Eric Novack has a few questions….

1. In California, where the SEIU is attempting to forcefully merge with the United Healthcare Workers, I can’t seem to find the focus on, you know, health care. “What it does is allows them to have the strongest voice possible in Sacramento,” said Mary Kay Henry, SEIU executive vice president.

2. Should the new administration be looking at Massachusetts as model to follow for health reform, or as a model of what must, at all costs (and they are extremely high), be avoided?3. How can we reconcile the fact that on Thursday the President-elect spoke about the importance of spending more on healthcare while on Sunday explaining that he intends to recommend spending less?4. In 2005, the association health plan bill (aka small business health plan) was killed, in large part, because advocates for specific disease conditions believed that state mandates and state lobbying efforts would be hampered if more people were covered under ERISA (i.e. national mandates—which are much harder to pass)— how will the administration propose to address this issue of state mandates in sweeping health care reform? 5. If health and health care are ultimately the most personal part of our lives, is it possible that more nationalization of health care will result in a greater role of lobbying bureaucrats and elected officials to seek and obtain care?6. How much would Medicare taxes be, and Part B and D premiums be, if the system actually needed to be self supporting, and the government had to keep adequate financial reserves like private insurers?

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  1. Note to Eric: a “trust fund” by that very name does exist for Medicare and Social Security, as used by the Social Security Administration in their 2008 annual report. I was using their term.
    The term is used all over the place by government agencies, including Treasury.
    I’m not sure why this point needs repeating, but:
    Social Security and Medicare provide cash and in-kind benefits to nearly forty million
    people each year. These social insurance programs are financed largely through payroll
    contributions, income taxes on benefits received, premiums, and federal general fund revenues
    that flow into federal trust funds for each program. The current and future financial status of the
    separate trust funds is the focus of the annual reports of the Medicare and Social Security Boards
    of Trustees, a focus necessitated by law that may appropriately be referred to as the “trust fund

    What you claim as expenditures from the general fund for Part A and Part B are in fact expenditures from the trust funds that were created for these programs. Look at Figure 1 on page 7 of the Treasury link to see that this is correct.
    Part of those trust funds are financed through premiums and dedicated payroll taxes. In the case of Part A, actually, all of it came through dedicated funding sources. In the case of Part B, as you indicate, 75% came from the general fund into what is called the SMI trust fund. What you neglected to mention is that claims are paid out of the trust fund, not directly out of the general fund. I know, this is a matter of accounting, but read the Treasury document before you say that it is “just” a matter of accounting. In fact what it does is bring about a different frame of reference, that of solvency, that does not apply to most other Federal departments and programs. As I mentioned, if the military were judged by this standard it would be totally insolvent, and yet fiscal conservatives aren’t alarmed about our future on the basis of this. You’ve been lured by the very framework of solvency and having to pay your own way that these trust funds were meant to create, so that you apply a different standard to Medicare than you do to Defense. It actually affects you psychologically, as it does almost everyone.
    Getting back to my original point, I was trying to say that regardless of the source of the money, in fact the Federal government has adopted the perspective of having to hold reserves (trust funds) for the Medicare program. Nothing that you say contradicts that, and you have not supported your original assertion in this post that reserves are non-existent or inadequate in Medicare compared to private insurance.

  2. 1 – I see your point here. American Culture and the American workplace has evolved over the years and unions have not evolved to meet the needs of workers. They have morphed into business and that serves no one. In this instance SEIU is doing what any reasonable business would do, consolidate their revenue base in to a leaner more controllable entity. In effect A power Base for the leaders of SEIU. It serves no one but them.
    2 – Well, I have seen many instances of the media and Dems not associated with the administration using the word “Model” when speaking of the MA system, but I dont think I have actually heard the Pres-Elect say it. I could be wrong but I think they usually say “Look to the successes” or ” we can learn from” the MA system. It has its flaws but it was designed to work a particular way and some things were unanticpated. But I think we can learn from it.
    3 – Hmmmm … thought on Friday he was talking about the plan as a whole and on Sunday he was talking about the spending to get it started. Again i could be wrong but thats how it came across to me.
    4 – Yes I am interested in this as well. I think in the end that most failures within any system will be the long term and/or expensive treatment of a smaller portion of illnesses and conditions that represent a relatively small portion of the patients but a disproportionate percentage of the cost. Not saying that there are conditions that should not be treated, just pointing out that 10 hip replacements would pay for vacinations for hundreds if not thousands of kids. So how do we address the needs of both?
    5 – Well i’m not sure that is a flawless Cause and effect argument. I think the more health care is nationalized, lobbyists and the orgs they represent will change. The issues certainly will. But lets be realistic and cut through the crap. Lobbyists do not belong in the democratic process. Lobbying is supposed to be done between legislators not by companies to legislators. The concept of lobbyists as the main fact finding process of our government is ridiculous. It should be outlawed.
    6 – True enough. What private insurers have that the Gov is horrible at is internal auditing. There are so many arrests for fraud in Medicare every year that the media doesnt even report it anymore. Plus the fact that some GPs are notoriously bad diagnosticians or practice lazy medicine ( ordering tests and allowing others to interpret the results for them) that the system is overloaded much of the time by unnecessary testing and procedures. And this is no small problem. I saw a study (sorry i cant ref it here I dont remember where i saw it) that polled GPs regarding xrays ordered before and after the GP or their organization became the primary provider of radiology (got their own Xray equiment). The study determined that DRs ordered a staggering 45% more xrays when they or their group were the ones being paid for it. 45%, that is more than significant it tells a story about turning healthcare into big business and why we should be concerned about it. A bit off the subject I know, but medicare reform should start with how it pays out before it worries about where the money will come from. But in the end you are right, both Medicare and SS are the biggest Ponzi schemes ever perpetrated.

  3. jd-
    Medicare Part A — 100% general fund (and we have $400+ billion deficit this past year)
    Medicare Part B — 75% by the general fund, 25% from premiums (see above re: funds) —
    Medicare Part C — this is the Medicare Advantage plan and the funds to ‘overpay’ private insurers also comes from the general fund
    Medicare Part D — >$100 billion from the general fund
    Note to jd— no “trust fund” exists for Medicare or Social Security
    Remember, we have Medicare Part P right now— that is Medicare-for-All, the Medicare- Part Ponzi

  4. Nate asks:
    > What if you have employees in all 50 states
    Then you suffer a diseconomy of scale — decide whether the upside is worth it to you. There is no particularly good reason to favor bigness, and lots of good reasons to favor local enterprise and control.

  5. To answer Eric’s last one: who says Medicare isn’t adequately reserved at the moment? Seriously, is this founded on anything other than ignorance?
    Medicare has four main parts, A-D. I’ll ignore Part C (Medicare Advantage) and Part D (drug coverage).
    For part A, the hospital fund has a much, much larger reserve than private insurers are required to have. The problem with the hospital fund isn’t that the reserves aren’t adequate to present payments, it’s that they won’t be adequate years from now if we keep bringing in lower revenues from dedicated taxes and premiums than is paid out in claims. Putting aside effective delivery system reform, the fix is just to bump up payments into the system, which would be equivalent to a jump in premium. Sound familiar? It’s not as though the private sector escapes this issue, or that it is any worse for Medicare. There is nothing to see here. Move along.
    Not convinced? Check this out from 1996:
    In fact, over the past 15 years, the Trustees have projected the date of insolvency to be anywhere from 1987 to 2005, and each year they recommended that Congress take action to protect the HI Trust Fund. Each time, the Congress and the Executive branch have always been able to respond to short-term challenges, improve the short-term longevity of the HI Trust Fund, and ensure continued Medicare protection for beneficiaries.
    1987 to 2005! And now when is the projected date of exhaustion of the hospital fund? Around 2019. And what does that mean? We have to use money from the general fund to support the Medicare Part A. Of course, 100% of military funding comes from the general fund, and people on the Right don’t seem to object to that.
    Getting back to the original question about reserve levels: for Part B, the Supplemental Medical Fund also appears to be in good shape. I couldn’t find recent numbers on the actual level, but did find this from 1996:
    According to the 1997 Annual Report on the SMI Fund reserves were 28.3 billion vs. 70.4 billion in expenditures. That’s about 40%. What, exactly, do you think private insurer reserves are? Hint: not higher than 40% of annual expenditures.
    Regardless of whether the reserve levels technically meet the same % of expenditure requirement, there is a big difference between Medicare Part B and private insurance: Part B premiums are statutorily required to increase to meet expenditures in order for the program to remain solvent.
    Part B of the Supplementary Medical Insurance (SMI) Trust Fund, which pays doctors’ bills and other outpatient expenses, and Part D, which pays for access to prescription drug coverage, are both projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet next year’s expected costs. However, expected steep cost increases will result in rapidly growing general revenue financing needs—projected to rise from 1.3 percent of GDP in 2007 to 4.1 percent in 2082—as well as substantial increases over time in beneficiary premium charges.
    So, there is no problem with reserve levels or solvency that is special to Medicare. There is of course, a huge problem: healthcare expenditures keep increasing faster than inflation and growth in GDP. That problem exists just as much, actually more, in the private sector as it is currently configured. Unfortunately, solving that problem will mean a decrease in revenue for physicians, hospital systems, etc., relative to growth in GDP. Not saying Eric is avoiding this solution out of self-interest…just pointing out the obvious.

  6. Nate, if we could all opt in and out of coverage as you suggest then we would reduce size of group and make the cost for each group larger. Who then could afford insurance? As usual the “choice” group hasn’t any social solidarity. Why is it that single-pay countries cover everyone with no opt out option and do it for less than half what we do it for?

  7. The AHP bill has been beaten for 12 years now and concern about mandates are a red herring. Number one reason for Democrat opposition is the Union’s told them to do it. Small employers able to join AHPs would be major competition to Union Taft Hartley Plans. Unions can offer benefits considerably cheaper and more efficiently then small employers because they can pool them together. Take this away and one of their main organizing tools is gone.
    The second is Tax revenue. States can’t tax claim payments by self funded plans as easily as they can carriers with a premium tax. Every claim dollar spent by a self funded plan is 1-5% fewer tax dollars.
    SEIU had a nasty fight in Vegas with some nurses trying to change Unions.
    The Service Employees International Union suffered a clear vote of no confidence this week as registered nurses it represents at three St. Rose Dominican hospitals voted in greater — though still inconclusive — numbers to join a rival union.
    Although the California Nurses Association earned more votes — 400 (49.8 percent) to the SEIU’s 377 (46.9 percent) — in the Tuesday and Wednesday balloting, the SEIU will continue to represent 1,100 nurses at the hospitals because a victory requires more than 50 percent of the vote.
    SEIU Nevada has been rocked by a string of controversies, including a Labor Department investigation into a contested union officer election last year.
    SEIU has always been more about politics and growing then improving anything.
    “4. Sure, let’s cut costs by denying some diseaes coverage. Typical insurance tactic; raise deductibles, raise co-pays, reduce coverage, then tell people how much money they’re saving – now that’s inovative thinking.”
    Interesting way of framing this situation. In Nevada and most states a women can buy individual policies that either cover maternity or don’t. Is it typical insurance tactic to give people a choice of what benefits they wish to buy? Why would a non-sexually active women want to pay extra for maternity benefits? And how is a top line policy no one can afford of any use? Most people if given the option of paying extra for the benefits of state mandates would not, that is why providers and special interest groups get legislators to mandate them. People would not pay for them otherwise.
    Most American’s consider freedom of choice a good thing not a bad tactic forced upon us.
    An insurance policy for a single male resident in mandate-enforced Boston, for example, costs five times more than a policy for his identical twin in mandate-free Tucson. This cost disparity is due in part to the Bay State’s many insurance regulations, which limit the types of policies that consumers can buy and drive up prices.
    Why is insurance becoming unaffordable?
    In 1965, only seven benefits were mandated by the states; today, the Council for Affordable Health Insurance (CAHI) has identified more than 1,800 mandated benefits and providers. More are on their way. In January 2004 alone, CAHI followed the introduction of 295 new mandates in states across the country.
    According to a 1999 study conducted by the Health Insurance Association of America (HIAA), as many as one in four individuals who are without coverage are uninsured because of the cost of state health insurance mandates.
    15 states require coverage of in-vitro-fertilization even though it frequently leads to expensive multiple births.
    7 mandate Hair Prothesis, others require coverage for massage therapists, naturopaths, Pastoral Counselors, and acupuncturists, which is all great unless your tight on money and really just want to buy coverage in case something serious happens. This is the problem with people that don’t understand risk, when your between jobs or just out of college your risk isn’t not being able to afford your weekly massage and adjustment. When your making good money you can afford to pay for the little stuff and just need to protect against the risk of a large claim. When you mandate benefits to help a few people you drive up the cost for the majority of the people who don’t need it.
    If you’re an employer in Kansas City, MO with employees living in both KS and MO you should have to offer 2 healthplans then, one for KS residents and the other for MO residents? What if you have employees in all 50 states(57 if you’re a Democrat)? Providers would also need to treat patients from different states differently, or would they not be allowed to treat out of state patients? ERISA should be expanded not repelled, state lines are artificial barriers not recognized by people when working, consuming HC, or living most aspects of their lives.

  8. 1) Was there a question in there?
    2) Depends on what you mean. This gets to a comment Matthew made a few days back: what in the world is wrong with 50 universal insurance plans? Why must there be one? Why is it that states induce “vagaries” by their own small-d democratic processes, but the feds don’t? Oh Wait!!! They do, but at an practically inescapable international scale. Personally I think it ought to matter where you live, and if you really prefer another set of policies, you can move. As from England or Canada to America. But maybe it should be more specific than that: it sounds to me like Englishmen and Canadians might prefer Massachusetts to Wyoming. This is more than fine with me.
    3) Maybe he’s talking about two different kinds of spending: service-specific versus aggregate. Common confusion, but I didn’t hear the speech.
    4) Hmmmm. Interesting point. ERISA was created to help multi-state employers, but being sympathetic at least to distributist notions I’m not sure this is a great thing. Maybe ERISA as such should be repealed: there’s no good reason for us to bend over backwards to increase economies of scale that permit the creation of enterprises “too big to fail”. Otherwise, see answer #2.
    5) Yes.
    6) Good question. I bet CBO has a couple of reports that contain the answer.

  9. 1. Small picture Eric’s right. Big picture, the evisceration of unions over the last 30 years was a big part of the reason for a) the collapse of Democratic organization (and political success) and b) the reduction in real wages and increase in real profits (and financial games) that caused the beggarment of the lower middle class and the current economic crisis. So I’m torn.
    2. Mass is partially a cop-out and was done without upsetting the providers. We’ll see if that’s a national model, but I doubt it’ll be that pretty
    3. He’s a politician, just learning this stuff…
    4. Eric’s right. We need to abolish state regulation of health plans/insurers. Of course he wouldn’t like the Federal regulation that I’d replace it with. But it needs to happen
    5. Yeah, so?
    6. Less than they are now.

  10. 1. No, the strongest voice is by health industry lobbyists in DC.
    2. The MA plan is nothing more than a bailout of providers by the taxpayers. It does not control costs as a true single-pay plan would.
    3. Maybe spending less on waste and overutilization (profits) while spending more on those that don’t have coverage.
    4. Sure, let’s cut costs by denying some diseaes coverage. Typical insurance tactic; raise deductibles, raise co-pays, reduce coverage, then tell people how much money they’re saving – now that’s inovative thinking.
    5. Yes lobbying by votes of individuals not money from corporations, and knowing that more healthcare would mean more taxes – that’s the balance of government run single-pay.
    6. No the question is; How much would Medicare taxes be, and Part B and D premiums be if we had a true single-pay system with universal budgets and price controls. No system can be self supporting without cost controls.

  11. Re. #3 – reading Pres. el. Obama’s preelection statement in the NEMJ, I had the impression that he and/or his advisors have an idea about the problems with medical inflation, and that not only coverage is needed, but cost control as well.
    I am not a studied health economist, but plan would be:
    1) he and his advisors should stress the facts that US healthcare is the most expensive one and that medicare and medicaid face serious trouble in the midterm OVER AND OVER, for at least 6-12 month.
    2) and stress the need for reimbursement reform. Say over and over e.g. that “the US has the best physicians, but also reimbursement structures that undervalue doctors’ efforts talking to and examining patients, and favors certain procedures too much”
    3) and then seriously reform the medicare schedule by mildly increasing (5-10%) “cognitive medicine” services and by seriously adjusting (e.g 20-50% over a few years) the most overpaid (and overused) procedures. Due to 1 and 2, he might have built up enough momentum to wither the storm produced by the high earners.

  12. Great questions, Eric! Number 1 deserves a lot more focus, as SEIU has targeted healthcare as a major organizing priority, if Congress passes the Employee “Free Choice” Act (which looks like at least a 50-50 chance).
    The approach SEIU took in New York was to ally with the Greater New York Hospital Association to shake down the legislature for more Medicaid funding, and to grab a big chunk of the proceeds from privatizing the Empire Blue Cross Plan to earmark for wage increases for their workers. The main agenda was, in Samuel Gompers’ immortal phrase, MORE. MORE taxpayer dollars, and MORE union dues.
    If you want to make healthcare affordable, and deal w/ #3, # 5 and #6, unionizing the nation’s hospitals and nursing homes is a strange way to get there.

  13. Eric – I’ve been trying to get #3 and #6 answered for quite some time.
    3. We shouldn’t need to throw money at an already expensive system. We must look for inequities and start reallocating the current spending to accomplish the goals we need to achieve.
    6. That is a very important question. I hope Medicare for All proponents aren’t resting solely on the fact that Uncle Sam has the power of taxation, the ability to print money, and almost unlimited borrowing power to make up any shortfalls.