Class Warfare Blog

August 15, 2012

Medicare Math

Filed under: Economics,Politics — Steve Ruis @ 10:38 am
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I know that the word “math” in a title is usually a trigger word that sends people running . . . the other way, but stick with me for a minute. I won’t even be using numbers.

I was one of those under-insured people you read about. From my retirement (at age 60) to my 65th birthday, the best I could afford was a health insurance policy in which I paid the first $5000 of medical expenses each year (a so-called “major medical” insurance because it doesn’t kick in until something major happens to you). But when I turn 65 I received Medicare (whew!). Being prudent I also contracted with an insurance company for a Medicare supplemental policy to cover the expenses Medicare doesn’t cover. Combined the two policies cost less than my crummy “major medical” policy did (and covers way more). By the way, if you didn’t know, you have to pay for Medicare, it is not free.

When Medicare kicks in they send you a well-organized and well-written book describing the program and making a number of health recommendations, primarily that one get a health screening to detect as early as possible any illnesses you may have or be susceptible to. In the process of doing that, I racked up several thousands of dollars of medical bills. Being a polite person, I also asked whether the doctors I consulted took Medicare patients and all of them did. I have since gotten the bills and in every case Medicare paid less than half of what was billed. Yet, the “Amount Owed by Patient” box was $0.00. This was true for doctors, technicians, hospitals, and labs (for tests).

“Medicare paid less than half of what was billed.”

At first I thought this was neat, all of those people working for less for our senior citizens but then I thought, well, who then were the full bills for? Ah hah, they were for insurance companies.

Insurance companies rarely work to hold prices down as they can just pass through increased costs to policy holders. Those policy holders are often largish businesses which look at just the bottom line and not what they are paying for item by item. Insurance companies are also trying mightily to shed individuals and any policy holder who might get sick (e.g. having a pre-existing medical condition) as a more cost effective way of improving their bottom line.

You may also have heard that a provision of “Obamacare” is that health insurance companies must pay out at least 80% of their premium income for medical care for policy holders and that when this provision kicked in several major insurance companies are having to issue rebates to customers because they failed to do that. Failing to make that 80% threshold means that their overhead and profits exceeded 20% of premium income.

So, what is Medicare’s overhead? About 3%. (Realize that the 3% is of a much smaller amount because Medicare charges so little.) In other words, 3% is a maximum value for what it costs to “push the paper.”

So, what happens if Medicare gets “voucherized” or “premium supported” out of existence? If one goes on insurance provided by one of the current companies, everybody’s costs go up, way up. The insurance company will pay $4000 for a bill that Medicare settles for $2000. And that private insurance company adds at least another 10% to the bill for its “shareholders” and high salaried executives.

A civilized debate about the future of Medicare would include:

  • the costs associated with the current plan over the next several decades
  • a debate on whether or not to figure out a way just to pay those costs (when the baby boomers die off—this is not callous as I am one—the costs of the system will drop dramatically with the numbers of participants dropping back)
  • several options for reform (each costed out) including comparisons with what other countries are doing better than we are
  • a referendum by the people as to what we want

The questions are: “Can we handle the debate?” “Will the politicians allow it?” “Will the monied powers behind the politicians allow it?”

June 3, 2010

Bill Gates’ Ideas are Better than Yours

Apparently the Congressional Republicans “better ideas” all revolve around tax cuts. Their core argument is that taxpayers know better how to spend their money than government does. Taxpayers will spend their money more wisely, more efficiently, more market empowermently, whatever, than government would. If Republicans actually believed this (I doubt they do as when they are in power, they spend more money, substantially more than their “tax and spend” opponents.) it should apply to businesses, too, shouldn’t it?

I think a fair test of this Republican belief is a tax neutral bill in which a large tax cut is made for poor to middle class folks, paid for entirely by a tax increase on wealthy folks. Now, don’t be repelled by this idea, the rich folks haven’t been repelled by the idea of tax cuts for them coupled to tax increases for us over the last 25 years. Do like they do and keep a stiff upper lip.

I don’t think Republicans would vote for such a bill, even though a great many more people would have more money to spend and, since rich people don’t spend all of their money every year like we do, they would hardly be discomfited. It satisfies their argument: more folks would be making decisions with their money than before.

Maybe this idea is too extreme. How about a bill in which everyone gets a tax cut, except the middle classes get a big one and rich folks get a tiny one? Any Republican votes there? You think not? So do I.

Now if a little voice in the back of your mind is screaming “But that is class warfare!” you are right. But, hey, they started the war over forty years ago and we haven’t even started fighting back, so I am not talking about starting a class war, I am saying “Join the fight . . . or die poor.”

My main point here is that the Republican’s guiding principle that “taxpayers will spend their money more wisely than government” should apply to businesses, too. My example is Bill Gates. Bill Gates donated 100 billion (that’s Billion, not Million) dollars to the Bill and Melinda Gates Foundation, which he runs with his wife. So, where did he get 100 billion dollars to donate? Everyone knows the story, so I won’t repeat it here. The point to be made is that Bill doesn’t need 100 billion dollars that he “earned” to live on. Not to pay his electrical bill, nor his cable bill, nor any other mundane expense. He has enough other money to cover his living expenses lavishly until he dies with some set aside for his kids. So the $100 billion dollars, well, he didn’t really need it.

He accumulated $100 billion dollars he didn’t need . . . how? (I know I am leading you by the hand, but stick with me, okay?) He generated $100 billion he did not need, even to be wealthy, by charging his customers more than he really needed to. If you bought a copy of Microsoft Windows ever (I have a copy of Windows 1.0 in my collection!), you were overcharged. Every copy ever sold was priced way too high. (Bill Gates isn’t the only person to make more money than he could possibly spend from Microsoft. Let’s see, there is Paul Allen, and. . . .) So, what are the consequences? The consequences are that Bill Gates’ ideas are better than yours. He has $100 billion dollars to invest in any idea he thinks is a good one. My ideas don’t count for much, because I don’t have money to invest in them and the task of finding investors is daunting—they all want to make money and Bill’s ideas, the ones he is investing in, aren’t to make money but to make the world a better place but then, so are many of mine.

For those of you who think I am picking on Bill and Melinda, because they are doing such good things for hungry people, for poor people, etc. I say, “So?” (Thanks, Dick Cheney!) According to the Republicans, you and I would do a better job of spending that money than Bill and Melinda are doing. The Gate’s programs are the equivalent of “do gooder” government programs that we also have had no say in supporting. Like the government, Bill and Microsoft took too much money out of our pockets to support programs that we had no say in. And many of these Gates Foundation programs are for people in other countries. Egad, they are the equivalent of foreign aid!

Okay, I will stop picking on Bill and Melinda, a nice if somewhat dorky couple. Let’s look at the dark side. Other “business persons” have accumulated way more money than they could possibly spend and they are using their funds for not so “positive” purposes. Rich conservatives have endowed Washington think tanks from which cushy jobs are offered to disgraced Republicans. Also from these think tanks much questionable “reports” and “research” flows.

Companies in the health insurance field paid $609,000 dollars a day for the first six months of 2009, trying to make sure that any health care reform that was drafted didn’t hurt their bottom lines. Could you scrape up $609,000? Could you scrape up another $609,000 for tomorrow? Where can you get such amounts of money? Where did they get such sums? This is money that was outside of the huge profits paid to shareholders and monies paid to cover overhead and to pay claims, mind you. Do you think, maybe, it was from charging way more for their services than they actually needed?

These are examples of individuals and companies accumulating such vast amounts of money that what they think counts for far more than any one, any hundred, or any million of us think. Our representatives in Congress vote with their corporate sponsors, no matter what their constituents think, and they aren’t even smart enough to cover that fact up.

Allowing huge piles of money to be in the hands of so few people and corporations is anti-democratic. In fact, disparity between the rich and the rest of us in income and property and total wealth are all at all-time highs. If this continues, there will be no democracy, no “one man, one vote.”

So, if you think I am some kind of closet socialist, coming out, think again. This country figured out how to keep the wealthy in line. A line that allowed them every luxury a mind could dream of, just not enough wealth to buy the Congress or small countries. If you want to see what America looks like in such a system, look at the 1960s. The changes of the New Deal and from the stresses of WWII under Franklin Roosevelt’s presidency, given a little time to take effect through the 1950s, produced a balanced country where the rich were rich and the poor were poor but the rich didn’t run things entirely to their betterment. The middle class was large and robust and were the primary customers for American businesses, and if we could recreate such a balanced condition, business would boom (again) and poor people would be less poor and the middle class folks wouldn’t be huddling in fear of bankruptcy.

We did it before, we can do it again. Join the fight . . . or die poor.

May 3, 2010

The Health Care Debate is Over . . . Not!

Filed under: Politics — Steve Ruis @ 9:37 am
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Now that the health care initiative has been passed, many people think, “Well, that’s done!” Sorry, you are not even close.

Do the math, people! Regarding the so-called health care debate, the Republicans repeatedly offered the following plan: the health-care market can take care of itself, in fact, why not open up the entire country for health insurance competition, that should do the trick. Unfortunately we got a whole lot of that Republican reform, and it isn’t good for you and me! The reason why is simple—this is pretty much what we have had for the last 40 years.

If you go back to the late 1960’s, the health insurance industry paid out almost 95 cents of every dollar they took in to settle claims, that is to pay hospitals, doctors, nurses, etc. Their overhead and profit came out of the other 5 cents (2-3 cents for overhead, 2-3 cents for profit). In that business model they were like grocery stores in that they had a small margin, but a big volume. (This is the same strategy involved in many gambling casinos, just take a little off of the top of a major stream of cash, and viola, a healthy business, so healthy in fact that gambling licenses are often referred to as “licenses to steal.”) The 60’s health insurance companies were all quite sound financially.

Based on major reforms in the health insurance industry, undertaken by those self-same industries mind you, they now pay out only about 80 cents of every dollar they take in to settle claims! They are now a high volume, high return industry. And people are getting rich doing it, especially health insurance executives.

In the five years from 2002 to 2007, health insurance profits increased 438%. We were told this was due to rising costs, but rising costs tend to hurt profits, not raise them, so something is not quite right. Is there any way to check on medical costs during that period? There is! During the same period, the Veteran’s Administration’s health care arm (the VHA, whose patients are older and sicker than the average) reported cost increases of about 1% per year. And the poor Federal Government didn’t have the advantage of healthy competition to keep it’s costs down! (A recent Rand Corporation (hardly a liberal company) study identified the health care delivery system that shows the highest quality service and the highest customer/patient satisfaction is . . . wait for it . . . the VHA.)

I sincerely hope people wake up to the fact that a profit motive is the wrong motive for a health insurance company. Their profits are in no way linked to your health, just like Wall Street banker’s profits are not linked to your financial health. In an ordinary purchase, like of a car, the dealer/manufacturer wants you to be happy with your purchase because you may buy another car from them in the future. Does an employer-funded health care plan care about whether you are served well? Are you going to take your business and go elsewhere? Do you even have a say in which plan you have? Have you ever been asked whether your plan works for you?

Studies show quality ratings of health care services have no impact on whether employers continue to offer those plans. Only the prices of those plans has the major impact on whether your employer continues with a health insurance plan. (I’m shocked; I’m truly shocked!) So, the motive for insurers is to pretty much ignore quality of service but run costs up in concert with other health insurer providers, because the employers are going to pick the lowest cost plan available and if all of the plans increase their costs together, there will be no incentive for the employer to change plans (until they give up entirely and stop offer insurance to employees). By the way, it was legal, al least until lately, for health insurance companies to collude on costs. We thought that would help them control costs, silly us!

The health insurance industry, abetted by well-paid Senators and Congressmen, have stacked the deck in the reform effort in favor of “no substantive change” and no change means plenty of money in their pockets and lousy health care for you. If nothing else, ask yourself how this country’s health services, the best in the world after World War II, have fallen to mediocre levels (#19 in the world) while the costs have escalated to being twice those of any other country. (Hey, they are still the best in the world if you are rich or have a fantastic health care plan, but if you are poor or middle class, bend over, hold your ankles, and cough. We are talking about average service here. The “market forces” people with their “best health care in the world” claims are only talking about their plans, the high end plans.) We do not have the best health services available on average, just the most expensive, and the reasons are an out of control health insurance industry and the wrong motives for most of the players in the system.

The Republicans have no real ideas—they were against Medicare, they were against Social Security, and they were against Medicaid. All because they hurt the profits of their masters. Until we can rein in those profits, we will continue as we have.

We will have to go back to get a public option or die . . . poor.

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