If there is one topic that raises the blood pressure among business leaders, small and global, is Workers Comp. It adds to the expense burden of every employee with states that require coverage. Insurers to business do not have an incentive to reduce this burden because they make money from the premiums paid.
Why hasn't the Health Reform debate included the potential for reducing the health care costs of persons injured on the job? Some claims result is multi-year payments that contribute to the escalation of insurance premium costs to businesses.
For employer-based insurance, I would think that every local Chamber of Commerce, every state governor or controller, and every state health care insurance provider would be camping on the steps of the Capitol to obtain the lowest possible, yet equivalent to today's, costs for medical care incurred by on-the-job injuries.
Who knows, there may be some Republicans among this heavily affected constituency.
Labels: governors, health care financing, labor entitlements, Republicans Bush Wackovia Pelosi crisis, workers comp
Health Care as a Moral and Constitutional Issue
In the past five years, we have had a national focus on the American system of providing health care to its citizens. During his first term, President Obama sponsored and achieved the passage of federal legislation aimed at establishing a national policy for health care. Attempts by many groups to introduce a single payer system, basing health care for everyone on a federally-funded insurance program akin to Medicare or the Veterans Health Services. The private insurance industry and the AMA fought for no changes, invoking 1930's images of socialized medicine under a totalitarian state and by providing media coverage to assert that the American approach to health care has resulted in the best health care possible in the world. Neither end of this political spectrum was successful in defeating all aspects of the other's arguments. The Affordable Care Act of 2010 (ACA) was the result. Almost immediately and henceforth to today, the Republican leadership in Congress has attempted to repeal the ACA and repealing the act was a principal theme during the Presidential election of 2012. To date, those efforts to repeal have been defeated by vote and by reelection of President Obama for a second term.
We pay taxes so that the government can provide the entire nation with a just program or entitlement. We like our highways, our air controllers, our ports and shores protected by our military. Why don't we like the government to provide a decent health care system for ensuring our human right to life, liberty and the pursuit of happiness? Why is not a healthy life a communal responsibility that our taxes should support and sustain?
WHAT MORE NEEDS TO BE DONE?
The Cost of Medical Education One cost driver in the health care industry is the cost paid to educate and train a physician. While a student in medical school, student loans help pay tuition costs and housing expenses in excess of $50,000 per year. After four years of medical school and their residencies of up to three additional years, the amount of personal debt from student loans for a licensed, medical doctor makes the National Debt seem trifling when compared to the monthly payments on her loans.
Part of the expense for training medical doctors is the period during which they are supervised by a senior physician, either faculty member or by an expert in a specialty. During their internships and residencies, doctors-in-training make the mistakes for which a practicing physician risks being sued for malpractice. A patient who consents to this level of care will have at least two doctors at all times. If the patient's attending [viz. own] physician monitors the care and treatment while hospitalized, the patient has three physicians who are paid from several sources. Level of care, or intensity, affects the prices as well, because of additional clinicians-nurses and technicians-plus specialized monitoring equipment, breathing assist equipment, and so forth, will raise costs as soon as the patient's physician orders it. In a teaching hospital, the patient's own physician normally defers to the attending physician, a senior resident or hospitalist physician or a consulting physician accountable for the patient while in the hospital. Because mistakes concerning a patient's care and treatment--including survival--are part of the learning process, patient care at teaching hospitals costs more. We learn from our mistakes.
Provider Fees A part of the cost algorithm that receives the most press and legislatures represents the prices hospitals and physician groups charge for their services. The public does not get information about why one hospital charges $X and another charges $Y for the same treatment. Physicians set their own fee schedules, even if their revenues reveal a variety of payments for fees charged seemingly unrelated to any published fee schedule. The expenses that institutional providers accrue from having recruited "the best and the brightest" clinical staffs, constructing modern facilities, and updated laboratories and equipment available to support a star surgeon or treatment group, plus granting practice privileges.
Every part of this labyrinth of a guild-segmented, private health care system makes its revenue according to different schedules of payments for patient care and treatment plus from auxiliary sales revenues, such as gift shops, parking, catering, etc. The effective revenues for patient care differentiate by retail or patient payments, by patient insurance reimbursements, by equity sales and investment returns, by Medicare, Medicaid and state health department price schedules for direct costs and negotiated rates for indirect costs. Non-profit hospitals and clinics can accept charitable donations under provisions of IRS Code 501.c.(3).
The key at each level of purchasing and for approving reimbursements has two parts: the wage, or manufacturing cost, plus overhead. Overhead includes the employee wages and benefits for administrative and technical support personnel, the proportionate expense for providing the clinical facilities, medical equipment used for diagnosis and treatment, the patient beds and rooms, utilities, acquisitions for nuclear medicine plus containment facilities, and a portion of the institution's debt service for those bonds that built the place. There are hundreds of additional components of administrative overhead costs built into each service charge, procedure done, etc.
Medicare's vetting and reimbursement bureaucracy is not an overnight service. For large medical centers and hospitals, the delay between incurring an expense and receiving revenue can extend weeks and months. Therefore, an additional piece of overhead are the costs incurred before receiving revenue from services, i.e., the cost of the float or sufficient cash to pay employees and its vendors.
To help hospitals with their float, Medicare instituted regular cash payments each month on the assumption of the amount Medicare eventually will pay, or not pay. Hospitals negotiate their overhead percentages with Medicare. The reimbursement rates from Medicare and Medicaid are set in Washington.
Hospitals bill private insurance companies for services rendered and, after a lengthy vetting of these claims, decide whether or not to reimburse the hospital, physicians, medications and other supplies required by that disapproved procedure. If the patient has Medicare A and B, private insurers will be billed for the difference between the expected Medicare payments and the retail or, most often, negotiated plan prices for the service. Hospitals maintain a list of prices for all of their services; Medicare/Medicaid will pay a percentage of the price, now below 50 percent; private insurers will make up some of the difference according to negotiated plans; and the patient pays co-payments. If the service's price represents 100 percent, and the revenues from insurers, research funds and Medicare only add up to 70 percent of the price, the hospital may bill the patient for that 30 percent. However, providers write off the difference between Medicare reimbursement and amounts of co-pays. Such write-offs are referred to as contractual allowances. Under Medicare Part B, the patient may be on the hook for 15-20 percent. Fifteen cents on the dollar may seem fair, except for the inability of the patient to decide whether to incur a cost being billed at full price. Routine operations on the heart and lungs, other organs or the body, are part of "accepted" practice today, whereas they may have been declared "extraordinary" or "experimental" compared to the state of the art at some prior time.
Costs for Inpatient Care The Admission process does not inhibit providers from full-cost-plus pricing. Once a patient signs the admission form, the patient accepts responsibility for all costs incurred while hospitalized. From that point on, our private health care system gives the green light for spending what the physician considers prudent, necessary care and treatment. After all, we agree to inpatient care because we "know" that the hospital is the place for the best care. As dubious as the patient's assumption may be, our society expects the best care. We Americans are reminded quite frequently in the media and by the health care industry that "our country offers the best health services in the world." That assertion is a pernicious public myth that is interfering with reforming our national health care system.
According to this commercial propaganda, a public-option health care system takes away our choice of physician. Most HMOs, keystones of Managed Care, require members to choose from among the physicians they have. Leaving one's physician may seem traumatic after a number of years, but employer-based health insurance can require one to do so in a job transfer. We have to inquire if our regular physician accepts our private insurance plan before receiving services. There are no standard reimbursement rates for professional fees and office visits. Medicare and Medicaid beneficiaries have to ask if a doctor accepts those patients. Sometimes, one hears that the doctor is no longer accepting new Medicare patients. I doubt if that is legal. The Medicare law maintains that if a doctor has just one Medicare patient out of hundreds, that doctor must accept new Medicare patients. The only way a doctor can refuse a new Medicare patient is if that doctor stops treating all Medicare patients in the practice. I have had to find a new physician because my doctor closed his mostly-Medicare/Medicaid practice. He said he could no longer afford to maintain his practice.
Will rationing Health Care force me to wait when I need treatment? Another argument is that our health care will be rationed and we will have to wait long periods to receive needed care. Prior to the full implementation of the Affordable Care Act of 2010 (ACA) unless it is an emergency, we have been content to wait for our doctor's next available appointment. If during that office visit our doctor orders x-rays, CT-scans, PET scans or an MRI, plus blood work, we have to wait until we can get to the pharmacy or the laboratory that will do the procedure. For the scans, we have to wait for the next available slot. After the patient accomplishes all of this, and regardless of the patient's transportation resources, the next waiting period will be with our doctor or with a specialist to whom the patient has been referred. Further, if the attending doctor concludes, the patient needs a specific surgeon or other specialist physician for the best treatment, or if the patient needs an organ transplant, another waiting period happens. Having to wait for necessary care and treatment is already the major inconvenience and potentially harmful to the patient in our American health care system. The patient incurs the costs of time, transportation and less-than-optimal health without any recognition of these costs being included in the economic cost algorithm.
Informed Consent for Medical Services While In The Hospital When a comatose, or mentally inhibited, or parent of an Emergency Room dependent child as patient, or a non-English speaker or someone who knows nothing about medical procedures, a nurse, social worker or doctor tells them at the time to sign a form that he or she has been informed about a pending procedure. How does the provider or physician expect the patient or patient's representative to sign an informed consent to treatment before the fact? Even though the patient must assume financial responsibility for the entire inpatient episode, patients have no information upon which to make such a choice.
And yet, the most cited cause of individual bankruptcy is a person's inability to pay for health care received. Suppose that person makes about $45,000 per year in take-home pay. What rationale exists to expect that patient to pay $25,000 $50,000 $300,000 and still have a place to life, food to eat, and time for rest. Sure that person signed that agreement of financial responsibility, but he or she may have made a different choice even to live with infirmity. A parent may choose to contribute to a retirement fund or a college fund, rather than be impoverished by medical bills. A patient may decide that he or she will treat or live with a health condition until they die. That is personal accountability and an informed one if the amount of money required for inpatient treatment could be known in advance.
Have a pet? Every veterinarian has a listing of prices per procedure, so you might decide not to treat your pet for cancer because it will cost $3-5,000 for the surgery, chemotherapy and radiation, or you can look for another, more affordable price. That is an informed payment process.
Our private health care system in America can bankrupt us-because a drunk driver ran the light. Is that right? Or, too much oxygen was given during anesthesia resulting in the patient's being deprived of a normal life, sometimes for decades. Is that right? Most providers, physicians, laboratories and other professional health care entities require or state that the patient agrees to arbitration of any dispute following the service. Is that right? Why isn't our judicial system competent or able to resolve these issues? Please ask for an explanation of that arbitration provision. Will the provider refuse care and treatment if one does not agree to arbitration before the fact? One physician to whom I had been referred did refuse to see me because I refuse to agree to arbitration. So, I went on record with my insurer and went to another physician.
The Constitution does not make a provision for arbitration as a substitute for access to the courts system. What is the motivation for arbitration? It is to lessen the costs of a mistake, an accident, or malpractice. The patient does not have to agree to arbitration, regardless of consequences. The court system remains available.
There is more work to do for improving our health care system. These questions are for politics, not religion-based morality or individual codes of ethics. Our society that accepts living within the social and political boundaries of our Constitution and judicial due process determines the secular basis for such a question through its laws. We as a nation should be more scrupulous about knowing the content and intent of proposed legislation as they enter our legislative process, not after they are enacted.
Change, reform is happening. Love it or leave it. (I did not originate that last challenge, but it now seems useful)
I would like every member of Congress and the DHHS senior staff to participate in the process for reforming health care in this time of crisis in federal budgeting to declare regarding personal health care:
- "What is sufficient for you personally and for those you represent?"
- "How will you know if reform is best for you personally and for those you represent?"
Then, I would like those answers published and read on television.
If the President wants this process to foster creativeness, then I believe this last step should be completed by the Administration Departments and the Congress--and made public--before Congress adjourns in 2012..
Labels: Administration, health care public Obama/Biden competitive markets anti-competitive, health care public plan, lobbyist, McConnell, Reid, single payer
Congress failed to help the public, their constituents, to have the means to acquire more control over their debt management and, as a result, to improve their ability to access consumer credit, apartment rental units, jobs, and sense of self-worth. Indeed, the recent legislation has had the effect of making retail credit less attractive to consumers.
Congress failed to address the shrinking of real estate market values for property owners whose property is near to a foreclosure sale, a short sale, or an auction. Reality check: If all homes in a particularly wealthy neighborhood have an average market value of $1.3 million (determined from the prior six months' sales prices), the entire neighborhood's market value can fall several percentage points if a small number of sellers have lost their jobs and can no longer pay their mortgage loans, or if a small number of repossessed homes go on the market at prices over 50% lower than the market value of homes in proximity, the entire real estate market in that area will experience a reduction in home equity value and in sellers' asking prices. Given the lower market value of competing homes in an area, buyers can take advantage of this price cutting, negotiate still lower home prices and the purchase prices negotiated will establish the new average market value for like homes in that neighborhood, perhaps around $675-700,000 or 52% lower.
The banks also have changed their underwritiing standards for mortgage loans. No longer can a mortgagor expect to find a lender using the 20% down/80% loan criterion for taking a new mortgage loan. More emphasis is being placed on the applicant's LTV (loan-to-value) as determined by the appraiser. An equivalent ratio of retail credit-debt-used to available-limits also affects the underwriter's criteria for mortgage loan approval.
There are no steps I can take to increase my credit score, other than to pay down my debts on time and with at least the minimum amount due. I have never had a mark on my payment record, I have owed more than now and I am paying, with exceptions, more each month than the min. amt. due. A year ago, my debt to available credit ratio was 47%. This ratio makes up approximately one-third of my credit score. Another one-third is affected by my debt and payment history. I used to not worry about this latter portion because of my cash available from my home's equity and my IRA. Lenders kept raising my available credit limits because of my access to liquid assets (i.e., to cash). Special rate offers enabled me to transfer a debt at 13.25% to a 0% debt rate for one year, thereafter at an 8.9% rate or to transfer a debt to an account with a 4.99% rate until the entire amount transferred was paid off. I used both, depending on which gave me the better cash flow in the future. Because of my excellent credit score and report, I could refinance my property and pay off all retail credit debt in escrow, and still keep my mortgage payments at almost the same amount as prior to refinancing. Refinancing is no longer an option, because there is no longer any equity in my home's value. TARP and other federal stimulus funding did not directly address the mortgage loan market's dependence on LTV, compounding the error of not addressing the shrinking values or credit card charge limits.
On their own, with nothing other than their ability to do so, all but one of my creditors have lowered my available credit by several thousand dollars. Now, my debt to available credit exceeds 85%. Nothing has changed on my end. How will this 47% to 85+% affect my credit score? I don't know and the credit bureaus are not talking.
In addition, with no constraints or sanctions for the card issuers, and despite the infusion of cash by the Treasury Department and new legislation, creditors still can raise the interest rates on retail credit balances whenever it makes business sense to them. When this has happened to me, I have seen the minimum amount due, as posted for my monthly statement, double my monthly payment.
Because of our "free market" economy, Bank A could care less about Bank B's change of the minimum amount due on Bank A's credit card balances. I put quotation marks around 'free market' because we have never in this country, since the Whiskey Rebellion, had our financial markets unfettered of federal and state regulations and rules for operating. Thus, if Bank B finds out about Bank A's increasing interest rate or minimum amounts due, Bank B can do the same thing. It every bank adopts this method for its revolving credit accounts (credit cards) this action becomes an industry standard way of doing business, not anti-competitive.
This ability to raise or lower interest rates does not stop per se the entry of a new bank into the retail credit market nor does it lead to a monopoly, so our existing anti-trust laws do not offer the consumer any basis for complaint. It seems to me that collusion among bankers or establishing a new industry standard for doing business in the retail credit market should be wrong. After all, the banks' actions have harmed the public at large, especially those persons living on fixed incomes or those persons whose household income is no longer sufficient to pay off existing loans plus provide for day-to-day living expenses.
I wrote in an earlier post about the curious behavior of banks' offering extremely low interest on savings accounts and certificates of deposit (CDs). The cost of cash to a bank, or the federal funds rate, has held constant for the past six months at 0.25 or $ 99.75 per $100 bought. This same bank will lend this $99.75 through a variety of loans and credit card accounts. To attract private capital, a bank today will pay an average interest rate of 1.311 to 1.321% on an average minimum deposit of $10,252, dependent upon the number of days up to 365 days those deposits remain in a money market account or a savings account. Banks will sell CDs of various time periods at an average yield of from a 3-month CD at 0.923 for an average purchase of $8, 547 to a 5-yr. Jumbo CA at 2.728 for an average purchase of $100,000.
In other words, a bank can pay 0.25 % (federal fund rate) up to 2.728% (to depositors) for the bank's operating cash. For an idea of how profitable this capital is, compare the following rates charged for different loans and consumer credit accounts:
- WSJ Prime Rate 3.25%
- Mortgages 5.372 APR for FHA 30-yr. fixed
- Credit Cards:
- Balance Transfer Cards 13.77%
- Cash Back Cards 14.35%
- All Variable 11.14%
- Low interest cards 9.17% [Source: www.bankrate.com, 20 July 2009]
On the other hand, there is nothing to interfere with a new lender coming into the consumer credit market offering completely different, more customer friendly and less costly terms for their customers. Any enterprise can go against an industry practice and such an ability can change the market practices completely.
With an abundance of Stimulus Money available today, perhaps some entrepreneur could have access to the minimum capital required, by regulation, to start a new consumer credit card business as a bank. A strong, perhaps using a different business model, competitor is something that we all need now that the banking industry standard practice for retail credit accounts is stifling small business owners and retail customers from buying and rebuilding our economy with more jobs to handle increased production and sales.
The next Reform stage should start at the local level, incorporate the Enterprise Zone incentives for small business and tax bank revenues from consumer loans and credit card accounts, including all associated fees, for the rate amounts above 10 percent. Residual TARP and Stimulus funds should be used to establish reserve levels before being remitted to the federal government.
Labels: banks, cost of money, credit cards, FICO scores, loans, reform legislation
Many attempt to reform or make changes, whether in an office or in a community, fail because the authority puts the requirement onto managers or supervisors or city department chiefs already in place. I believe that most people want to do their jobs well. If the people given the assignment to redesign a process or function have been in charge of the current way, it is safe to assume that they believe their work is being done in the right way. And they are doing their jobs well. Asking them to design a new way of operating is at once sending them the signal that they are not
thought of as doing their jobs well. It also can challenge their self-image or invested ego in an alienating way. Leaders may forget that it is more important to know what is understood rather than what is said.
One reason for charging obscenely high fees for being the consultant hired to design and implement such changes is the knowledge that long after the engagement has ended, every failure or mistake can and will be blamed on the outside consultant.
Labels: change, communications, consultants, fees, organizations
On June 28, I posted my input to the White House Office for Health Reform and Special Counselor to the President, Nancy-Ann DeParle. See Changes for Health Care Reform. In the July 2 newsletter FierceHealthcare, Ann Zieger posted the following news item:
White House health reform director Nancy-Ann DeParle is in a tight spot. A new investigative report has concluded that DeParle earned more than $6 million serving on the boards of major healthcare corporations, some of which have been accused of fraud, mismanagement and regulatory violations during her service there.This cloud hangs over this new Administration's appointee and it could have been prevented by an adequate vetting of Ms DeParle's ongoing industry relationships. If the President has relied on her to form his health reform program or to validate its feasibility, I'm afraid we will end up with the missmash of tweakings of the current system much the way the Credit Card Reform legislation turned out to be. Only the card issuers' interests were protected. I have this feeling about health care reform that is very similar to credit card reform.
While there's no evidence she was aware of or involved in allegedly illegal activities, she served in three cases on board committees overseeing the companies' legal and regulatory compliance. That certainly doesn't look good, regardless of what actually happened, particularly given her rep as a progressive.
One example of the problem was her involvement as director and compliance committee member at DaVita Inc., which has been subject to investigations into its billing and drug-prescribing practices. She also served in a similar role at medical equipment supplier Guidant, whose execs apparently knew of cases in which its devices failed but never disclosed those failures.
To learn more about these issues:
- read this Kaiser Health News piece
What is the problem? Is Obama thinking that his campaign blog was sufficient for leading the actual reform process? I hope he's not the boss who, after sending out copies of his opinions on a topic, assumes the recipients will faithfully refine and produce a final statement as President. I suppose Joe Biden is doing something, but I'm unclear where is turf responsibilities are. The President and his Chief of Staff move very quickly and may be outpacing their staff. Both are known to be extremely intelligent, fast thinkers.
One of my bosses was like that. In fact, those of us on his senior staff tried to raise his awareness of what his work mode did to us. For one thing, once he had grasped the nature of the issue and had formed his preferences on how to resolve it articulated or not, his mind moved on to other things. Not being mind readers or boss whisperers many of us would have questions about filling in the blanks as he had done in his extraordinary mind. His usual reaction to someone asking for more information would cause a frown and an impatience. Such a boss can be very intimidating and there developed a reluctance to raise issues or to revisit the original item. So, one staff meeting, we turned the tables and had a candid discussion with him about our division's decision-making process, specifically his. Well, he was quite surprised and it took him a while to fully digest our comments. To his credit, he really tried to be more expressive, informative and open to our ideas and concerns.
Is this what is causing simple yet crucial mistakes by the White House staff? A little hero worship? Is the almost messianic awe President Obama evokes inhibiting his staff? Or is the pace of change too ambitious for Washington--and the nation? This current time of change may suggest the need a for a breather.
I am very disappointed with the shortcomings of the legislation just enacted on credit cards.
Not only was the issue of a federal usury limit not open to public discussion, the new law does not restrain the retail credit issuers' ability to make unilateral decisions for changing the terms and conditions for using their cards. Not only have issuers pushed up daily interest rates and shortened the payment due date interval, almost all issuers associated with VISA and MasterCard have reduced the amount of available credit for their customers.
Economics can be summed up as the study of the commerce of rents. When I use one of my credit cards, I rent cash from the card's issuer on previously established T&C. For this, the issuer bills me monthly for rent in the amount I paid to the merchant. Using VISA as an example, the merchant will receive about 97% of the amount (including sales tax) shown as the transaction amount charged to my card. The card issuer has an agreement with VISA for VISA to function as the clearing house between me and issuer. For acting as the intermediary or clearing house, the issuer pays VISA to accurately record the transaction total for which I rented cash using the issuer's card and pays VISA the cash transaction total amount. The next paragraph explains two different corporate policies for accounting for revenues.
It's to the merchant's advantage to have robust sales paid in cash or by credit card. The merchant wants to maximize cash revenues to pay the costs of doing business. The merchant may also purchase inventory using rented cash, viz. credit, to ensure a predictable cash inflow is vital for remaining in business.
What we need for our economy now is Rent Control, plain and simple. Instead of apartment rents, this rent control is about cash.
Banks saw an opportunity to expand their retail banking products to include credit cards for individuals and businesses. Prior to expanding into retail and wholesale credit business, the banking industry's markets were underwriting and mortgages, also known as funding loans and structured repayment loans for real estate and personal, unsecure loans. Bank revenues came from interest charged on mortgages and other loans.
Long-term reform of the US banking system will involve parsing out the different kinds of credit instruments in different markets to establish requirements of a new system. Currently, the banks seem focused on cash inflows and minimal cash payments. It seems to me that raising interest rates for savings accounts and CDs would increase the volume of deposits and purchases of CDs even at rates up to half of that charged to its business and individual debtors. The banks, however, seem unwilling to pay out interest on savings and CDs at rates more than 2% of the banks' cost of money or to lower lending rates even when their cost of cash could produce 400-500% profit margins. Instead, absent government regulation, the banks are realizing profit margins for retail credit over 3,000%. When banks can buy money at 0.0-1.23% for their reserve requirements, investments and loans, they charge fees and interest for credit card receivables at unregulated rates of up to 35-40% per dollar owed, the card users provide not only cash related to principal, but also the free cash received from payments for interest and fees.
The Obama Administration did not succeed in reforming a banking system developed in 1934 because the U.S. credit-based economy remains insufficiently regulated to encourage savings, to stabilize the manner in which the banks make their profits from retail credit and mortgage loans. The federal infusion of cash prior to January 20, 2009, gave carte blanche without mandating terms and conditions for using those $ billions offered for the taking. After the Obama Administration set rules on the use of stimulus cash, banks could not pay back those funds quickly enough. Had Congress created a strong, national bank for regulating debt, cash reserves and currency value, then true reform could have been possible.