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.
Showing posts with label Politics. Show all posts
Showing posts with label Politics. Show all posts
Sunday, November 14, 2010
Sunday, November 7, 2010
Pelosi & Boehner, Like Peas and Carrots, or Carrots and Peas
Following the changing of the guard in the US House or Representatives on Tuesday November 2, there is little question as to the identity of the next Speaker of the House. John Boehner R-OH has been the House Minority Leader since January 3, 2007, and is expected by most to be selected by Republicans to serve as the next Speaker.
Somewhat surprising is Nancy Pelosi’s decision to run for the position of House Minority Leader following the Democratic rout. It’s not uncommon for Representatives vacating the Speaker’s seat to stay in Congress, but it was somewhat expected that Pelosi would not run for party leadership following such a slaughter during the mid-term elections under her watch.
The reason for Pelosi’s decision is made clear by a couple statements in her letter announcing her run to other Democrats in the House (11/5):
“We have no intention of allowing our great achievements to be rolled back.”
“…driven by the urgency of protecting health care reform, Wall Street reform, and Social Security and Medicare, I have decided to run.”
Pelosi is making it extremely clear what she intends to do if elected to the House Minority Leader post, (which is not a stretch but also not yet a foregone conclusion). Considering the fact many of the Democrats who lost their seats in the House were more moderate, this leaves the more liberal base of the Democratic caucus to stay and fight. Other Democrats in the House will likely easily align with Pelosi philasophically, and will support her strongly.
Republicans have been branded, successfully or not and/or appropriately or not, as the “Party of No.” My crystal ball is showing a clear change in roles within the House – Democrats will be fighting hard, under Pelosi’s leadership, to protect the “gains” of the Democratic party since Obama’s placement at 1600 Pennsylvania Ave. There will be a lot of “No” on changes to be proposed by the new Republican majority.
Republicans making plans for the upcoming 2 years were initially quick to rattle sabers and make zealous and likely overstated comments about intentions or plausible impacts. Even Senate Minority Leader Mitch McConnell got into the act:
"People who supported us - political independents - want it repealed (health care reform bill) and replaced with something else. I think we owe it to them to try." (CBS – Face the Nation 11/7)
But with so much pride and legacy involved from the Democratic side, there is almost no possibility ANY sitting Democrat will go along with a repeal. So, let’s put that one out of our minds and look to more plausible options.
Boehner’s made some more realistic comments in an interview with FOX News on 11/5:
“This health care bill will ruin the best health care system in the world and it will bankrupt our country. … And secondly, let’s not forget, this is also about jobs. And if you look at all of the requirements on employers, you can understand why they’re not hiring new employees, because we’ve raised the cost of employment. … And trust me, I’m going to make sure this health care bill never ever, ever is implemented.”
That sounds like a big promise – but not the one you may have heard before, or the innuendo offered by McConnell. If you notice, Boehner did not use the word “repeal” but instead made reference to “make sure the health care bill never ever, ever is implemented.” See my previous post.
The cooperative spirit is likely not going to grace the Capital building anytime soon, and if Boehner and Pelosi are elected to their respective expected leadership positions, we may just see a simple switcheroo. Boehner will be the one attempting to move forward the business of the American people (or the Republican translation of that business) and Pelosi will be leading the opposition party with questions like “Where are the jobs?” Because the Republicans’ first order of business will be to attempt to change the course of legislation previously passed under the Pelosi-controlled House, Pelosi will not easily or likely cooperate in any fashion with these efforts, out of pride if nothing else.
So, before we had the two chummy pals in a peas and carrots position. Now we’ll have carrots and peas. Same old story, different verse.
Thursday, November 4, 2010
Republicans on Health Care Reform Post Election
Finally, it’s over. The mid-term 2010 election season has finally come to a merciful end. For now, no more radio and TV ads of candidates trying to expose how their opponent is either stupid, crazy, or just a plain @ss-hole.
Now the pundits will begin to theorize on how the now Republican-controlled House will impact things like economic stimulus, job creation, and the well-beloved health care reform bill.
Many Republicans (and I include the Tea-Party as Republicans for purposes here) ran, at least partially, on the platform that they would work to repeal the health care reform law. Even the man who is likely to become Speaker, John Boehner of Ohio (I used to live in that district BTW) made the statement Wed, the day after the election - “We have to do everything we can to try to repeal this bill and replace it with common sense reforms to bring down the cost of health care.”
Just one teensy, tiny problem there… Republicans only control the House, and the Senate remains in Democrat hands. Not to mention that man living in the White House. He might have something to say about it.
So the idea that the health care reform law passed under the Democrat-controlled Congress and White House earlier in 2010 is going to be repealed is unrealistic. If you truly believe it to be possible, tell me how, because I don’t see Democrats in Congress or the White House abandoning their ideas and going along with a repeal, no matter the reasonability or the superiority of any alternative plans offered by Republicans. (which have not been offered yet)
What is much more likely would be Republicans putting healthcare reform on a diet. Another part of the Republican platform is fiscal control. Spend less, tax less, reduce deficits, etc. It is conceivable that Republicans could attempt to alter the course of healthcare reform by treating it like they will likely attempt to treat many spending initiatives – with a scalpel.
What Republicans may do is work to slash the funding necessary to implement many parts of health care reform. The House-version of the next federal budget could include little, if any $ for implementation, while the Senate version might contain more. (donkeys and elephants at their finest) They would have to work it out in conference committee, but the net result would likely be an inability (or reduced ability) at HHS to efficiently implement what the legislature has dictated.
Unfortunately, for stakeholders involved in this mess, while HHS would not have the $ to implement their portions, it’s likely that would not mean the reform measures would be dead. Given HHS’s recent stance about insurance companies, it is likely that HHS, despite limited funding, would still attempt to require compliance with the law (taking action against those who are not compliant with requirements) despite this lack of funding.
The impact of such a scenario playing out is hard to predict. In any event, despite Republican speeches to the contrary, health care reform is likely not to be repealed, and “fixing” it (as best as we can) should be the agenda of the day. Focusing rhetoric on a repeal is only going to hurt Republicans and tax payers in the long run, as it’s not an achievable (though worthy) goal.
Now the pundits will begin to theorize on how the now Republican-controlled House will impact things like economic stimulus, job creation, and the well-beloved health care reform bill.
Many Republicans (and I include the Tea-Party as Republicans for purposes here) ran, at least partially, on the platform that they would work to repeal the health care reform law. Even the man who is likely to become Speaker, John Boehner of Ohio (I used to live in that district BTW) made the statement Wed, the day after the election - “We have to do everything we can to try to repeal this bill and replace it with common sense reforms to bring down the cost of health care.”
Just one teensy, tiny problem there… Republicans only control the House, and the Senate remains in Democrat hands. Not to mention that man living in the White House. He might have something to say about it.
So the idea that the health care reform law passed under the Democrat-controlled Congress and White House earlier in 2010 is going to be repealed is unrealistic. If you truly believe it to be possible, tell me how, because I don’t see Democrats in Congress or the White House abandoning their ideas and going along with a repeal, no matter the reasonability or the superiority of any alternative plans offered by Republicans. (which have not been offered yet)
What is much more likely would be Republicans putting healthcare reform on a diet. Another part of the Republican platform is fiscal control. Spend less, tax less, reduce deficits, etc. It is conceivable that Republicans could attempt to alter the course of healthcare reform by treating it like they will likely attempt to treat many spending initiatives – with a scalpel.
What Republicans may do is work to slash the funding necessary to implement many parts of health care reform. The House-version of the next federal budget could include little, if any $ for implementation, while the Senate version might contain more. (donkeys and elephants at their finest) They would have to work it out in conference committee, but the net result would likely be an inability (or reduced ability) at HHS to efficiently implement what the legislature has dictated.
Unfortunately, for stakeholders involved in this mess, while HHS would not have the $ to implement their portions, it’s likely that would not mean the reform measures would be dead. Given HHS’s recent stance about insurance companies, it is likely that HHS, despite limited funding, would still attempt to require compliance with the law (taking action against those who are not compliant with requirements) despite this lack of funding.
The impact of such a scenario playing out is hard to predict. In any event, despite Republican speeches to the contrary, health care reform is likely not to be repealed, and “fixing” it (as best as we can) should be the agenda of the day. Focusing rhetoric on a repeal is only going to hurt Republicans and tax payers in the long run, as it’s not an achievable (though worthy) goal.
Sunday, October 31, 2010
Is Birth Control Preventive Medicine?
Almost no-one will argue that effective preventive medicine is the future. Preventing a disease is almost always less expensive than treating that disease after a diagnosis.
Less clear is the answer to the question, "What is a disease?"
Seems simple, right? Well, maybe not...
Webster's Dictionary defines the word disease like this - a condition of the living animal or plant body or of one of its parts that impairs normal functioning and is typically manifested by distinguishing signs and symptoms.
With that in mind, let's move to this question, "Is pregnancy a disease?"
Oh... A little harder... Objectively, pregnancy is manifested by distinguished signs and symptoms. Yes, occasionally a man can get himself in some social trouble mistaking some extra pounds for a motherly glow... But, for the most part, it's pretty clear when a woman is expecting - at least after she crosses the 6 month mark or so.
I think the more important point on the definition of a disease is "impairs normal functioning." This is likely even more contentious. Are there things that a person of the female perspective can't (or shouldn't) do while pregnant? Should a woman be considered "impaired" while pregnant. Now, my wife was certainly a little less emotionally "stable" while pregnant (and right after birth...) but I wouldn't agree that she was "impaired." About the only "normal" thing impaired during pregnancy might be menstruation.
So, according to my incredibly skilled analysis above, preventing pregnancy could not be claimed to be preventive medicine, as I don't believe we can classify pregnancy as a disease. A physical (and maybe mental) condition, yes. But, not a disease.
But, pregnancy IS expensive. Now, if you're willing to boil water, clench your teeth on a stick, and do it the old fashioned way, maybe not. But, to do it according to current American standards, it is.
So, the point of this post... Should pregnancy prevention be considered preventive medicine? A panel will begin meeting in November to decide that, among other questions. If birth control is found to be preventive medicine, it could come to pass that insurance companies will be required to provide birth control to women at no cost.
Dr. David Grimes, an obstetrician-gynecologist who teaches medicine at the University of North Carolina makes this argument:
"There is clear and incontrovertible evidence that family planning saves lives and improves health. Contraception rivals immunization in dollars saved for every dollar invested. Spacing out children allows for optimal pregnancies and optimal child rearing. Contraception is a prototype of preventive medicine."
To me, from a cost perspective, this argument is pretty sound. Save lives. Optimal pregnancies. Good return on investment. Sounds good.
Others are not so convinced, and it is rooted in the disapproval of birth control in general.
"We don't consider it to be health care, but a lifestyle choice," says John Haas, president of the National Catholic Bioethics Center. "We think there are other ways to avoid having children than by ingesting chemicals paid for by health insurance." Not a surprising stance from the Catholic church.
Objectively, and if you ignore the argument about the morality of birth control, preventing unplanned or unwanted pregnancy could be a good thing financially for both the health care system and individuals who are impacted by lifelong costs (that they may have otherwise not incurred). About the only group negatively impacted could be hospitals. If estimations that about half of all pregnancies are unplanned, and we assume that half of those (25% of all pregnancies) would be delayed and the other half would have been prevented all together, then revenue for hospitals could be reduced and postponed if birth control was utilized at near-universal levels.
So, there are really unarguable financial benefits to universal availability of birth control (especially those that are more effective, like implants and intrauterine devices) and so the support for coverage really comes down to your position regarding the morality of birth control.
My crystal ball tells me we'll see universally covered (at little to no patient cost) birth control.
Less clear is the answer to the question, "What is a disease?"
Seems simple, right? Well, maybe not...
Webster's Dictionary defines the word disease like this - a condition of the living animal or plant body or of one of its parts that impairs normal functioning and is typically manifested by distinguishing signs and symptoms.
With that in mind, let's move to this question, "Is pregnancy a disease?"
Oh... A little harder... Objectively, pregnancy is manifested by distinguished signs and symptoms. Yes, occasionally a man can get himself in some social trouble mistaking some extra pounds for a motherly glow... But, for the most part, it's pretty clear when a woman is expecting - at least after she crosses the 6 month mark or so.
I think the more important point on the definition of a disease is "impairs normal functioning." This is likely even more contentious. Are there things that a person of the female perspective can't (or shouldn't) do while pregnant? Should a woman be considered "impaired" while pregnant. Now, my wife was certainly a little less emotionally "stable" while pregnant (and right after birth...) but I wouldn't agree that she was "impaired." About the only "normal" thing impaired during pregnancy might be menstruation.
So, according to my incredibly skilled analysis above, preventing pregnancy could not be claimed to be preventive medicine, as I don't believe we can classify pregnancy as a disease. A physical (and maybe mental) condition, yes. But, not a disease.
But, pregnancy IS expensive. Now, if you're willing to boil water, clench your teeth on a stick, and do it the old fashioned way, maybe not. But, to do it according to current American standards, it is.
So, the point of this post... Should pregnancy prevention be considered preventive medicine? A panel will begin meeting in November to decide that, among other questions. If birth control is found to be preventive medicine, it could come to pass that insurance companies will be required to provide birth control to women at no cost.
Dr. David Grimes, an obstetrician-gynecologist who teaches medicine at the University of North Carolina makes this argument:
"There is clear and incontrovertible evidence that family planning saves lives and improves health. Contraception rivals immunization in dollars saved for every dollar invested. Spacing out children allows for optimal pregnancies and optimal child rearing. Contraception is a prototype of preventive medicine."
To me, from a cost perspective, this argument is pretty sound. Save lives. Optimal pregnancies. Good return on investment. Sounds good.
Others are not so convinced, and it is rooted in the disapproval of birth control in general.
"We don't consider it to be health care, but a lifestyle choice," says John Haas, president of the National Catholic Bioethics Center. "We think there are other ways to avoid having children than by ingesting chemicals paid for by health insurance." Not a surprising stance from the Catholic church.
Objectively, and if you ignore the argument about the morality of birth control, preventing unplanned or unwanted pregnancy could be a good thing financially for both the health care system and individuals who are impacted by lifelong costs (that they may have otherwise not incurred). About the only group negatively impacted could be hospitals. If estimations that about half of all pregnancies are unplanned, and we assume that half of those (25% of all pregnancies) would be delayed and the other half would have been prevented all together, then revenue for hospitals could be reduced and postponed if birth control was utilized at near-universal levels.
So, there are really unarguable financial benefits to universal availability of birth control (especially those that are more effective, like implants and intrauterine devices) and so the support for coverage really comes down to your position regarding the morality of birth control.
My crystal ball tells me we'll see universally covered (at little to no patient cost) birth control.
Wednesday, October 27, 2010
Healthcare Reform - A Gloomy View
Many things have been said and written, both positive and negative, about the Affordable Care Act(ACA) (if you have some spare time, you can click here to read it in full text). Many continue to claim it's virtues, but Senators Tom Coburn (R-OK) and John Barrasso (R-WY) have a different opinion. Their report, Grim Diagnosis, lays out 9 areas of concern (though only 7 are unique in my view) where the Senators feel the ACA is harmful both from both financial and job perspectives.
1 Jobs -
The Senators first point to a CBO analysis that says that expanding Medicaid coverage and the phasing out of subsidies on expensive insurance will diminish some individuals' incentives to work. On the one hand, it is argued, an increased availability of Medicaid will lead to some workers reducing or eliminating the hours they currently work. For the subsidies, the Senators connect the reduction in subsidies to an effective increase in marginal tax rates, which reduces the incentive for a worker to work more hours.
The report goes on to look at the new "excise tax", estimated to bring $20B, imposed on manufacturers of medical devices. The tax is based on gross sales by the manufacturer (2.3% to be exact). While margins will vary from company to company, it is not unreasonable to think that companies currently experiencing a 2.3% net margin (or less) would now be in a bad place. In order to maintain profitability, some may consider off-shoring or reduced investment in innovation, and also may not grow at the pace (growth = jobs) previously expected.
2 - Penalize Low Income Workers
While many are aware of the relatively unpopular "individual mandate" (the part that effectively allows insurance companies to eliminate coverage denials for pre-existing conditions, among other things), there is also an effective "employer mandate" of sorts embedded in the new law. Beginning in 2014, businesses with more than 50 employees will be "fined" $2,000 per employee if they choose not to provide approved insurance for their employees. So, an employer of 51 employees would pay $102,000 in fines annually for not providing coverage (or for providing coverage that for some reason does not get "approved" status). Alternatively, the employer could provide coverage, which would likely cost much more. At best, this would give a disincentive to businesses around 50 employees from growing (preventing new job creation). At worst, employers could be in a position to reconsider the employment of low-wage employees, finding that the additional cost of employing them no longer is financially beneficial due to increased cost. Somewhere in the middle is the idea that employees will be kept on, but wages will drop to compensate for the added costs. In any case, the majority of impacted workers will likely be low-wage, less-skilled employees, likely in the retail or food service industries.
3 - Rising Deficits
The Senators point out an interesting point about the way the Congressional Budget Office (CBO) reviews legislation for cost. The CBO looks at the immediate 10 year budget window and determines net cost. The ACA begins to "generate revenue" (taxes) year one, but does not implement many costs until many major insurance market changes take effect, in 2014. This front-load of revenue, while delaying the implementation of costs, skews the review of the 10 year window. So, while the bill was scored as a savings in the first 10 years, it is likely that costs will catch up with the taxes quickly, then adding to the deficit.
4 - Challenging Increases to State-Level Costs
Anyone who followed the health care debate remembers the Nebraska provision called the "Cornshucker Kickback." Under the agreement, which was later abandoned and removed from the law, the federal government was to fully absorb and fund the estimated $100 million increase in Medicaid costs (though actual costs will likely be much more in Nebraska). All states will experience in costs, and this is expected to further challenge cash-strapped treasuries. With limited options for deal with state-level budget deficits, we're likely to see increases in tax burden or decrease in state spending to compensate.
5 - Increased ER Waits and Costs
Common ground covered by advocates of the health care reform bill was the idea that unfunded health care utilization, by those without health care coverage, increases the bill for all of those who are covered. Family USA estimated the cost of unfunded care at more than $1000 annually in premium cost for each insured family. Much of this unfunded care is thought to be in ER visits, as hospitals are federally required to provide basic care, even if they know they will not be paid.
The health care overhaul will not eliminate ER wait times or costs. In fact, because of network restrictions within Medicaid programs, many Medicaid patients have issue quickly getting access to their primary care physician, driving them to visit ERs. (not to mention limited out of pocket costs to help deter ER utilization) Increasing the Medicaid roles will only exacerbate this wait time issue.
Also, increasing coverage to 30 million additional people (many through state Medicaid programs) will no decrease costs. The unfunded ER costs will now be covered under Medicaid (no real change expected to the utilization) and some people who DO avoid using the health care system due to their inability to pay will no longer have that barrier. All in all, increased cost AND increased waits at emergency rooms.
6 - CLASS
Admittedly, before I read the Grim Diagnosis report, I was not aware of the inclusion of the "Community Living Assistance Services and Supports" program (CLASS). This is will basically be federally guaranteed Long Term Care insurance, designed to help people stay in their homes longer, by paying for assistance with activities of daily living, like bathing, eating or dressing. Premiums would be based on the age of a participant when they enter the program, and would remain relatively fixed as long as they remain in the program.
The CLASS program sounds good overall, but unfortunately is a potentially unfunded liability, much like Social Security... If managed poorly, the program could quickly be underwater, with no one left to bail it out but the American taxpayer.
Also, CLASS was an additional budget trick. Participants must be enrolled in the program for 5 years before benefits begin to be paid out. So, for the 10 year budget period reviewed by the CBO, there was 10 years of premiums to be considered, but only 5 years of cost. Sound familiar?
7 - Medicare Remains Underfunded
Medicare's unfunded liabilities are in the trillions of dollars. Unfortunately, the health care reform bill did little improve this.
The report goes on to talk about impacts to young workers entering the workforce, and higher expenses for employers, which are both extension of points made before.
Overall, the report focuses on the negatives (or potential negatives) that are outputs of the health care reform, and spends no time looking at potential positives. Even so, these are mostly valid points and perspectives that raise serious questions about the viability of the future of the health care system in America - specifically the purpose of the bill to begin with.
1 Jobs -
The Senators first point to a CBO analysis that says that expanding Medicaid coverage and the phasing out of subsidies on expensive insurance will diminish some individuals' incentives to work. On the one hand, it is argued, an increased availability of Medicaid will lead to some workers reducing or eliminating the hours they currently work. For the subsidies, the Senators connect the reduction in subsidies to an effective increase in marginal tax rates, which reduces the incentive for a worker to work more hours.
The report goes on to look at the new "excise tax", estimated to bring $20B, imposed on manufacturers of medical devices. The tax is based on gross sales by the manufacturer (2.3% to be exact). While margins will vary from company to company, it is not unreasonable to think that companies currently experiencing a 2.3% net margin (or less) would now be in a bad place. In order to maintain profitability, some may consider off-shoring or reduced investment in innovation, and also may not grow at the pace (growth = jobs) previously expected.
2 - Penalize Low Income Workers
While many are aware of the relatively unpopular "individual mandate" (the part that effectively allows insurance companies to eliminate coverage denials for pre-existing conditions, among other things), there is also an effective "employer mandate" of sorts embedded in the new law. Beginning in 2014, businesses with more than 50 employees will be "fined" $2,000 per employee if they choose not to provide approved insurance for their employees. So, an employer of 51 employees would pay $102,000 in fines annually for not providing coverage (or for providing coverage that for some reason does not get "approved" status). Alternatively, the employer could provide coverage, which would likely cost much more. At best, this would give a disincentive to businesses around 50 employees from growing (preventing new job creation). At worst, employers could be in a position to reconsider the employment of low-wage employees, finding that the additional cost of employing them no longer is financially beneficial due to increased cost. Somewhere in the middle is the idea that employees will be kept on, but wages will drop to compensate for the added costs. In any case, the majority of impacted workers will likely be low-wage, less-skilled employees, likely in the retail or food service industries.
3 - Rising Deficits
The Senators point out an interesting point about the way the Congressional Budget Office (CBO) reviews legislation for cost. The CBO looks at the immediate 10 year budget window and determines net cost. The ACA begins to "generate revenue" (taxes) year one, but does not implement many costs until many major insurance market changes take effect, in 2014. This front-load of revenue, while delaying the implementation of costs, skews the review of the 10 year window. So, while the bill was scored as a savings in the first 10 years, it is likely that costs will catch up with the taxes quickly, then adding to the deficit.
4 - Challenging Increases to State-Level Costs
Anyone who followed the health care debate remembers the Nebraska provision called the "Cornshucker Kickback." Under the agreement, which was later abandoned and removed from the law, the federal government was to fully absorb and fund the estimated $100 million increase in Medicaid costs (though actual costs will likely be much more in Nebraska). All states will experience in costs, and this is expected to further challenge cash-strapped treasuries. With limited options for deal with state-level budget deficits, we're likely to see increases in tax burden or decrease in state spending to compensate.
5 - Increased ER Waits and Costs
Common ground covered by advocates of the health care reform bill was the idea that unfunded health care utilization, by those without health care coverage, increases the bill for all of those who are covered. Family USA estimated the cost of unfunded care at more than $1000 annually in premium cost for each insured family. Much of this unfunded care is thought to be in ER visits, as hospitals are federally required to provide basic care, even if they know they will not be paid.
The health care overhaul will not eliminate ER wait times or costs. In fact, because of network restrictions within Medicaid programs, many Medicaid patients have issue quickly getting access to their primary care physician, driving them to visit ERs. (not to mention limited out of pocket costs to help deter ER utilization) Increasing the Medicaid roles will only exacerbate this wait time issue.
Also, increasing coverage to 30 million additional people (many through state Medicaid programs) will no decrease costs. The unfunded ER costs will now be covered under Medicaid (no real change expected to the utilization) and some people who DO avoid using the health care system due to their inability to pay will no longer have that barrier. All in all, increased cost AND increased waits at emergency rooms.
6 - CLASS
Admittedly, before I read the Grim Diagnosis report, I was not aware of the inclusion of the "Community Living Assistance Services and Supports" program (CLASS). This is will basically be federally guaranteed Long Term Care insurance, designed to help people stay in their homes longer, by paying for assistance with activities of daily living, like bathing, eating or dressing. Premiums would be based on the age of a participant when they enter the program, and would remain relatively fixed as long as they remain in the program.
The CLASS program sounds good overall, but unfortunately is a potentially unfunded liability, much like Social Security... If managed poorly, the program could quickly be underwater, with no one left to bail it out but the American taxpayer.
Also, CLASS was an additional budget trick. Participants must be enrolled in the program for 5 years before benefits begin to be paid out. So, for the 10 year budget period reviewed by the CBO, there was 10 years of premiums to be considered, but only 5 years of cost. Sound familiar?
7 - Medicare Remains Underfunded
Medicare's unfunded liabilities are in the trillions of dollars. Unfortunately, the health care reform bill did little improve this.
The report goes on to talk about impacts to young workers entering the workforce, and higher expenses for employers, which are both extension of points made before.
Overall, the report focuses on the negatives (or potential negatives) that are outputs of the health care reform, and spends no time looking at potential positives. Even so, these are mostly valid points and perspectives that raise serious questions about the viability of the future of the health care system in America - specifically the purpose of the bill to begin with.
Thursday, October 21, 2010
Medical "Lost Their Minds" Ratios
A majorly contentious portion of the "health care reform" debate (which was more of a debate about health insurance, as little about "health care" was really reformed) was the minimum Medical Loss Ratios(MLRs) that would be applied to commercial health insurance coverage. MLR is basically the % of the premium $ collected by an insurer (that chunk of change taken out of your paycheck PLUS the amount paid by your employer, if you're employer covers you) that ends up paid out by the insurer to pay for medical claims.
For the individual and small-group markets, the minimum MLR contained in the Affordable Care Act is 80%. That means, for every $1 paid in premium, $0.80 must be paid out for claims or "activities that improve health care quality." Said another way, insurance companies are limited, for this market, to spending/keeping $0.20 per $1 collected in premiums for everything else, like administrative expenses (rent, payroll, travel, etc.) and profit. In the large-group market, the minimum MLR is 85%. A carrier who exceeds the MLR for a line of business must "pay-down" the difference in the form of a rebate to policyholders.
The intention is obviously to limit the profits of insurance companies, who were generally vilified during the debate. But let's take a look at some big round numbers to see how this might play out.
United Health Group (UNH) had premium revenue of approx $79B in 2009. They had approx $65B in "medical costs", which, using simple math, gives them a MLR of ~82%. This MLR calculation doesn't take into consideration the new "activities that improve health care quality" allowance, so, if restated in "new" math, expect that MLR to be higher.
UNH also has a mix of small and large group clients, and the MLR on their different lines of business would be done separately. Blended, expect their MLR "requirement" to fall somewhere in the 83-84% range. I don't think they'll have any trouble meeting that.
So, for a mamoth of an insurer like UNH, who is running relatively efficiently, MLR reform doesn't seem to present much of an issue. But the American economy's lifeblood is small business - and in health insurance, these would not be mom and pop insurance stands, but smaller, regional competitors of companies like UNH, who don't have some of the efficiencies and scale of UNH, who employes somewhere around 80,000 employees.
These smaller insurers will have a tougher time meeting the MLR requirements. Many may have MLRs much lower than UNH using today's math, and will be scrambling to come into compliance. They'll likely do it in a few different ways.
First, they will get "creative" on what they will count in the quality bucket. Don't worry, the regulators and auditors are already smaking their lips... That won't last long for those who try it (and are not successful). Next, they'll cut their expenses, likely drastically. More lost jobs - lovely - and they will start to lose the ability to provide service (call centers) for their membership, who will begin to defect. Finally, they'll look for a buyer. Someone like, you guessed it, UNH.
In the end, MLR minimums will simply drive additional consolidation in the marketplace, leaving fewer, larger insurers. Of course, without the ability to pile up cash from profits (remember profits are limited here), this will only last a short while. Big companies will run out of money to buy little companies (and won't be able to pile up cash quickly to replenish their coffers) and then the little guys who are left will simply close up shop. Imagine a news story telling you that your health insurance company simply shut down...
In a matter of a few years we could have significantly less health insurers, all of which (remaining) will be attempting to find new ways to make a larger profit, which means lower levels of personal service (lay off workers to increase the portion of premiums that end up on the bottom line).
And all of this does almost nothing to actually impact the true driver of health care cost growth - utilization of new, more expensive treatment options, with little to no evidence of superiority over existing treatment options. So, we've reformed health insurance to something likely less desirable than it is today, and still will be experiencing huge increases in cost, because that premium (the ever growing paycheck whitholding) is and always has been tied to the costs of the medical claims coming in, which will keep on coming.
For the individual and small-group markets, the minimum MLR contained in the Affordable Care Act is 80%. That means, for every $1 paid in premium, $0.80 must be paid out for claims or "activities that improve health care quality." Said another way, insurance companies are limited, for this market, to spending/keeping $0.20 per $1 collected in premiums for everything else, like administrative expenses (rent, payroll, travel, etc.) and profit. In the large-group market, the minimum MLR is 85%. A carrier who exceeds the MLR for a line of business must "pay-down" the difference in the form of a rebate to policyholders.
The intention is obviously to limit the profits of insurance companies, who were generally vilified during the debate. But let's take a look at some big round numbers to see how this might play out.
United Health Group (UNH) had premium revenue of approx $79B in 2009. They had approx $65B in "medical costs", which, using simple math, gives them a MLR of ~82%. This MLR calculation doesn't take into consideration the new "activities that improve health care quality" allowance, so, if restated in "new" math, expect that MLR to be higher.
UNH also has a mix of small and large group clients, and the MLR on their different lines of business would be done separately. Blended, expect their MLR "requirement" to fall somewhere in the 83-84% range. I don't think they'll have any trouble meeting that.
So, for a mamoth of an insurer like UNH, who is running relatively efficiently, MLR reform doesn't seem to present much of an issue. But the American economy's lifeblood is small business - and in health insurance, these would not be mom and pop insurance stands, but smaller, regional competitors of companies like UNH, who don't have some of the efficiencies and scale of UNH, who employes somewhere around 80,000 employees.
These smaller insurers will have a tougher time meeting the MLR requirements. Many may have MLRs much lower than UNH using today's math, and will be scrambling to come into compliance. They'll likely do it in a few different ways.
First, they will get "creative" on what they will count in the quality bucket. Don't worry, the regulators and auditors are already smaking their lips... That won't last long for those who try it (and are not successful). Next, they'll cut their expenses, likely drastically. More lost jobs - lovely - and they will start to lose the ability to provide service (call centers) for their membership, who will begin to defect. Finally, they'll look for a buyer. Someone like, you guessed it, UNH.
In the end, MLR minimums will simply drive additional consolidation in the marketplace, leaving fewer, larger insurers. Of course, without the ability to pile up cash from profits (remember profits are limited here), this will only last a short while. Big companies will run out of money to buy little companies (and won't be able to pile up cash quickly to replenish their coffers) and then the little guys who are left will simply close up shop. Imagine a news story telling you that your health insurance company simply shut down...
In a matter of a few years we could have significantly less health insurers, all of which (remaining) will be attempting to find new ways to make a larger profit, which means lower levels of personal service (lay off workers to increase the portion of premiums that end up on the bottom line).
And all of this does almost nothing to actually impact the true driver of health care cost growth - utilization of new, more expensive treatment options, with little to no evidence of superiority over existing treatment options. So, we've reformed health insurance to something likely less desirable than it is today, and still will be experiencing huge increases in cost, because that premium (the ever growing paycheck whitholding) is and always has been tied to the costs of the medical claims coming in, which will keep on coming.
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