J.C. Moore Online
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Posts Tagged ‘Health Care Reform’

Should Entitlement Programs Be Reformed?

Sun ,10/06/2012

Many who are successful attribute it to their ability and hard work. That is often true, but most Americans also owe their success to the opportunities, education, and resources that our country provides us – and also to good fortune. Our country provides safety nets so that no matter how fortunate or unfortunate a person is in their life, they will receive healthcare and not be destitute in old age. Those safety nets are often called “entitlements programs “, and that is true. We all pay to support those programs through taxes and contributions and we are all entitled to the benefits. Those who do not need the safety nets, or who do not wish to pay their share, often want to reform them in ways consistent with their self-interest.

 In the Tulsa World article, “Social Security, health care reform needed”, John Brock lays out a plan to remove government from managing retirement funds, Social Security, workers compensation, and health care. Mr. Brock says “the solution to our government’s problems is to empower people to manage their own affairs.” Though empowering people sounds good, the article is based upon questionable assumptions.

 The first assumption is “that the government is controlling our lives more and more.”  That is a common theme in politics these days, but hardly true. We democratically elect our representatives and leaders, and we have much more control over our government than probably any other country in the world.

The second is “having a government manage these necessities is risky. “ He points out that Greece, Spain, and a number of state and local governments are having financial problems. That’s true, but is not necessarily because of their entitlement programs. Many of the problems stem from the fact that the wealthy have found ways to reduce or avoid paying taxes. He goes on:  “For decades governments have been taking on future obligations without making provisions to cover the costs.” However, in many cases, provisions were made to cover the cost but later tax cuts reduced the expected revenues. Then, there are many who do not think that teachers, policeman, fireman, serviceman, and other government employees are worth the retirement funds provided them.

The next assumption is that Social Security “will default in the near future”. The Social Security trust fund is adequate to pay benefits through 2023, and raising the FICA cap could extend it through 2080. The Social Security Trust Fund is invested in US Treasury bonds, which earn interest and are as solid as theUS government. We are lucky that Social Security was not privatized in 2006, as the recession would have wiped out much of our retirement savings.

The final assumption is that we all have the time and the expertise necessary to deal with the work that Mr. Brock’s plan would require. Those who are wealthy and lucky would certainly profit from managing their own accounts, but those who lack expertise or are not lucky may end up with no medical care provisions or retirement funds.

 The idea of insurance is to spread risk and the larger the population, the less expensive and more reliable insurance is. Spreading the risk over every citizen increases the efficiency and provides a safety net for everyone. We are lucky to live in a country where we enjoy the benefits that self governance and cooperation affords us. We should resist efforts to remove programs which provide our safety nets from government management, particularly if it makes them less reliable or managed by those who desire to profit from them.

(c) 2012 J.C. Moore

George Will’s War on Regulations

Fri ,25/05/2012

                     “Good regulations make good citizens.”

 You would not think that if you read George Will’s article “Obamacare: Regulatory state’s war on business”. He tells how Carl Karcher built his hotdog cart business up to Carl’s Jr. Restaurants, now CKE Industries, a multibillion dollar business. However, Mr. Karcher passed on in 2008 and Mr. Will has written an anecdotal story based upon quotes from CEO Andy Puzder.  He claims that “CKE’s health care advisers, citing Obamacare’s complexities, opacities and uncertainties, said it would add between $7.3 million and $35.1 million to the company’s $12 million health care costs in 2010, unless CKE converted many of its full-time employees to part time.“ He felt it would be necessary to do that to avoid providing them with the health insurance required by Obamacare. The article goes on, blaming Obama’s policies for the poor economic climate, the high cost of fuel prices, and for creating “ multitudes of regulators who regard business as the enemy” and are conducting a “regulatory state’s war on business”.

 Although the healthcare bill is called Obamacare, Mr. Will should remember that what we have is not the universal health care that President Obama wanted. It is the half-a-loaf that remained after the compromises necessary to get the bill through Congress and overcome the Senate’s plan to filibuster it. Had universal care been enacted, CKE and other businesses would not be responsible for providing health care for their workers. Mr. Puzder apparently also missed the point that even now Obamacare requires that insurance companies use 80% of the premiums collected to pay for healthcare. In many cases, this will mean lower premiums and rebates to the insured *. The affordable health care act was passed requiring universal coverage, but Congress weakened the restrictions on what insurance companies can charge. The problems CKE has in covering employees with health insurance is more the fault of Congress than of the administration.

There is also an ethical problem that Mr. Will passed over. Most of CKE Industries’ employees work for near minimum wage and are covered by the company’s “mini-med health care program”. If that program does not meet the requirements of Obamacare, is it adequate to cover their needs if they have a serious health problem? Mr. Karcher is not here to speak for what he would do, but Mr. Puzder apparently sees it as a trade-off between job creation and providing adequate health care for his employees. He is apparently willing to convert many employees to part time in order to cut costs on their health care. In 2007, before the company went private, CKE Restaurants, Inc. earned revenues of approximately $1.5 billion. Is it possible that Mr. Puzder is making a trade-off between his employees’ healthcare and the company’s bottom line? Perhaps Mr. Will should look into that issue.

* Note: Under the Affordable Health Care Act, health insurers must pay 80% of the premiums collected for medical expenses or return the difference. Here is a list, by state of the amount expected be refunded under this provision.

Why Not Privatize?

Sun ,17/04/2011

Privatization. It is usually assumed that private enterprise will find efficient ways to do things and lower costs to the benefit of consumers and taxpayers.  That assumption is probably true when it comes to providing innovation and developing resources. The recent failure of some of our largest private companies have caused an  economic downturn which, along with tax cuts, have left the federal, state, and local governments with financial problems. Privatizing public services and resources is being considered as a way to reduce costs and raise money.

City Services: As a way to save money, many small towns and cities are considering turning their basic services such as water, trash and sewer over to private companies. This has not always worked out well.  As an example, Coatesville, Penn decided to sell off its drinking water and wastewater infrastructure in 2001 and invest the money in a trust fund to be used for city services. But privatization hasn’t been the economic boon the city hoped.  The residents have seen their water and sewer rates jump 85 percent since American Water, the largest water corporation in the country, took the helm. Last year the company proposed a 229 % rate hike for sewer services, forcing the city to cobble together money for legal fees to fight back. (1) Privatization doesn’t always promote efficiency. The trash in Wichita, Kansas is collected by several private trash companies, and customers in any part of town can contract with any of the companies. The result is that several large trash trucks navigate most streets of Wichita each week, resulting in increased noise, wasted energy, more exhaust fumes, and damage to the streets, which of course, the city repairs.  Even though residents of Wichita pay 30 to 50% more than residents of comparable cities with public trash services, a measure to franchise the trash system was defeated amid criticisms of “government control” and “loss of freedom to choose”.

CompSource. The state of Oklahoma gave its wealthiest citizen a nice tax cut in 2004, which, with the economic downturn,  has left the state government strapped for cash. One proposal to raise money was to sell CompSource Oklahoma, which has been providing workman’s comp to state workers for 76 years – apparently successfully. State Rep. Dan Sullivan pushed for privatization of CompSource because: “It’s a fundamental issue of what is the proper function of government . Is it to compete with private enterprise? We think not.”  He also claimed the increased competition would lower rates. That sounds good, except an expert in comp insurance pointed out it would cost more to insure state employees and 40% -70% more to insure workers in high risk categories, such as volunteer firefighters, oil field workers, and farm workers. The plan fell through, for the time being, when it was discovered that the state might not get the proceeds from the sale and that the politicians pushing the matter had ties to the insurance companies who would profit from the sale. (2)

Medicare and Social Security. Privatization of Government services for ideological reasons often fails as a practical way to lower costs. While privatizing Medicare was ostensibly done to reduce costs, the Medicare Advantage Plans created have increased the cost to the government by 14% and decreased the long term stability of the program. Also, to reduce costs, the plans created the infamous “donut hole“ that costs seniors an additional $25 billion annually. (3) The cost created by privatizing is not a mystery, as the VA and Medicare  have a 3-5% overhead while private insurance companies have an overhead of 15% or more. That is something that should be considered when thinking of health care reform.

Social Security is one of the most effective and popular government programs. It provides a safety net so that no matter how fortunate or unfortunate people are in their choices and investments, they will not be destitute when they retire.  The recent attempts to privatize SS would have been a boon to the financial services industry and money poured in for promotion and campaign donations. After the recent economic downturn, we should all be grateful that the plans to privatize Social Security failed. Some private pension accounts lost as much as 40%, while Social Security paid reliably. The idea that SS is going broke, part of the PR created to try to justify privatizing SS, still lingers on. (4)

Public Service: Our public servants, teachers, firefighters, police, military personnel, and the myriad employees that run our country, actually serve us well. Their pay is usually determined by their responsibilities, experience, and education, as in the GS ratings of federal employees that determine their compensation. Public servants seldom receive bonuses and sometimes little appreciation for doing their job well. The government does not make a profit so their services can be provided at lower cost. And, while we have little say about what goes on in the boardroom, our elected representatives are in charge of public employees.  While it may not be the role of government to compete with private industry, it is certainly not the role of government to make policies that favor private companies over the needs of our citizens. Certainly, privatization for purely ideological reasons is a bad idea that should not override practical considerations.

(1) http://www.alternet.org/story/149725/vision:_how_small,_mostly_conservative_towns_have_found_the_trick_to_defeating_corporations

(2) http://jcmooreonline.com/2009/10/01/will-privatizing-compsource-lower-costs/

(3) http://www.cbpp.org/cms/index.cfm?fa=view&id=2917

(4) http://jcmooreonline.com/2010/08/04/is-social-security-going-broke/

(C) 2011  J.C. Moore

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Can Kids with Preexisting Conditions Be Excluded?

Fri ,26/03/2010

After a year of wrangling over the Health Care Reform Bill, there are claims that the bill may not cover kids with preexisting conditions until 2014. That is not so. The Weekly Standard has championed this idea with an article titled Oops: Health Care Bill Does not Cover Kids Preexisting Conditions.(1) The language of the Bill was written by the Senate but the focus of the article is to blame President Obama . There seems to be some ambiguity in the way the bill is worded and insurance companies may be trying to use it as a loophole. One might wonder why this is just now being brought up. But, there is more to the story.

The Weekly Standard took its information from an AP news article. It is an example of cherrypicking as the Weekly Standard didn’t tell the whole story. The AP news article also goes on to quote HHS spokesman Nick Papas who said: “To ensure that there is no ambiguity on this point, the secretary of HHS is preparing to issue regulations next month making it clear that the term ‘pre-existing exclusion’ applies to both a child’s access to a plan and his or her benefits once he or she is in the plan for all plans newly sold in this country six months from today,” (2)

In spite of all the hullabaloo created by the Weekly Standard, the Christian Science Monitor says denial of insurance to kids with preexisting conditions will end this year. They say ” Six months from the day the bill was signed (let’s see … that’ll be Sept. 23, by our calculation), insurers will no longer be able to exclude children with preexisting conditions from being covered by their family policy. For current policies, that means insurers will have to rescind preexisting-condition exclusions.” (3)

The medical information site, WEB-MD has some answers about what reform will mean to consumers: Question: “What provisions begin soon? “Answer: “Starting this year, children up to age 26 would be allowed to remain on their parents’ health plan. People with pre-existing medical conditions would be eligible for a new federally funded “high-risk” insurance program. Small businesses could qualify for tax credits of up to 35% of the cost of premiums. Insurance plans would be barred from setting lifetime caps on coverage and would no longer be able to cancel policies when a patient gets sick. Health plans would also be prohibited from excluding pre-existing conditions from coverage for children. “(4)

So there is no “Oops” as the Weekly Standard claims. Kids with preexisting conditions will be able to get insurance coverage this year.

Update, 03/29/2010:  Apparently, this has been completely straightened out:

“After Health and Human Services Secretary Kathleen Sebelius wrote a letter warning insurers against using loopholes to avoid covering children with pre-existing conditions, AHIP President Karen Ignagni wrote back to say insurers will comply with all regulations.”(5)


(1) http://www.weeklystandard.com/blogs/oops-health-care-bill-does-not-cover-kids-pre-existing-conditions
(2)http://www.google.com/hostednews/ap/article/ALeqM5jYnajhWrPEXihcCrpRNfUKN7rN-AD9EKTKIG0
(3) http://www.csmonitor.com/USA/Politics/2010/0324/Health-care-reform-bill-101-rules-for-preexisting-conditions
(4) http://www.webmd.com/healthy-aging/news/20100322/faq-how-health-care-reform-will-affect-consumers-employers?ecd=wnl_day_032410

(5) http://tpmlivewire.talkingpointsmemo.com/2010/03/ahip-responds-to-sebelius-letter-about-kids-with-pre-existing-conditions.php

Research credit: Barbara Moore

The Constitution, Social Security, & Healthcare Reform

Mon ,05/10/2009

The author once attended a retirement seminar sponsored by AG Edwards. The speaker tried to convince the participants that no matter how much money they had saved, they would eventually run out if they lived long enough. That is unless, of course, they let AG Edwards invest their savings. The speaker did not mention Social Security, and fortunately for those who put their money in stocks, Social Security was there as a safety net.

Social Security was created by the Social Security Act of 1935 in the midst of the Great Depression to provide for retired workers who had lost their life savings. Congresses right to create Social Security was established on the general welfare provisions of the Constitution and by  Article 1, Section 8 which establishes Congresses power to collect taxes and provide for the general welfare of the United States.  It says, “The Congress shall have power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and General Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”

Several challenges to the Social Security Act of 1935 were decided in its favor by the Supreme Court. The most notable of these was U.S. v. Butler (1936) that held that the Spending Power Clause of the Constitution gave Congress broad power to tax and spend for what it determined to be the general welfare of the country. Because Congress has discretion to determine what is the general welfare, no court since Butler has ever invalidated a federal spending program on the ground that the general welfare of the country was not being promoted.1 Also, in Helvering v. Davis ( 1937), the Supreme Court defended the constitutionality of the Social Security Act of 1935 requiring only that the welfare spending be for the common benefit as distinguished from some mere local purpose. It affirmed a District Court decree that held that the tax upon employees was constitutional. 2

Social Security is certainly a government manage retirement program but it has not put private retirement funds such as AG Edwards out of business. Social Security provides a safety net so that no matter how fortunate or unfortunate you are in your choices and investments, you will never be destitute. Congress has the authority to create a government managed health care safety net for Americans. It would likely not put private insurers out of business but it would certainly provide a safety net for health care.

We are now in the midst of an economic downturn that has cost millions of Americans their jobs and their health insurance. What better time to enact health care reform.

(1) http://qanda.encyclopedia.com/question/butler-decision-428463.html

(2) http://en.wikipedia.org/wiki/Helvering_v._Davis

The Health Care Debate's Red Herrings

Tue ,15/09/2009

The debate on the healthcare has been filled with red herrings. Swallowing red herrings makes people irritable and they often say things in anger without thinking them through. If we trace the red herrings to their source, we would probably find that they were created by those who have the most to gain from the failure of health care reform. However, health-care reform is too important to let it be sidetracked into pointless arguments.

One of the red herrings popped up dramatically in the President’s address to Congress. When President Obama pointed out that the Health Care Reform Bill would not provide coverage for illegal aliens, Senator Joe Wilson (R-SC) shouted out “You lie.” Clearly someone had planted a red herring as the health-care bill specifically says on page 146: “Sec 246 — NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS: Nothing in this subtitle shall allow Federal payments for affordability credits on behalf of individuals who are not lawfully present in the United States.”

The problem with illegal immigrants arose from a truly bipartisan and humanitarian effort.  In 1986, two major pieces of legislation were passed by the Democratic Congress, approved by the Republican Senate, and signed into law by President Reagan. The 1986 Immigration Reform and Control Act provided amnesty for 1.5 million undocumented aliens. Its purpose was to halt illegal immigration, but we now have 12 million illegal immigrant so it has apparently failed. The connection to health care came also in 1986 with the passage of the Emergency Medical Treatment & Labor Act which ensured public access to emergency services regardless of ability to pay. Those without money or health insurance now use the emergency room as their primary healthcare provider. The cost of that is staggering, and much of the cost is eventually paid by citizens in the form of higher taxes and more expensive medical services. Illegal immigrants have become a serious problem, but it is not one that can be corrected by the health-care bill.

There are strong feelings on both sides of the abortion issue. Health care reform is too important to those on both sides to let it become a battlefield for ideological differences. The Health-care Reform Bill does not provide public funds for abortions. The bill does not mention abortion. There are those who wish to insure that public funds are not used for abortion and their wishes should be respected. There are those who think providing health care to women who are now uninsured would surely reduce the number of unintended pregnancies and they are right. There are methods of birth control acceptable to every religious faith. Certainly, providing health counseling to women, good prenatal care for expectant mothers, and excellent health care for babies are goals that everyone can share.

 Tort reform is another red herring. The malpractice system is clearly broken. Doctors are afraid to admit error for fear being sued, malpractice insurer will not pay a claim without an admission of error, and an injured patient has little recourse but to sue.  A University of Michigan1 study has shown that malpractice lawsuits could greatly be reduced if doctors would admit their errors, apologize, and compensate the patient fairly for their mistakes.  It has been estimated that litigation costs and malpractice insurance add about 1-1.5 % to total health-care costs.2 The malpractice system needs to be fixed but doing so will not substantially reduce medical costs or help the uninsured. Perhaps malpractice insurance co-ops for doctors should be considered.

 Unfortunately, the cost of health care reform is not a red herring.  Most estimates put the cost at slightly less than $1trillion over 10 years. To put that in perspective, that is about the amount spent in seven years on the Iraqi war; the amount spent in one year to bail out the banks, insurance companies, and the auto industry; or half the amount spent over 9 years to provide tax cuts to those in the highest income tax brackets.3 (See note below.) Healthcare reform could easily be paid for by letting the 2001 tax cuts expire . The United States has a graduated income tax scale based on the idea that those who profit the most from the resources and opportunities our country offers should pay more in taxes. Perhaps seeing that every citizen has health care would let us feel good about paying more in taxes.

(1)   See: http://www.msnbc.msn.com/id/32011837/

(2)   http://www.upenn.edu/pennnews/sourcesheet.php?id=529

(3) Citizens for Tax Justice, using data from the Congressional Budget Office, calculate  that  the 2001 tax cuts have cost  about $2.1 trillion in lost revenue and another $0.4 trillion in  interest  on  the deficit created. Letting the tax cuts expire would  save about  $2.5 trillion over the next 10 years which would pay for Health Care Reform twice over.    See  http://www.ctj.org/pdf/bushtaxcutsvshealthcare.pdf  for their figures.

Research Credit:  Barbara Moore

Your Family’s Health Depends on Health Care Reform

Mon ,31/08/2009

“Your family’s health depends on the health of everyone.”

The advantages of health care reform have been lost in the politics and arguments about the Health Care Bill.  Here are some advantages :

Productivity. We would have happier and more productive citizens. Most people receive health care insurance from their employer.  There is a good reason for that. Healthy people are happier, perform better, are less likely to be hurt on the job, and miss fewer days of work  Offering healthcare benefits lets companies attract and retain better-qualified employees, shows that management cares about the workers, and is a great morale builder.  Couldn’t the same principles work on a national level?

Jobs. It would create job openings. One great way to create jobs would be to provide health benefits to those who wish to retire early. There are about 45 million baby boomers who are now between 55 and 65.  Many of them have the resources to retire early but feel they must continue working to retain their health care benefits.  Health care reform would let them retire early, opening up more jobs.

Bankruptcies could be  reduced by better health coverage. A Harvard study found that about 50% of all bankruptcies in the United States are caused by illness and unpaid medical bills. Bankruptcies affect everyone because the health providers, banks, businesses, and credit card companies who lose money in the bankruptcy pass the cost on to the rest of us. Bankruptcies were a big factor in our recent housing crisis that negatively affected us all.

Reduced Insurance Rates: The health care bill, as passed, requires that 80% of the premiums collected by insurance companies be paid back in benefits. Currently, the overhead for private insurance companies ranges from 15% to 35%. Those companies with high overheads will have to find ways to reduce their rates or be replaced by the more efficient companies.  Companies that pay back less than 80% will have to give refunds to their policy holders at the end of the year.

Healthier Americans. Your family’s health depends on the health of everyone. Unless you are a hermit, you will likely come into contact with thousands of people during this next winter. People without health care are less likely to receive immunizations and are much more likely to have untreated communicable diseases.   This is particularly important since a Swine Flu epidemic is a possibility.

The advantages of health care reform are obvious to those with no health insurance.  Remember, except for the Grace of God, that could be you.

Health Care Co-ops a Poor Option

Wed ,19/08/2009

Healthcare co-ops are now being promoted as a way to keep government out of healthcare. They might be effective at doing that but it is questionable whether they would be effective at providing health care reform. Most people don’t know about healthcare co-ops because they are not really an option for their healthcare. Senator Kent Conrad (D-ND) has proposed a co-op system in which the government would provide $6Billion in seed money to doctors, businesses and hospitals to form the co-ops. Eventually the co-ops would have to become self-supporting with premiums paid by members. Senator Conrad should be commended for his effort to find a bipartisan compromise but health care co-ops will do little to bring about health care reform.

 During the depression, the Farm Security Administration encouraged the development of rural health cooperatives, and at one point, they had about 600,000 members. Unfortunately, few co-ops survived after the FSA removed its support in the late 1940s. One that did is the Group Health Cooperative in Washington State and it is an example of a successful co-op. It has its own hospitals, hires its own Doctors at salary, and tightly manages its costs and membership. It took eighty years for the co-op to get where it is today and it is unlikely that a start up co-op could achieve the same success in a short time. When the seed money runs out, new co-ops would likely disappear and we will have spent $6Billion with little to show for it. Many health care co-ops have gone bankrupt. An example is Sunkist Growers , once a licensed insurance co-op that covered about 23,000 people. It fell into insolvency because claims outpaced income in 2001 and it left employers and medical providers holding the bag for about $11 million in unpaid medical claims.

Some healthcare co-ops negotiate with private insurance companies to provide insurance for their members. Their advantage is that they provide group insurance rates to small businesses, farmers, and individuals who might otherwise have difficulty negotiating favorable insurance rates.  Their disadvantage is that their rates, co-pays, network providers, and pre-existing condition policies are very much like any other private insurer. One such company is the Farmers Health Cooperative in Wisconsin which cooperates with Aetna and functions much like a PPO.  It has been successful because its members are reasonably healthy people. Co-op health care has mostly been successful in such small demographic niches. Jamie Court, president of Consumer Watchdog, says that “if co-ops attract high-risk people, who would otherwise go uncovered, it could bleed the co-op’s funding dry.”

Government is already providing health care. It is a strange spectacle to see Medicare recipients, Veterans, Congressional Representatives, and Senators decry socialized medicine when they, in fact, benefit from public subsidized health care. Would they be willing to put aside their present health coverage and go on a co-op system? I think not!  The Health Care Reform Bill, H.R. 3200, is a reasonable bill and it should not be replaced by a health co-op system unlikely to be successful.

Research Credit: Barbara Moore