Lane 3

U.S. Senator Tom Coburn, M.D. on Health Care Reform

Watching this won’t take but four minutes from your day. Senator Coburn has a great grasp on the issue of health care reform.

The Real Motive for the Public Option?

Do you get a sense that President Obama and the Democrats are truly desperate to produce a plan that leads to single-payer? On August 20th, Speaker Pelosi said, “There’s no way I can pass a bill in the House of Representatives without a public option.” Does this remind you of California on May 19th?

Take the time to read and comprehend Jeffrey Rogers Hummel’s article, Why Default on U.S. Treasuries is Likely and you will come to understand the motivation that will drive politics over the next several years. Hummel describes two firewalls separating us from default:

• The first is the trust funds of Medicare and Social Security. Tax income into these two programs is expected to be outstripped by claims in 2017 and 2037, respectfully. Once this happens the Fed will have to dip into general revenue – thus depriving politicians the largess they are famous for tossing about. And, if investors in U.S. Treasuries sense weakness they will demand a risk premium. If this happens Hummel then considers a collapse similar to that of the Soviet Union a possible scenario.




• The second firewall involves hyperinflation and is a resulting choice between preserving the value of the dollar and defaulting on the debt. Hummel predicts that the Feds would choose to save the value of the dollar and would therefore default.

Why is a single-payer plan sacrosanct to liberals? Single-payer provides a form of dollar cost averaging whereby the unprofitable Medicare / Medicaid plans absorb the profitable private sector plans thus affording the financial cushion the Feds so desperately need.

Hummel concludes with:

What will ultimately kill the welfare State is that its centerpiece, government-provided social insurance, is simultaneously above reproach and beyond salvation. Fully-funded systems could have survived, but politicians had little incentive to enact them, and much less incentive to impose the huge costs of converting from pay-as-you-go. Whether this inevitable collapse of social democracies will ultimately be a good or bad thing depends on what replaces them.

Who holds the almost $12 trillion in US debt? $4.3 trillion is held by the US government. $4 trillion is held by the public (individuals, corporations, state or local governments) and $3.3 trillion is held by foreigners.

So, in the end, may the desperate motivation to enact ObamaCare really be to placate these debt holders? Said another way, is providing coverage to 47 million uninsured the goal or the excuse? What do you think?

“Death Panels” in Private / Public Plans?

A friend recently tweeted: “Death panels? Cigna has one “If the appeal involves..experimental treatment, a committee will conduct this appeal review” http://is.gd/2mSYI”

In an interview with David Lionhardt of the New York Times, President Obama said the following with regard to end-of-life care:

“So that’s where I think you just get into some very difficult moral issues. But that’s also a huge driver of cost, right? I mean, the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here. Well, I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place.”

So, when President Obama says these words one could reasonably conclude that he is speaking of a new system of limiting care because Medicare and Medicaid already have an exclusion for “experimental and investigational” services (Section 411.15(o)).

What might such a system look like? We only have to look as far as the UK for the answer. Compare President Obama’s comments to the words found on the web page of National Institute of Health and Clinical Excellence (NICE), the rationing board for the NHS:

With the rapid advances in modern medicine, most people accept that no publicly funded healthcare system, including the NHS, can possibly pay for every new medical treatment which becomes available. The enormous costs involved mean that choices have to be made.

The NHS employ a tool called a QALY (quality-adjusted life years measurement) to help decide whether a person is deserving of a particular medical treatment. So, what we really are discussing is whether or not, as a society, we want ObamaCare to include a QALY-type system of limiting treatment and services to our citizens.

A person may look at a committee at a private insurer deciding on experimental or investigational medical treatments and equate that to a QALY system under ObamaCare but there are differences.

• Under a QALY system we are talking about denying to people proven treatments (read not experimental or investigational). Contrast that to a denial of payment for an experimental or investigational treatment. These would include procedures that have not been approved by the Food and Drug Administration or treatments that have not been proved effective in clinical studies.




• Frequency. The vast majority of people covered by private insurance are under age 65 (read much younger than today’s life expectancy of 77.9 years). Whereas, people on Medicare are quickly approaching or even exceeding 77.9. The introduction of a QALY-type system will, by its very nature, impact more senior citizens than the under age 65 crowd currently covered by private insurance.




• You can sue a private insurance company! When is the last time you heard of a successful suit against the Federal government? Private insurers have an incentive to make their product attractive to the buying public. A government-run, single-payer plan has no such worries.




• Look at what has happened in the UK. Britons were promised a plan of benefits. That became expensive and rationing ensued. People demanded that they have access to these denied treatments. So, now in the UK you get to pay the taxes for your “free” government insurance – and, if you want it (and can afford it) you can “top-up” and the government will allow you to pay for that life saving drug out of your own pocket!

Conclusion

A friend wrote, “…being skeptical of a public plan is not the same as being against health-care reform.” There are a number of things that can be done to make coverage more affordable and accessible. A QALY-type system of rationing care would come as a rude shock to Americans. We are a society of achievers who possess a “can-do” attitude. To throw up our hands and take an easy approach of just letting the government handle things is a mistake.

So, now that you understand the difference between “experimental and investigational” exclusions and a QALY system, when politicians speak of “cutting wasteful spending” be careful. They may be speaking of me-ma, you, your spouse or your child.

The Biggest Losers

Doctors! The latest in health care reform has a proposal coming out of the House Ways and Means for a 4 percent levy on incomes exceeding $200,000 (read doctors). Physicians already face the threat of lower Medicare reimbursements and increased expenses associated with implementation of EMR systems. So practice revenue will be going down while expense go up – all at the same time the doctors’ take-home pay gets hit with a tax increase.

Isn’t it ironic that doctors will be paying the way to see more lower profit margin patients? Who knew that making health insurance affordable could be so expensive?

Why Did You Sponsor @rjurney’s Trip to Silicon Valley?

How cool is that? The good folks at TechDrawl, Ben and Celia Dyer, rub some brain cells together and decide to ask some questions regarding the the impact of geography on a start-up. Who better to send on the mission than Russell Jurney? Armed with an AirTran ticket, Flip Mino, and some walking-around money, Russell set off to the Silicon Valley to get some answers.

So, what inspired you to part with your hard-earned dollars and sponsor Russell’s trip? Here’s my reasoning:

I had been following with interest the back and forth twitter of Urvaksh Karkaria, a journalist with the Atlanta Business Chronicle and author of the AtlanTech blog, and Paul Freet, a serial entrepreneur and Commercialization Catalyst at Georgia Tech’s VentureLab. Their conversations basically centered around the future of the dead tree (print) media in relation to “new” media. So, in the end, I viewed the call for sponsorship of Russell’s trip as a way to (i) help the Atlanta start-up community, and (ii) participate in a new media experiment.

What I expect to see from Russell’s reporting is an unabashed level of honesty and candor, a Linus-like level of sincerity, a tenacious dedication to the story, and a good dose of humor that is unique to the man.

Good business reporters like Urvaksh will always have an audience. A niche, however, is being carved out for stories that don’t fit the traditional print model. Pick up a subscription of the ABC – it’s well worth it. But also take the time to follow Russell’s reporting at TechDrawl.

Taxing Health Benefits – Remember Section 89?

It was 1989 when I got into the health insurance business. A new law was coming on-line called Section 89. It was championed by Chicago politician, Dan Rostenkowski, who chaired the House Ways and Means committee.

This legislation was a small, almost ignored part of the massive Tax Reform Act of 1986. In a nutshell, Section 89 was designed to:

• limit the tax-favored status of health benefits for “highly compensated” employees (those earning $50,000 or more),
• discourage employers from offering health plans that favored “highly compensated” employees, and
• extend health coverage to the uninsured.

Taxing the health benefits of “highly compensated” employees to fund benefits for the uninsured – sound familiar?

Once the Internal Revenue Service got around to writing the administrative rules for the law, Section 89 went from being ignored to the biggest issue in human resources. Employers were forced to conduct complicated non-discrimination tests – and employees were exposed to taxes on their benefits.

The outrage was so great that in late 1989 Section 89 was repealed with a House vote of 390 to 36.

So now twenty years later as Congress and President Obama consider taxing health benefits you should remember Section 89. Remember that the paragraphs of legislation signed by a president become reams of policies and procedures once touched by the Internal Revenue Service. Remember that it is you, the employer, who must comply these new rules. And, it will be your clients and employees who will bear the ultimate cost.

Contact your senators and congressman and let them know what you think.

National Healthcare?

Unless your name is Chuck Nolan you’ve heard that our government is working to fundamentally change our healthcare system.  For the past 40 years there has been a steady march towards nationalized healthcare.  We are now closer than ever to that end. 

38 trillion reasons to nationalize healthcare

In 1965, Medicare was signed into law by President Johnson.  Medicare is the government-run, single-payer health plan which covers the country’s elderly population. 

People think that their Medicare payroll taxes are held in some "lockbox" and invested until it is time to retire and collect benefits.  Sadly, Medicare is run as a "pay-as-you-go" system.  The taxes taken from your paycheck today are spent on a retiree’s healthcare costs tomorrow. 

Because there are fewer and fewer workers to support an increase number of retirees Medicare is approaching insolvency.  It would reportedly take $38 trillion to fully fund Medicare.  Is that likely with the US GDP at $13.8 trillion?

So, if you are the Federal government, and your Bernie Madoff moment is less than 8 years away what do you do?

Nationalize Healthcare

Make no mistake, Medicare for All – a single-payer system – is their stated goal.  Your ability to obtain affordable, quality healthcare will be dependent on the government.

Former White House economic adviser Keith Hennessey has summarized the competing House versions here.  The Wall Street Journal reports that Obama wants to raise $634 billion in new taxes to pay for the expansion.  Here are some highlights of what we might expect:

• A government mandate that employers provide and contribute towards their employees’ health insurance or be subject to a tax penalty.  Think of your neighborhood restaurant.  To cover the extra cost for health insurance they will charge more for your meal.  Could you consider this new cost a tax increase?  How many people will be laid off because of this mandate?
• Tax employer-sponsored health insurance.  Currently the value of health insurance is not taxable to either employees or employers.  This benefit may be eliminated or reduced.
• Increase sin taxes – new taxes on sugary drinks, tobacco and alcohol products.
• Higher premiums for Medicare recipients.
• Reduced payments to medical providers.  If doctors and hospitals receive less payment will patients receive less care?  Will there be less incentive for experienced doctors to remain in practice?  Will the innovation of life saving techniques and products suffer because of a diminished profit potential?
• Reduced tax advantages for health savings accounts, flexible spending accounts and itemized medical deductions.
• A government mandate that each individual have insurance – or be subject to a tax penalty.  Note that the LA Times reports the insurance industry is receptive to this mandate.
• Add a health insurance "exchange" where people can compare and purchase a new government sponsored "public plan" alongside  products from private insurers.  This public plan is a major bone of contention between Democrats and Republicans.  It is described as the proverbial camel’s nose that could lead to a single-payer system in the US.  I wrote about Georgia’s brief consideration of an exchange here.
• Guarantee issue and guarantee renewability of insurance policies.
• No exclusion for pre-existing conditions.
• A prohibition of insurers from charging higher premiums based on health status.  This seems ideal, but understand then that healthy people will significantly subsidize the premiums of the unhealthy.

Could the medicine be worse than the disease?

An Alternative

So our politicians have gotten underwater to the tune of $38 trillion.   The government currently covers about 92 million Americans through Medicare, Medicaid and Tricare.  Should they be trusted to provide quality coverage for the other 208 million?

If you were to get yourself in deep debt, what options would you have but to reduce costs and live within your means.  Maybe our Federal government should take steps to reduce its own footprint and properly fund its obligations (Medicare, in this case). 

Conclusion

If you are so inspired, contact your senators and congressman and let them know what you think.  Opposing the "public plan" option, in my mind, is our best bet in maintaining competition and quality of care in our healthcare system.

Two Lemonade Stands

The kid down the block has a lemonade stand which serves 208.5 million customers and has expenses of $1.05 trillion. Your lemonade stand only serves 92.7 million customers, but has expenses of $1.35 trillion and you are in debt to the tune of $68.1 trillion. Wouldn’t a hostile take-over look attractive to you? Wouldn’t you be calling for “reform?”

Behind closed doors do our politicians have the same bug-eyed look Madoff must have had on December 10th?

How to Own Your Own Company in 5 Easy Steps

Why struggle for years grovelling at your boss’ feet for whatever tidbit is thrown your way? There has to be a better way! Now this may sound like a ShamWow commercial, but you can own your very own company in just five easy steps:

1. Get fired from your job.
2. Have your former employer fail to notify you of your COBRA or state continuation rights (thus you become uninsured).
3. Come down with a terrible illness or injury and incur thousands of dollars in uninsured medical bills.
4. Sue your former employer for failing to notify you of your right to continue on the company health plan.
5. Take stock ownership of your former employer because they don’t have the cash to pay off your Mac-Daddy judgment!!!

Yep, it’s that easy. You just have to work for a company that doesn’t take its fiduciary duties seriously. President Obama just signed into law the American Recovery and Reinvestment Act (ARRA) which mandates that taxpayers cover 65% of COBRA premiums for involuntarily terminated individuals.

There are new Department of Labor notices that must be mailed to everyone who lost coverage since September 1, 2008. The deadline to send these notices is April 18, 2009. Let me know if your company might need some help (or not if you aspire to own them one day)…

The Cabin Project

People have asked about pictures I’d posted on a little cabin I built a couple summers ago. Seeing as I’m very tired of writing about insurance, now seemed like a perfect time to take a break and write about something fun.

My mom owns some timberland near Millerville Alabama. We were attracted to the property because it has some great views of the Talladega range, it is mainly hardwood as opposed to planted pine, and there are a number of streams running throughout.

The previous owner had built a cabin about 25 years ago aside the Hillabee creek. All the locals had told the guy he was crazy to build there, but he did so anyway. As it turns out, he picked the lowest spot within in several square miles – the junction of three creeks. When Hurricane Opel passed through many years ago the high water mark was about first floor ceiling level. To make a long story short, as pretty as it looks you would not want to spend the night in it (unless you like mice and don’t have any mold allergies).

So, building a new cabin was high on my list of things to do. Learning from the mistakes of my predecessor I picked a site on the highest hilltop. For most weekends throughout the spring and summer of 2007 my mother, son and I would put in six or eight hour days sawing and hammering. The site has no electricity so all the work was done with hand tools.

It is a simple 12 by 12 single room with a vaulted ceiling that holds a small loft. We wrapped it with plenty of porch so you would have room to enjoy the view and to grill up something tasty to eat.

The work I’m sure will never be finished. For example, after waking up a couple months ago with the inside temperature at 30 degrees, I finally put insulation in the ceiling but still have yet to drywall it.

It was a great project – one that brought good friends and family together. And, now we have a cool get-away where we can hunt, shoot, hike, scratch, and spit ’til our hearts content. A nice change of pace from Atlanta…