interested in an ala carte approach. Seems the majority of those polled would like to skip their vegetables and fill up instead on fat and sugar-filled dessert. Given the state of health in our country, this seems to fit.
As I've stated in a previous blog post, it's extremely unlikely, despite the posturing of the GOP leadership, that the health care reform law will be repealed in full. With a divided Congress, and an Obama White House, wholesale repeal is not a realistic or achievable goal for the GOP. However, I believe it is dangerous to consider partial repeal or weakening of these less popular aspects fo the law, while leaving the more popular aspects unchanged or strengthened. In the end, the health care law was about cost (as is almost everything Congress involves itself in) and if Congress were to bend to the popular opinion, we would further endanger our country financially, undermining other efforts underway to find ways to improve the long-term financial stability of our country. (not to mention that such changes would destabilize and destroy current health insurance)
As for the question of a mandate for the Republicans in Congress, I fail to see any aspect of a mandate for the GOP. Republicans captured only the House, and the Senate remains in Democratic control. I would say we instead saw a mobilization of portions of the Republican base (and a lack of inspiration for the Democratic base) mixed with a healthy dose of general dissatisfaction with the slow economic recovery orchestrated by the Democrat-weighted Congress.. A Republican claim of a mandate is purely posturing. So, despite a lack of hiding partisan bias in the presentation of the poll results, the McClatchy headline is, I suppose, technically correct...
Sunday, November 21, 2010
Bad Economy Means Clearer Skies
A study published in the journal Natural Geoscience shows something amazing - Worldwide carbon emissions DROPPED 1.3% from 2008 to 2009. The drop in emissions was much higher in some specific geographic areas like:
US - (6.9)%
Germany - (7)%
Russia - (8.4)%
UK - (8.6)%
Japan - (11)%
Certain parts of the world still saw dramatic increases in carbon emissions -
India - +6.8%
China - +8%
The drivers of the drop in emissions include efforts to reduce emissions, investment in "green" technology, a worldwide reduction in deforastation, and... get this... the global recession.
That's right, a poor economy is helping the earth. The lead author of the study confirmed that the drop in emissions was directly related to the global recession. "There is a close link between the world's gross domestic product and emissions of carbon dioxide," says Pierre Friedlingstein of the University of Exeter in the United Kingdom.
As the world's economy recovers (for some) as expected, it is also expected that the growth of carbon emissions will again grow by more than 3% from 2009 to 2010.
So, finally we have a positive out of the bad economy. And if Washington doesn't act soon on the pending tax increases coming Jan 1, 2011, or the balooning federal debt, we could see the US carbon emissions drop again in the future. Good for tree huggers - Bad for everyone else.
US - (6.9)%
Germany - (7)%
Russia - (8.4)%
UK - (8.6)%
Japan - (11)%
Certain parts of the world still saw dramatic increases in carbon emissions -
India - +6.8%
China - +8%
The drivers of the drop in emissions include efforts to reduce emissions, investment in "green" technology, a worldwide reduction in deforastation, and... get this... the global recession.
That's right, a poor economy is helping the earth. The lead author of the study confirmed that the drop in emissions was directly related to the global recession. "There is a close link between the world's gross domestic product and emissions of carbon dioxide," says Pierre Friedlingstein of the University of Exeter in the United Kingdom.
As the world's economy recovers (for some) as expected, it is also expected that the growth of carbon emissions will again grow by more than 3% from 2009 to 2010.
So, finally we have a positive out of the bad economy. And if Washington doesn't act soon on the pending tax increases coming Jan 1, 2011, or the balooning federal debt, we could see the US carbon emissions drop again in the future. Good for tree huggers - Bad for everyone else.
Boehner Pledges to Fly Commercial
Previously Republicans have attacked Nancy Pelosi and her use of an air-force jet for travel between Washington and her home district in California - not because of the use of the jet itself, but for the size and lavishness of the supposed jet requested. In early 2007, due to security risks cited by the House sergeant-at-arms, there was discussion about "upgrading" the jet used for Speaker travel, to allow Speaker Pelosi to make it between DC and California non-stop. The jet used by the previous speaker, a govt version of a Gulfstream jet, sat 12. The jet apparently requested at the time was a govt version of a 757-200 with seating for 45 in business class, along with a stateroom, conference center, communications center... Basically the type of aircraft used by the First Lady and the Vice President. For full details on the debate in 2007, click here. For the snopes.com review of this debate, click here.
Recently, as John Boehner prepares to assume the role of Speaker of the House, there has been renewed discussion on Speaker travel. Here's Boehner's stance on it:
While Boehner's position is in line with the government fiscal responsibility position he and other Republicans have been talking about, his stance of continuing to fly commercial from Washington to his home district may be more show than substance.
The fact of the matter is that the Speaker of the House sits right behind the Vice-President in terms of succession. I can't imagine this country, post-9/11, allowing such a high-ranking elected official traveling commercial on a regular basis, especially when on official business. Security protocol shouldn't allow it. In fact, even the Bush White House, when presented with the debate in 2007 over Pelosi's use of military aircraft commented:
"As Speaker of the House, she is entitled to military transport and... We think it's appropriate. And, so, again, I think this is much ado about not a whole lot. It is important for the Speaker to have this kind of protection and travel," said White House spokesman Tony Snow, at the time.
I would guess that, given a little time, this pledge of commercial flight will morph into only applicable to "personal" flight. The future speaker seems to leave the purpose of the travel he references out of his comments. For government business, it would make a lot of sense to have him travel on military aircraft.
Plus, I'm sure Boehner would prefer not to be felt up everytime he heads to and returns from Ohio.
Recently, as John Boehner prepares to assume the role of Speaker of the House, there has been renewed discussion on Speaker travel. Here's Boehner's stance on it:
While Boehner's position is in line with the government fiscal responsibility position he and other Republicans have been talking about, his stance of continuing to fly commercial from Washington to his home district may be more show than substance.
The fact of the matter is that the Speaker of the House sits right behind the Vice-President in terms of succession. I can't imagine this country, post-9/11, allowing such a high-ranking elected official traveling commercial on a regular basis, especially when on official business. Security protocol shouldn't allow it. In fact, even the Bush White House, when presented with the debate in 2007 over Pelosi's use of military aircraft commented:
"As Speaker of the House, she is entitled to military transport and... We think it's appropriate. And, so, again, I think this is much ado about not a whole lot. It is important for the Speaker to have this kind of protection and travel," said White House spokesman Tony Snow, at the time.
I would guess that, given a little time, this pledge of commercial flight will morph into only applicable to "personal" flight. The future speaker seems to leave the purpose of the travel he references out of his comments. For government business, it would make a lot of sense to have him travel on military aircraft.
Plus, I'm sure Boehner would prefer not to be felt up everytime he heads to and returns from Ohio.
Saturday, November 20, 2010
A Few Thoughts On TSA Pat-Downs & Those Vocal About Them
For all those out there concerned about your "junk" and the TSA's sudden interest in said "junk," I have a few unsolicited thoughts.
First, the physical, digital (meaning with hands and fingers, not referring to data with 1s and 0s) inspection of your nether region is a choice you actively choose to make, completely independent of any outside force. You are free to choose to be inspected by the new scanners, if selected for such review (most airports, if not all, have too few scanners to screen all travelers with this method, even if they were permitted to), or you may choose a pat-down. The choice is pretty much yours.
Second, despite what your crazy fantasies have shown you, the TSA TSOs are no more thrilled with feeling your jewels than you are. Despite your suspicions otherwise, the inspections of the land between your legs likely wasn't in the job description they saw when they were hired, and like a gynecologist, after the first few peeks under the gown, it's a job... and in some cases, one most of us really wouldn't want.
Finally, yes, as you are so loudly shouting, the x-ray or pat review of your package is likely not terribly effective, and we should be more closely examining the packages in the cargo hold as well as the one in your jeans. The bad guys who wish to do us harm are always two steps ahead, and know our security better than we do. They're already thinking up new, and creative ways to attack us that we would likely never detect, even with our most advanced technology (which I already admitted is not even yet fully deployed). Still, it's my humble opinion that a moment of anonymous ogling (by someone who is already, just a few days in, sick of looking at "naked" fat Americans) or, if you choose the hard way, a healthy clothed inspection of Jim and the twins, in the grand scheme of things is better than being sucked through a newly blown hole in the side of a jet.
Mostly, my message is, get over yourself. If you don't like it, tell your Congressman, and vote accordingly. Until then, realize it's unlikely you have anything memorable to view on x-ray or feel through your chinos, so stand there, smile, and move onto your gate. The sooner you get on your way, the sooner the 350lb 4'10" man behind you (who will likely be your seat-mate during your flight) can get his thrill for the day, and the TSO involved can write his resignation letter.
First, the physical, digital (meaning with hands and fingers, not referring to data with 1s and 0s) inspection of your nether region is a choice you actively choose to make, completely independent of any outside force. You are free to choose to be inspected by the new scanners, if selected for such review (most airports, if not all, have too few scanners to screen all travelers with this method, even if they were permitted to), or you may choose a pat-down. The choice is pretty much yours.
Second, despite what your crazy fantasies have shown you, the TSA TSOs are no more thrilled with feeling your jewels than you are. Despite your suspicions otherwise, the inspections of the land between your legs likely wasn't in the job description they saw when they were hired, and like a gynecologist, after the first few peeks under the gown, it's a job... and in some cases, one most of us really wouldn't want.
Finally, yes, as you are so loudly shouting, the x-ray or pat review of your package is likely not terribly effective, and we should be more closely examining the packages in the cargo hold as well as the one in your jeans. The bad guys who wish to do us harm are always two steps ahead, and know our security better than we do. They're already thinking up new, and creative ways to attack us that we would likely never detect, even with our most advanced technology (which I already admitted is not even yet fully deployed). Still, it's my humble opinion that a moment of anonymous ogling (by someone who is already, just a few days in, sick of looking at "naked" fat Americans) or, if you choose the hard way, a healthy clothed inspection of Jim and the twins, in the grand scheme of things is better than being sucked through a newly blown hole in the side of a jet.
Mostly, my message is, get over yourself. If you don't like it, tell your Congressman, and vote accordingly. Until then, realize it's unlikely you have anything memorable to view on x-ray or feel through your chinos, so stand there, smile, and move onto your gate. The sooner you get on your way, the sooner the 350lb 4'10" man behind you (who will likely be your seat-mate during your flight) can get his thrill for the day, and the TSO involved can write his resignation letter.
Friday, November 19, 2010
Fixing Costs of Health Care - Part 2
Continued from Part 1
Let’s go back to our little button from Part 1. Imagine that our button is one of many buttons, because the button/dial administration is giving them out to anyone who asks for one, no matter if they have any chance of hearing a bell or not. Well, it’s now becoming common knowledge that no-one is really paying any attention to the button pushing. It’s also becoming common knowledge that dial-turning is really getting watched closely. In fact, the button/dial administration is really cracking down on dial-turners. If you’re caught doing that, you don’t get a Christmas bonus. The dial-turners are getting scared (they promised their family an in-ground pool), and they want to get out of the dial-turning business and get into something safer, with lesser penalties for getting caught. So, the dial-turners, who are organized by the way, start asking for buttons, and set them up.
Back to the real world (getting dizzy yet?), and the same thing is happening. Organized crime is real. Illicit drugs, as an example, have been a nice tidy revenue stream for these groups for some time. But life for drug dealers and suppliers, because of things like the War on Drugs, is getting a little harder (I didn’t say the War on Drugs was completely ineffective). Not impossible, mind you (remember the cockroach analogy?) but harder. Many are finding that health care fraud schemes are just as profitable, without as much risk of being shot by a competitor, and with more limited sentences for convictions. Oh – and for years, almost no-one was watching. So, if you’re a criminal looking for an easier row to how, take a look at health care fraud.
But fraud is only a portion (though a big portion) of the issue associated with the fee-for-service payment system in health care. There is also an embedded fatal flaw in the core idea of incenting providers and suppliers on a volume basis. Through fee-for-service systems, we reward “doing” more, even if the more that is being done is unnecessary, is of lower quality than we would expect or want, or is more expensive than an alternative that may be just as, if not more effective than the more being done.
It’s certainly logical, in any endeavor, to pay for products and services that are both valuable to the consumer/stakeholder and are not readily or easily available/doable on your own. I am glad to pay someone a reasonable amount to do things like repair my vehicle, fly an airplane I’m using to reach a far off destination, or provide my home and my family with clean, running water. These are things that I personally do not have the expertise, time or desire to do for myself, and so I gladly give portions of my hard-earned money to others for these acts and products. The same goes for medical care. I’m happy to provide funds to someone else to help me by providing diagnostic services when I’m ill, provide me medications that are needed for my conditions, or even perform surgery when it is needed.
What is not logical is to establish and then support a system where the services are paid for whether they are needed or not, and no matter the outcome of that service. For example, when I take my car into the mechanic for an oil change, I don’t want to pay for a new transmission if I don’t need one. If I board a plane to Atlanta, I don’t want to find out that I’ll also be paying (extra) for a stop over in Detroit that I don’t need (or want for that matter). And I want clean water in my home, but I would not want to pay the utility company if my water is constantly brown, and makes me sick because of contamination.
The same is true for health care. We want to get better, or, better yet, prevent getting sick. For those services, it is logical to pay. However, if, in the process of “getting better” or “preventing illness” we are subjected to service, treatments or medical products that do not help us along the path to wellness (or actively make us more sick), and we are asked to pay for those things, then we have a problem.
So, by using fee-for-service, we have fraud, which will admittedly be present in any system, but is more prevalent in a system that makes it easy to bill, pays quickly, and has so much volume that it’s easy to slip below the radar. We also have a perverse incentive to drive volume of work versus quality of work. We can potentially, through enforcement efforts, keep fraud in check to a certain degree. We cannot, however, eliminate the fatal flaw in how we incent payment without major overhaul.
We must come up with a system for payment in the health care industry that reduces or eliminates the incentive to just do “more” and replaces it with incentives to do what is “right” for the patient and actually “works” to accomplish our end-goal of health. I actually propose we start at the end of the process and develop backwards. Our end goal in health care is (or should be) to improve or preserve health. So, let’s use health status of a patient as a criteria marker for payment. In other words, pay for medical outcomes.
Instead of paying for services, on a negotiated fee schedule, pay for improvements in conditions. If I am diagnosed with high blood pressure, why not pay my health care provider when my blood pressure goes down? If I am diagnosed with diabetes, why not pay my health care provider when my Hemoglobin A1C is brought into a normal range? Take established and accepted treatment goals, and incent health care providers to help the patient reach those goals.
In the same vein, think about paying primary care physicians based upon the health status of their patients overall, instead of based upon how many encounters they have in their medical office. Instead of “visits” they are paid on “wellness.”
I would suggest we pay handsomely for helping patients reach aggressive goals, and pay very poorly for working at it and yet failing to have patients “get there.” At the same time, to engage patients in their own care/health give them an incentive to do their part. I propose you establish cost-sharing schemes that allow the patient to pay less out-of-pocket if they reach their health goals and more out-of-pocket if they don’t.
Suddenly, you have everyone aligned. You have health care providers looking at how to most efficiently and effectively get people better, or better yet, keep them well. Your personal health is now tied to your financial health. Your person health is also tied to your health care provider’s financial health.
Hold on – we’re going back to our button… No-one knew it, but the bell you were hearing was ringing every time a fire broke out somewhere in America. And your button – well, it turned on the sprinkler system to put out the fire. Well worth the $5, right? But, slowly but surely, with all the extra button pushes (yours, your brother-in-law’s and organized crime’s) most of the homes in America are now flooded. So, realizing they have a problem, the button/dial administration undergoes a radical transformation, and emerges as the fire suppression administration. They recall all buttons. Instead, they offer every family in American $10 a week if they do not have a home fire. Instances of home fires drop dramatically. Unfortunately without the extra button income you have to cut back to 2 peppermint mochas a week (using your new fire avoidance allowance). But fortunately your brother-in-law takes his lovely family, RV and yacking dog home, and the dial-turners decide to investigate widget-making as a new profession instead.
Fraud in health care will never be completely gone. No matter the system in place, someone will find a way to game it. At the same time, not payment schema is perfect, and there will always be some illogical aspects. But, with engaged patients, properly aligned health care providers, and sufficient credentialing (and ongoing audits), I believe the majority of the health care fraud we experience today would be gone, overall health care costs would drop and we’d likely be healthier to boot.
Let’s go back to our little button from Part 1. Imagine that our button is one of many buttons, because the button/dial administration is giving them out to anyone who asks for one, no matter if they have any chance of hearing a bell or not. Well, it’s now becoming common knowledge that no-one is really paying any attention to the button pushing. It’s also becoming common knowledge that dial-turning is really getting watched closely. In fact, the button/dial administration is really cracking down on dial-turners. If you’re caught doing that, you don’t get a Christmas bonus. The dial-turners are getting scared (they promised their family an in-ground pool), and they want to get out of the dial-turning business and get into something safer, with lesser penalties for getting caught. So, the dial-turners, who are organized by the way, start asking for buttons, and set them up.
Back to the real world (getting dizzy yet?), and the same thing is happening. Organized crime is real. Illicit drugs, as an example, have been a nice tidy revenue stream for these groups for some time. But life for drug dealers and suppliers, because of things like the War on Drugs, is getting a little harder (I didn’t say the War on Drugs was completely ineffective). Not impossible, mind you (remember the cockroach analogy?) but harder. Many are finding that health care fraud schemes are just as profitable, without as much risk of being shot by a competitor, and with more limited sentences for convictions. Oh – and for years, almost no-one was watching. So, if you’re a criminal looking for an easier row to how, take a look at health care fraud.
But fraud is only a portion (though a big portion) of the issue associated with the fee-for-service payment system in health care. There is also an embedded fatal flaw in the core idea of incenting providers and suppliers on a volume basis. Through fee-for-service systems, we reward “doing” more, even if the more that is being done is unnecessary, is of lower quality than we would expect or want, or is more expensive than an alternative that may be just as, if not more effective than the more being done.
It’s certainly logical, in any endeavor, to pay for products and services that are both valuable to the consumer/stakeholder and are not readily or easily available/doable on your own. I am glad to pay someone a reasonable amount to do things like repair my vehicle, fly an airplane I’m using to reach a far off destination, or provide my home and my family with clean, running water. These are things that I personally do not have the expertise, time or desire to do for myself, and so I gladly give portions of my hard-earned money to others for these acts and products. The same goes for medical care. I’m happy to provide funds to someone else to help me by providing diagnostic services when I’m ill, provide me medications that are needed for my conditions, or even perform surgery when it is needed.
What is not logical is to establish and then support a system where the services are paid for whether they are needed or not, and no matter the outcome of that service. For example, when I take my car into the mechanic for an oil change, I don’t want to pay for a new transmission if I don’t need one. If I board a plane to Atlanta, I don’t want to find out that I’ll also be paying (extra) for a stop over in Detroit that I don’t need (or want for that matter). And I want clean water in my home, but I would not want to pay the utility company if my water is constantly brown, and makes me sick because of contamination.
The same is true for health care. We want to get better, or, better yet, prevent getting sick. For those services, it is logical to pay. However, if, in the process of “getting better” or “preventing illness” we are subjected to service, treatments or medical products that do not help us along the path to wellness (or actively make us more sick), and we are asked to pay for those things, then we have a problem.
So, by using fee-for-service, we have fraud, which will admittedly be present in any system, but is more prevalent in a system that makes it easy to bill, pays quickly, and has so much volume that it’s easy to slip below the radar. We also have a perverse incentive to drive volume of work versus quality of work. We can potentially, through enforcement efforts, keep fraud in check to a certain degree. We cannot, however, eliminate the fatal flaw in how we incent payment without major overhaul.
We must come up with a system for payment in the health care industry that reduces or eliminates the incentive to just do “more” and replaces it with incentives to do what is “right” for the patient and actually “works” to accomplish our end-goal of health. I actually propose we start at the end of the process and develop backwards. Our end goal in health care is (or should be) to improve or preserve health. So, let’s use health status of a patient as a criteria marker for payment. In other words, pay for medical outcomes.
Instead of paying for services, on a negotiated fee schedule, pay for improvements in conditions. If I am diagnosed with high blood pressure, why not pay my health care provider when my blood pressure goes down? If I am diagnosed with diabetes, why not pay my health care provider when my Hemoglobin A1C is brought into a normal range? Take established and accepted treatment goals, and incent health care providers to help the patient reach those goals.
In the same vein, think about paying primary care physicians based upon the health status of their patients overall, instead of based upon how many encounters they have in their medical office. Instead of “visits” they are paid on “wellness.”
I would suggest we pay handsomely for helping patients reach aggressive goals, and pay very poorly for working at it and yet failing to have patients “get there.” At the same time, to engage patients in their own care/health give them an incentive to do their part. I propose you establish cost-sharing schemes that allow the patient to pay less out-of-pocket if they reach their health goals and more out-of-pocket if they don’t.
Suddenly, you have everyone aligned. You have health care providers looking at how to most efficiently and effectively get people better, or better yet, keep them well. Your personal health is now tied to your financial health. Your person health is also tied to your health care provider’s financial health.
Hold on – we’re going back to our button… No-one knew it, but the bell you were hearing was ringing every time a fire broke out somewhere in America. And your button – well, it turned on the sprinkler system to put out the fire. Well worth the $5, right? But, slowly but surely, with all the extra button pushes (yours, your brother-in-law’s and organized crime’s) most of the homes in America are now flooded. So, realizing they have a problem, the button/dial administration undergoes a radical transformation, and emerges as the fire suppression administration. They recall all buttons. Instead, they offer every family in American $10 a week if they do not have a home fire. Instances of home fires drop dramatically. Unfortunately without the extra button income you have to cut back to 2 peppermint mochas a week (using your new fire avoidance allowance). But fortunately your brother-in-law takes his lovely family, RV and yacking dog home, and the dial-turners decide to investigate widget-making as a new profession instead.
Fraud in health care will never be completely gone. No matter the system in place, someone will find a way to game it. At the same time, not payment schema is perfect, and there will always be some illogical aspects. But, with engaged patients, properly aligned health care providers, and sufficient credentialing (and ongoing audits), I believe the majority of the health care fraud we experience today would be gone, overall health care costs would drop and we’d likely be healthier to boot.
Fixing Costs of Health Care - Part 1
Imagine there's a button on your desk, designed to be pressed every time you hear a bell. And every time you press the button, $5 is deposited in your checking account. You hear the bell every few hours, and you push the button each time. Looking around, though, you notice that no-one is watching you press the button. Apparently they trust that you are only hitting the button when the bell rings. But you're a good, honest person... Right?
A few days in, and Starbucks has re-launched their seasonal peppermint mocha. It's you're favorite. But, expensive gourmet coffee isn't in your budget. No-one's watching, and you really want that mocha. It's for mental health, right? And you've been loyally pressing that button every time the bell rings... And maybe you missed one while you were in the restroom... So, just to be safe, you hit that button one extra time. No real harm, and you get your mocha.
That peppermint mocha was good. You could use one every day. What's the harm? You hit the button just one extra time each day, except Monday - you need two that day. It's hard to get going on Mondays...
I could go on. But everyone can likely see where the normal human response might lead to in this hypothetical scenario. Eventually the person here is hitting the button willy nilly and is buried in coffee and muffins. Heck, maybe they have a Starbucks installed in their office, with a personal barista.
What I describe is not very different from the way that the vast majority of our US healthcare payment system is structured. The term in the industry is “Fee-For-Service” which basically means the payer makes payment to a healthcare provider every time they bill for a service - or every time they hit the button.
But, doctors are good people, right? They go to school for a long time. They have patient best interest in mind (usually – or so we hope). They treat us when we're sick, and help us get well. We like them.
So, what's the problem here? Doctors should be paid for what they do and know, right? Would anyone argue that doctors should be paid for their services? But, doctors are people. And just like the button situation, they get paid for services – so the more services you do, the more money you make. Mix normal human tendencies with cost pressures (think liability insurance to protect against lawsuit) and you have a mixture ripe for problems.
And let me be clear, fee-for-service in healthcare is not just limited to doctors – it’s the basis for payment for all healthcare providers and suppliers. The more you do, deliver, or ship, the more revenue comes in. In fact, when it comes to risk of fraud, generally providers like physicians are seen in the lowest risk category.
Now, let’s look at that button again. Your brother-in-law, who drove his 20 year old RV to your house for Christmas, learns about your button. He’s a slightly less than upstanding citizen, and he’s been out of work since he left the service, and he blacks out every time the microwave is used, because of the plate in his head… (anyone catch the National Lampoon’s Christmas Vacation reference???) He wants a button too. Suppose he can get one, and he sits there, hitting the button once every second, racking up huge sums of money.
Back to reality – and we can talk about hitting the button in healthcare – healthcare fraud. Less than upstanding people, who understand how the payment system works (hit the button, get $$), and they know how to play it - setup companies to bill for services, don’t actually do them (or do them badly) and make tons of money. And for a long time, almost no-one was looking.
So, what to do? There are lots of ideas, some in practice, some not.
First, you declare war on fraud, which is what the government has done recently. Huge sums of money are being fed into the healthcare fraud battle to root out and eliminate fraud, waste and abuse. New contractors, new divisions within Centers for Medicare & Medicaid Services (CMS), strike forces between Department of Justice, Office of Inspector General, Department of Health and Human Services and US District Attorneys and even private-public partnerships (like the National HealthCare Anti-Fraud Association (NHCAA)) are gaining more and more support to combat the “bad-guys.”
But is it enough? If the War on Drugs (similar to this War on Fraud) has shown us anything, it’s that spending tons and tons of money on enforcement doesn’t guarantee you will quickly win the war. The enemy is often agile, flexible, and highly motivated. The enemy in this war always seems a step ahead, and despite spending lots of $ on the battle, they never seem to be eradicated. They’re cockroaches – they never die, and if you stomp on 1, there are 10 in the wall, waiting until you turn out the light.
To be continued…
A few days in, and Starbucks has re-launched their seasonal peppermint mocha. It's you're favorite. But, expensive gourmet coffee isn't in your budget. No-one's watching, and you really want that mocha. It's for mental health, right? And you've been loyally pressing that button every time the bell rings... And maybe you missed one while you were in the restroom... So, just to be safe, you hit that button one extra time. No real harm, and you get your mocha.
That peppermint mocha was good. You could use one every day. What's the harm? You hit the button just one extra time each day, except Monday - you need two that day. It's hard to get going on Mondays...
I could go on. But everyone can likely see where the normal human response might lead to in this hypothetical scenario. Eventually the person here is hitting the button willy nilly and is buried in coffee and muffins. Heck, maybe they have a Starbucks installed in their office, with a personal barista.
What I describe is not very different from the way that the vast majority of our US healthcare payment system is structured. The term in the industry is “Fee-For-Service” which basically means the payer makes payment to a healthcare provider every time they bill for a service - or every time they hit the button.
But, doctors are good people, right? They go to school for a long time. They have patient best interest in mind (usually – or so we hope). They treat us when we're sick, and help us get well. We like them.
So, what's the problem here? Doctors should be paid for what they do and know, right? Would anyone argue that doctors should be paid for their services? But, doctors are people. And just like the button situation, they get paid for services – so the more services you do, the more money you make. Mix normal human tendencies with cost pressures (think liability insurance to protect against lawsuit) and you have a mixture ripe for problems.
And let me be clear, fee-for-service in healthcare is not just limited to doctors – it’s the basis for payment for all healthcare providers and suppliers. The more you do, deliver, or ship, the more revenue comes in. In fact, when it comes to risk of fraud, generally providers like physicians are seen in the lowest risk category.
Now, let’s look at that button again. Your brother-in-law, who drove his 20 year old RV to your house for Christmas, learns about your button. He’s a slightly less than upstanding citizen, and he’s been out of work since he left the service, and he blacks out every time the microwave is used, because of the plate in his head… (anyone catch the National Lampoon’s Christmas Vacation reference???) He wants a button too. Suppose he can get one, and he sits there, hitting the button once every second, racking up huge sums of money.
Back to reality – and we can talk about hitting the button in healthcare – healthcare fraud. Less than upstanding people, who understand how the payment system works (hit the button, get $$), and they know how to play it - setup companies to bill for services, don’t actually do them (or do them badly) and make tons of money. And for a long time, almost no-one was looking.
So, what to do? There are lots of ideas, some in practice, some not.
First, you declare war on fraud, which is what the government has done recently. Huge sums of money are being fed into the healthcare fraud battle to root out and eliminate fraud, waste and abuse. New contractors, new divisions within Centers for Medicare & Medicaid Services (CMS), strike forces between Department of Justice, Office of Inspector General, Department of Health and Human Services and US District Attorneys and even private-public partnerships (like the National HealthCare Anti-Fraud Association (NHCAA)) are gaining more and more support to combat the “bad-guys.”
But is it enough? If the War on Drugs (similar to this War on Fraud) has shown us anything, it’s that spending tons and tons of money on enforcement doesn’t guarantee you will quickly win the war. The enemy is often agile, flexible, and highly motivated. The enemy in this war always seems a step ahead, and despite spending lots of $ on the battle, they never seem to be eradicated. They’re cockroaches – they never die, and if you stomp on 1, there are 10 in the wall, waiting until you turn out the light.
To be continued…
Sunday, November 14, 2010
Shared Sacrifice
The Republican election-day parties were less than two weeks ago, but they seem like a lifetime ago. With the balloons and streamers cleaned up, and the foggy-headedness of the next day cleared (I'm sure no-one offered any toasts that night) we can get down to training up these new Congress-people so they can take on the world in January. And they will be taking on some pretty tough issues.
One of the issues of the day, and decade, and for all time is the federal debt. Our federal government is currently spending trillions of dollars which we don't really have, and many are waking to the reality that we have many hard financial decisions to make in the very near future to avoid pushing our great nation (and by extension the entire world) into a financial crisis situation.
Recent economic events will likely keep meaningful budgetary and spending reforms in check for another year or so, but change is coming, and there will be much shared sacrifice. To see some of the proposals to be battled out in Washington in the coming months, take a look at the "debt commission's" draft proposal. (http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf)
In this proposal are cuts and reforms that cover both domestic and defense spending, tax reform and Social Security and Medicare/Medicaid solvency. No popular or unpopular governmental program seems to be off-limits, and I argue that we can't afford to protect any project or budget from the surgeon's knife. The cancer of overspending has metastasized to all governmental organs, and we need a whole-body treatment.
Let's briefly hit on some of the more striking (to me at least) changes proposed to get deficits and debt under control.
Defense Spending
-Freeze salaries (civilian and non-combat military) for 3 years.
-Reduce overseas bases by 1/3
-Reform (I read reduced benefits) Tricare (military healthcare)
-Integrate military children into local public schools
Domestic Spending
-Reduce Congressional and White House budgets by 15%
-Freeze federal employee salaries for 3 years
-Cut federal workforce by 10% (through less drastic 2 for 3 replacement plan)
-Eliminate 250,000 federal augmentee contractor employees (non-defense)
-Eliminate earmarks
Defense and domestic spending cuts each account for $100 billion in savings.
Tax Reform
It sure is fun for politicians to talk about tax reform (I mean, who can't support, besides those employed by H&R Block, the idea of simplifying the tax code - and by extension the craziness of the forms) but generally the end result of any tax discussion in Washington results in further complicating the situation versus improving it. The commission lays out 3 options for comprehensive tax reform. Personally I like their zero plan which takes out all tax "expenditures" (which I believe represent credits and deductions) and establishes a simpler tax rate to be applied without all the gyrations we go through today to "adjust" the income you earn. They then allow for the re-introduction of popular and potentially necessary credits like the child tax credits and earned income credits, but pay for them by actually increasing the tax rates themselves.
As a back-up to the ideas that are proposed, they recommend a third option, which allows Congress to come up with alternative plans, but holds Congressional feet to the fire by "haircutting" tax breaks annually (thereby creating an outcry from the populous) until tax reform is enacted.
Other Revenue
The commission recommends other revenue sources, like increasing the federal tax on gasoline. Raise some tax revenue and incent greener transportation development... PotentiallypPretty smart. (I didn't say popular)
Medicare
The Doc Fix proposal is to, well, not fix it... The proposal is to pay doctors less, increase incentives for quality and efficiency, and introduce tort reform to reduce liability expense for providers.
Additionally, the proposal includes generally increasing cost-share borne by Medicare beneficiaries to promote consumer engagement in healthcare decisions. The idea is to make sure people buy healthcare like they do other consumer goods - by seeing and feeling the actual price, and allowing consumers to decide the value of treatment for themselves. With the right information available to people, and education to what all that information means, it's something that can work. Think high-deductible health plan in Medicare.
The proposal also aims to increase brand-name rebates in the Medicare Part D space, collecting these from brand-name drug manufacturers. (sounds like we've been at this well before, but the commission looks to go back)
Social Security
Social Security did not escape the commission's eye. The plan here is to gradually increase retirement age to account for people living longer, update the way cost-of-living increases are calculated (there's been no increase for 2 years recently anyway) and increase the % of payroll income subject to withholdings.
All in all, if Congress does everything the commission recommends, just about everyone in America would be pissed off about something. But you know what, maybe that's the way it should be. And maybe, just maybe, our duly elected representatives in that little corner of what used to be part of Maryland will make those hard decisions, throw political longevity to the wind, and do what we need to so as a nation to survive financially.
We should, as a nation do what we all know we must do to be financially solvent on our own balance sheets. We must spend no more than we earn, and, if we're smart, put something away for the proverbial rainy day. Perhaps of we'd done that over the last few decades, we'd not be in the mess we are today.
PS - I do not necessarily personally like or endorse any of the particular recommendations of the commission. I do support, however, the idea of universal sacrifice, and realize I will end up doing my fair share of it, like it or not.
One of the issues of the day, and decade, and for all time is the federal debt. Our federal government is currently spending trillions of dollars which we don't really have, and many are waking to the reality that we have many hard financial decisions to make in the very near future to avoid pushing our great nation (and by extension the entire world) into a financial crisis situation.
Recent economic events will likely keep meaningful budgetary and spending reforms in check for another year or so, but change is coming, and there will be much shared sacrifice. To see some of the proposals to be battled out in Washington in the coming months, take a look at the "debt commission's" draft proposal. (http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf)
In this proposal are cuts and reforms that cover both domestic and defense spending, tax reform and Social Security and Medicare/Medicaid solvency. No popular or unpopular governmental program seems to be off-limits, and I argue that we can't afford to protect any project or budget from the surgeon's knife. The cancer of overspending has metastasized to all governmental organs, and we need a whole-body treatment.
Let's briefly hit on some of the more striking (to me at least) changes proposed to get deficits and debt under control.
Defense Spending
-Freeze salaries (civilian and non-combat military) for 3 years.
-Reduce overseas bases by 1/3
-Reform (I read reduced benefits) Tricare (military healthcare)
-Integrate military children into local public schools
Domestic Spending
-Reduce Congressional and White House budgets by 15%
-Freeze federal employee salaries for 3 years
-Cut federal workforce by 10% (through less drastic 2 for 3 replacement plan)
-Eliminate 250,000 federal augmentee contractor employees (non-defense)
-Eliminate earmarks
Defense and domestic spending cuts each account for $100 billion in savings.
Tax Reform
It sure is fun for politicians to talk about tax reform (I mean, who can't support, besides those employed by H&R Block, the idea of simplifying the tax code - and by extension the craziness of the forms) but generally the end result of any tax discussion in Washington results in further complicating the situation versus improving it. The commission lays out 3 options for comprehensive tax reform. Personally I like their zero plan which takes out all tax "expenditures" (which I believe represent credits and deductions) and establishes a simpler tax rate to be applied without all the gyrations we go through today to "adjust" the income you earn. They then allow for the re-introduction of popular and potentially necessary credits like the child tax credits and earned income credits, but pay for them by actually increasing the tax rates themselves.
As a back-up to the ideas that are proposed, they recommend a third option, which allows Congress to come up with alternative plans, but holds Congressional feet to the fire by "haircutting" tax breaks annually (thereby creating an outcry from the populous) until tax reform is enacted.
Other Revenue
The commission recommends other revenue sources, like increasing the federal tax on gasoline. Raise some tax revenue and incent greener transportation development... PotentiallypPretty smart. (I didn't say popular)
Medicare
The Doc Fix proposal is to, well, not fix it... The proposal is to pay doctors less, increase incentives for quality and efficiency, and introduce tort reform to reduce liability expense for providers.
Additionally, the proposal includes generally increasing cost-share borne by Medicare beneficiaries to promote consumer engagement in healthcare decisions. The idea is to make sure people buy healthcare like they do other consumer goods - by seeing and feeling the actual price, and allowing consumers to decide the value of treatment for themselves. With the right information available to people, and education to what all that information means, it's something that can work. Think high-deductible health plan in Medicare.
The proposal also aims to increase brand-name rebates in the Medicare Part D space, collecting these from brand-name drug manufacturers. (sounds like we've been at this well before, but the commission looks to go back)
Social Security
Social Security did not escape the commission's eye. The plan here is to gradually increase retirement age to account for people living longer, update the way cost-of-living increases are calculated (there's been no increase for 2 years recently anyway) and increase the % of payroll income subject to withholdings.
All in all, if Congress does everything the commission recommends, just about everyone in America would be pissed off about something. But you know what, maybe that's the way it should be. And maybe, just maybe, our duly elected representatives in that little corner of what used to be part of Maryland will make those hard decisions, throw political longevity to the wind, and do what we need to so as a nation to survive financially.
We should, as a nation do what we all know we must do to be financially solvent on our own balance sheets. We must spend no more than we earn, and, if we're smart, put something away for the proverbial rainy day. Perhaps of we'd done that over the last few decades, we'd not be in the mess we are today.
PS - I do not necessarily personally like or endorse any of the particular recommendations of the commission. I do support, however, the idea of universal sacrifice, and realize I will end up doing my fair share of it, like it or not.
Christmas Shopping With a Side of Miles
I'm not the only one who thinks the Christmas shopping season starts earlier and earlier each year. The major retailers are getting into the "spririt" in a big way this year, and they're kicking off their year-end profit season even earlier. "Black Friday Preview" sales are all over the place - both in-store and online.
I personally don't really enjoy Christmas shopping, though I love getting gifts... :-) However, online shopping makes it all so much easier and enjoyable. Add to that the rash of free or reduced shipping this tume of year, and it really doesn't seem worth getting off the couch to go shopping - just boot up your favorite browser (yes, I still use Internet Explorer) and enter that credit card number.
For us, though, we look a little bit closer than just who has the current sale. It is said it is better to give than to receive. I can't necessarily argue or validate that, but if you're going to give, you might as well get something too...
Most of my frequent flier miles are with Delta, so before I whip out that credit card, I head to http://www.skymileshopping.com/ (see my previous post about turning food into miles)
By clicking through this site, for many, many shopping sites I can earn anywhere from 1 to more than 10 skymiles for every $1 I spend at participating sites. With hundreds (if not thousands) of $$ to be spent, it's another great way to maximize my Skymiles account balance.
Will I buy anything outside of the skymiles shopping site - sure. But not if I can help it.
I personally don't really enjoy Christmas shopping, though I love getting gifts... :-) However, online shopping makes it all so much easier and enjoyable. Add to that the rash of free or reduced shipping this tume of year, and it really doesn't seem worth getting off the couch to go shopping - just boot up your favorite browser (yes, I still use Internet Explorer) and enter that credit card number.
For us, though, we look a little bit closer than just who has the current sale. It is said it is better to give than to receive. I can't necessarily argue or validate that, but if you're going to give, you might as well get something too...
Most of my frequent flier miles are with Delta, so before I whip out that credit card, I head to http://www.skymileshopping.com/ (see my previous post about turning food into miles)
By clicking through this site, for many, many shopping sites I can earn anywhere from 1 to more than 10 skymiles for every $1 I spend at participating sites. With hundreds (if not thousands) of $$ to be spent, it's another great way to maximize my Skymiles account balance.
Will I buy anything outside of the skymiles shopping site - sure. But not if I can help it.
Saturday, November 13, 2010
What Are The Public Schools Teaching Our Kids?
This evening, we were supporting the Georgetown Elementary School PTA by eating dinner at Chic fil A. If we gave them our little tickets, the school gets 15% of the proceeds of our purchase (and the teacher with the most tickets gets a chicken party of some sort).
As we're finishing up with our meal, and while we are battling Finley to keep her out of the overcrowded play area, Cadence says something that shocks us both.
"Today, at school I learned what an 'ass-kick' is."
As you can imagine, Melissa and I were taken a little by surprise. I asked her to repeat the word several times, with the same result of her saying 'ass-kick' several more times.
Finally, Melissa asked her to explain exactly what as 'ass-kick' is, and Cadence started down a complicated and indirect way of explaining the 'axis' of a sphere...
What are the public schools coming to when your kids don't even learn the correct definition of an 'ass-kick.' Going to have to have a talk with her teacher...
As we're finishing up with our meal, and while we are battling Finley to keep her out of the overcrowded play area, Cadence says something that shocks us both.
"Today, at school I learned what an 'ass-kick' is."
As you can imagine, Melissa and I were taken a little by surprise. I asked her to repeat the word several times, with the same result of her saying 'ass-kick' several more times.
Finally, Melissa asked her to explain exactly what as 'ass-kick' is, and Cadence started down a complicated and indirect way of explaining the 'axis' of a sphere...
What are the public schools coming to when your kids don't even learn the correct definition of an 'ass-kick.' Going to have to have a talk with her teacher...
Thursday, November 11, 2010
Short Cycle Dispensing Shaping Up
As previously discussed in my post from October 11th, the pharmacy industry that services patients receiving care in what are termed "Long Term Care Facilities" is about to experience a major shake-up. The Affordable Care Act calls for a very specific change in how pharmacy services are provided to these patients when receiving coverage under Medicare Part D.
The Affordable Care Act (ACA) calls for dispensing of Part D covered medications to residents of these long term care facilities (more commonly known as nursing homes) in 7-day supplies or less, in an attempt to curb costs associated with wasted medications. The was scored in such a way that this particular provision was expected to generate $6 billion in Part D savings within 10 years.
CMS's proposed rule(s) for changes to Medicare Advantage and Medicare Part D plans for the year 2012 is about to be released (though it may have been held up (purposefully???) waiting for the mid-term election to pass), and here's a preview of some of the highlights related to the 7-day-or-less provision:
This is all based on a first read, and is just reflective of a "proposed" rule, which is subject to update and change based upon comments CMS receives. However, there are some interesting thing here.
Brand Only -
Certain parts of the pharmacy industry have been lobbying for a brand-only exclusion, arguing that added costs of dispensing more often would not be offset by cost savings related to waste on less expensive products. The proposed $ cutoff being tossed around was $400. CMS seems to have bitten on this, at least partially, and at least temporarily. However, CMS will require generics later (I guess they are leveraging the no later than January 1, 2012 implementation requirement in the legislation, at least for generics).
Personally, I see it as difficult for pharmacies and nursing facilities to operationalize brand only 7-day-or-less, and would expect at least some just do it for all meds since they have to do it for some. There are likely some, however, who will try to implement 7-day-or-less for just the ~20% of scripts that are currently brand.
New Reporting -
CMS has apparently added a new "reporting requirement" for plan sponsors related to unused medications. This can only be accurately reported by the pharmacies, and for pharmacies to report the amount of unused medications, they have to take it back... And so, CMS has required that pharmacies take unused medications back and report the amounts to the plan sponsors (who will, in turn, report to CMS). The idea is apparently for CMS to measure the amount of waste still in the system, AND to correlate the amount of waste with the types of dispensing techniques that allowed the waste to occur.
This is interesting because they have also inferred that dispensing fees paid to pharmacies (which are most certainly to be renegotiated based upon this change to the industry) can include amounts to pay for processing of returned unused producs (something not common in Part D today, though seems to occur for some state Medicaid programs).
Facility/Pharmacy Choice on Dispensing Technique -
CMS will require the dispensing technique to be consistent within a particular facility (to meet requirement within the legislation's language around uniformity) but will allow the facility and the pharmacy determine the appropriate dispensing technique for each location. The plans will simply have to live with and support whatever technique is in place for the facility in which their member resides.
There also appears to be a requirement placed upon plan sponsors to ensure that pharmacies are being uniform within each facility they service, which is new as well. I hear audit bells...
Dispensing Technique Reported on Each Claim -
I read that CMS will require Part D sponsors to report, at a claim level, the dispensing technique used for each claim. This can only be reported by the pharmacy, and can only efficiently be accomplished using a field on the claim transaction. The National Council on Prescription Drug Programs (NCPDP) has been working on an update to the codes available to accomplish this. (see my previous post about NCPDP and the influence it has in the pharmacy industry)
My question is where this will be reported on the Prescription Drug Record (PDE) submitted by plans to CMS. I don't believe a field exists today, and so the PDE record layout (which is changing from 2010 to 2011) may need to be updated (again) in order to accomodate this.
Copayment Logic Variability -
An interesting and dissapointing fact is that CMS did not mandate a logic for how to handle copayments. This lack of direction may lead to confusion in the industry, as plan sponsors appear to be able to choose first fill, last fill, or pro-rate. I'm not sure, at this point, how pharmacies will know if a copayment has been pro-rated or not.
Automated Remote Dispensing -
CMS all but endorsed automated remote dispensing (currently offered by technology companies like Talyst) as the most efficient dispensing technique in reducing waste in LTC pharmacy services. This may offer a big opportunity for companies offering this technology, as the current ROI models have really been focused on the Medicare Part A pharmacy segment. This change, in total, offers remote dispensing technology providers a new market of buyers.
Also of note is the allowance that plans can negotiate different dispensing fees for different dispensing techniques. This further strenthens the opportunity for these technology suppliers, as pharmacies may be offered higher dispensing fees from plans if they adopt these technologies. Nothing like a regulatory boost to get your business going.
All in all, I'm still not convinced that the waste budgeted to be saved by this move will be found under the conditions set forth in the proposed rule. But, it sure will keep the software programmers (and technology suppliers) busy for the next 12 months as the industry grapples with how to be compliant with this new requirement, and how to make it a profitable change.
***
UPDATE 12/11 - Follow-up Post
The Affordable Care Act (ACA) calls for dispensing of Part D covered medications to residents of these long term care facilities (more commonly known as nursing homes) in 7-day supplies or less, in an attempt to curb costs associated with wasted medications. The was scored in such a way that this particular provision was expected to generate $6 billion in Part D savings within 10 years.
CMS's proposed rule(s) for changes to Medicare Advantage and Medicare Part D plans for the year 2012 is about to be released (though it may have been held up (purposefully???) waiting for the mid-term election to pass), and here's a preview of some of the highlights related to the 7-day-or-less provision:
- The 7-day-or-less requirement will only apply to Brand Name medications, though Generics are encouraged to be included as well - and CMS indicates they will require Generics at another (future) time
- Products for acute care and those that are "difficult to dispense in 7-day-or-less supplies" are excluded from the requirement (think antibiotics and eye-drops and inhalers)
- CMS will require reporting from plan sponsors (and thus plan sponsors will require reporting from pharmacies servicing LTC facilities) that quantifies "wasted" products. The rule also requires LTC facilities to return unused medications to the pharmacy for accounting for this purpose (new requirement)
- Part D plan sponsors will basically be required to support all iterations of different 7-day-or-less dispensing techniques, but techniques must be uniform within each facility
- Dispensing methodology must be reported for each LTC pharmacy claim (likely through PDE reporting)
- Copayments will be allowed to be applied on the first transaction of a month, last transaction of a month, or be prorated by days supply, in most cases (pro-rated not allowed on Low Income beneficiaries)
- CMS appears to endorse automated remote dispensing as the most efficient and waste-reducing dispensing technique
- CMS seems to endorse (or at least allow) Plan sponsors negotiating different fees to be paid for transactions dependent upon the dispensing technique used
This is all based on a first read, and is just reflective of a "proposed" rule, which is subject to update and change based upon comments CMS receives. However, there are some interesting thing here.
Brand Only -
Certain parts of the pharmacy industry have been lobbying for a brand-only exclusion, arguing that added costs of dispensing more often would not be offset by cost savings related to waste on less expensive products. The proposed $ cutoff being tossed around was $400. CMS seems to have bitten on this, at least partially, and at least temporarily. However, CMS will require generics later (I guess they are leveraging the no later than January 1, 2012 implementation requirement in the legislation, at least for generics).
Personally, I see it as difficult for pharmacies and nursing facilities to operationalize brand only 7-day-or-less, and would expect at least some just do it for all meds since they have to do it for some. There are likely some, however, who will try to implement 7-day-or-less for just the ~20% of scripts that are currently brand.
New Reporting -
CMS has apparently added a new "reporting requirement" for plan sponsors related to unused medications. This can only be accurately reported by the pharmacies, and for pharmacies to report the amount of unused medications, they have to take it back... And so, CMS has required that pharmacies take unused medications back and report the amounts to the plan sponsors (who will, in turn, report to CMS). The idea is apparently for CMS to measure the amount of waste still in the system, AND to correlate the amount of waste with the types of dispensing techniques that allowed the waste to occur.
This is interesting because they have also inferred that dispensing fees paid to pharmacies (which are most certainly to be renegotiated based upon this change to the industry) can include amounts to pay for processing of returned unused producs (something not common in Part D today, though seems to occur for some state Medicaid programs).
Facility/Pharmacy Choice on Dispensing Technique -
CMS will require the dispensing technique to be consistent within a particular facility (to meet requirement within the legislation's language around uniformity) but will allow the facility and the pharmacy determine the appropriate dispensing technique for each location. The plans will simply have to live with and support whatever technique is in place for the facility in which their member resides.
There also appears to be a requirement placed upon plan sponsors to ensure that pharmacies are being uniform within each facility they service, which is new as well. I hear audit bells...
Dispensing Technique Reported on Each Claim -
I read that CMS will require Part D sponsors to report, at a claim level, the dispensing technique used for each claim. This can only be reported by the pharmacy, and can only efficiently be accomplished using a field on the claim transaction. The National Council on Prescription Drug Programs (NCPDP) has been working on an update to the codes available to accomplish this. (see my previous post about NCPDP and the influence it has in the pharmacy industry)
My question is where this will be reported on the Prescription Drug Record (PDE) submitted by plans to CMS. I don't believe a field exists today, and so the PDE record layout (which is changing from 2010 to 2011) may need to be updated (again) in order to accomodate this.
Copayment Logic Variability -
An interesting and dissapointing fact is that CMS did not mandate a logic for how to handle copayments. This lack of direction may lead to confusion in the industry, as plan sponsors appear to be able to choose first fill, last fill, or pro-rate. I'm not sure, at this point, how pharmacies will know if a copayment has been pro-rated or not.
Automated Remote Dispensing -
CMS all but endorsed automated remote dispensing (currently offered by technology companies like Talyst) as the most efficient dispensing technique in reducing waste in LTC pharmacy services. This may offer a big opportunity for companies offering this technology, as the current ROI models have really been focused on the Medicare Part A pharmacy segment. This change, in total, offers remote dispensing technology providers a new market of buyers.
Also of note is the allowance that plans can negotiate different dispensing fees for different dispensing techniques. This further strenthens the opportunity for these technology suppliers, as pharmacies may be offered higher dispensing fees from plans if they adopt these technologies. Nothing like a regulatory boost to get your business going.
All in all, I'm still not convinced that the waste budgeted to be saved by this move will be found under the conditions set forth in the proposed rule. But, it sure will keep the software programmers (and technology suppliers) busy for the next 12 months as the industry grapples with how to be compliant with this new requirement, and how to make it a profitable change.
***
UPDATE 12/11 - Follow-up Post
Wednesday, November 10, 2010
Veterans Day
Never Forget
Cool Travels for a Geocoin
I've previously posted about geocaching. If you've never heard of it, look at my previous post, or watch the video here.
To demonstrate something cool about geocaching, here is the path that a Geocoin (with a unique code on it that geocachers pick up from caches and later leave in other caches) Melissa and I dropped in Dallas TX has taken since it's initial placement in early October of this year:
Yep, not only has our geocoin gone from Dallas to Alaska, but it took a trip through Hong Kong to get there. Having never been to Hong Kong myself, I think this is pretty cool.
The goal of this particular coin is to make it to Hawaii. Interestingly enough, it appears the coin got pretty close (not sure on the flight path obviously) but didn't quite make it yet. Some coins and other similar geocaching items (like travel bugs) take years to make it to their destination, or never make it at all. The fact that our coin has traveled more then 13,000 miles since we dropped in 30 days ago is amazing to me.
I think I'm going to go order some more geocoins. This could be fun!
To demonstrate something cool about geocaching, here is the path that a Geocoin (with a unique code on it that geocachers pick up from caches and later leave in other caches) Melissa and I dropped in Dallas TX has taken since it's initial placement in early October of this year:
The goal of this particular coin is to make it to Hawaii. Interestingly enough, it appears the coin got pretty close (not sure on the flight path obviously) but didn't quite make it yet. Some coins and other similar geocaching items (like travel bugs) take years to make it to their destination, or never make it at all. The fact that our coin has traveled more then 13,000 miles since we dropped in 30 days ago is amazing to me.
I think I'm going to go order some more geocoins. This could be fun!
Ducks in 10-Gallon Hats - Fighting Over Our Money
Members of Congress are getting ready to suit up in their chaps, spurs and ten-gallon hats. Oh, and don't forget their bills... duck bills... lame duck bills. We're getting ready to watch a lame-duck Congress, dressed for a show-down at the OK Corral, come back into session for a shoot out - the outcome of which will determine all of our tax bills for the near future.
Unless this current Congress acts, the "Bush Tax Cuts" will expire on December 31, 2010. Democrats are poised to support extending the cuts for those individuals earning less than $200,000 annually and families earning less than $250,000. The Republicans, alternatively, advocate extending the tax cuts permanently and for all tax filers.
Both parties, by advocating extending tax cuts at all, are agreeing that lower tax bills equate to more money in consumer's pockets, leaving more money for other expenditures, thus driving the economy. The argument has been, and will continue to be over the costs and benefits of extending the cuts for higher-income individuals.
Here's a great chart showing the possible tax rate outcomes:
From my perspective, what is at odds is the expected value, to the economy, of putting more money (or said otherwise leaving more money) in the pockets of the country's wealthiest citizens. When taxes are cut for all, obviously the wealthy, like the less wealthy, will spend more as consumers (granted likely on more luxury items) since they have more money in their pockets. But consumer spending is not the only potential impact of lower taxes if extended to wealthier Americans. Americans in top tax brackets also own small businesses - lower taxes can mean more reinvestment in business growth, and thus subsequent job growth. Also, wealthier Americans are more likely to make size able investments to grow their wealth - funds that are valuable capital for companies. Availability of capital is the key to growth, and just like small business owners, the more money a business has, the more they can spend on growing business - growing jobs.
Alternatively, tax cuts cost the federal government revenue. Money that doesn't come in through the treasury can't be spent by the government (if you, for a fleeting moment, forget that our country runs huge budget deficits) and if budgets are balanced, reducing tax revenue must come with equal reductions in spending. It's estimated that the current tax "cuts" (when compared to the alternative rates), if made permanent, would cost the federal government $3.7 TRILLION over 10 years. That's a lot.
When people talk about the "cuts" and extending the "cuts" we have to remember that NOT extending the cuts doesn't mean people keep paying the same tax bills, but in fact, tax bills will INCREASE for Americans. This is an obvious concern for an economy that remains extremely dependent upon consumer spending. If people's wallets get even slimmer through what amounts to tax increases, the economy is further threatened.
Also of note is the amounts of the $3.7 trillion price tag that is attributable to the wealthy versus those who come in in the lower tax brackets. $3 trillion of the cost would come from the people the Democrats want to extend tax cuts for. Only $700 billion comes from the wealthiest Americans.
The best choice on this matter is not clear, and will be fought fiercely in Tombstone D.C.
Here are the basic options:
- Let the tax cuts expire and you threaten the already teetering (though arguably recovering) economy by reducing dollars individuals have available for consumer spending (or heck, to pay their mortgage - let's not forget about the housing market still buried a the bottom of an port-o-potty), and money available for investment or reinvestment in businesses (which drives jobs growth).
- Extend the tax cuts for the majority of Americans (raising taxes on the wealthy) and you cost the federal government $3 trillion over ten years, and only really extend the status quo for those who get the cuts. In this scenario you at least do bring $700 billion into the federal coffers (remarkably close (but still less) to the cost of the last federal stimulus - through spend in a MUCH shorter timeframe - which many argue another stimulus is needed) but federal deficits will continue to rise quickly without any real changes to federal spending.
- Extend the tax cuts for all Americans, which costs about 25% more that just for the non-wealthy, preserving all consumer spending and current investment rates, but costing the federal government the full expense of the reduced revenue.
Extending the tax cuts is not a fix for the economy, but certainly could hurt the economy greatly if nothing is done and they expire completely. Alternatively, extending the tax cuts costs us all trillions more in deficits and debt. The downside of huge debt I'll save for another post...
And so, we're back at the OK Corral. Boehner and Pelosi are taking up their positions, and pointing their pistols at one another. I wonder who has the bigger hat? I just hope neither of them shoots a whole in my wallet...
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