Health Care Costs Continue To Rise

Because many people who supported the PPACA, both popularly and derisively known as Obamacare, did so from moral fervor and political partisanship (as did many opponents, often with the added fecal nugget of racism dropped in) they were utterly uninterested in any epistemological or evidence based evaluation for the claims that Obamacare would lower premiums, deductibles, and health care costs. 

Supporters took it as an article of faith that Obamacare would do all of those things. And if you questioned that belief or wondered if there were a better way of lowering health care costs, lemming like supporters squealed that you were a dummy, a useful idiot for Republicans, or worst of all some sort of hateful right-wing conservative cretin misogynist misandrist who just wanted people to die.

Silence heretic!!!!

Well.

Republicans Fail to Repeal or Replace ObamaCare

The Republicans control the House, the Senate and the Presidency. Democrats can use procedural tricks,Senate tradition and appeals to the judiciary branch to slow down portions of the Republican agenda, but by and large Democrats can't stop anything that Republicans are bound and determined to get. The PPACA was passed without any Republican votes. Republicans swore that once they had the power to repeal it the PPACA or ObamaCare was dead meat. During the Obama Administration, the Republicans voted time and time and time again to kill ObamaCare. Some said they would replace it with something better but just about all of them agreed that ObamaCare had to go. Like yesterday if not before. But a funny thing happened over the years that ObamaCare was the law. A noticeable portion of the Republican constituency found that even as they hated ObamaCare and of course Obama, they loved the PPACA. Many of these people were so stupid that they didn't realize that the PPACA and ObamaCare were the same thing. 

Once Trump won the White House and had Republican majorities in the House and Senate ObamaCare should have been easy to repeal. But we saw this week that when it really came down to it Republicans, at least in the Senate, were people who, as James Brown might have said, just liked talking loud while saying nothing.  At this time the Senate could not bring itself to modify the PPACA or to remove it.

ObamaCare Lives Another Day

In case you somehow hadn't heard the Republican members of the House of Representatives could not come together to support the American Health Care Act (AHCA). I don't have a lot to write on this at the moment both because (1) I've already written at length why I think that the law (PPACA or ObamaCare) that the AHCA was designed to replace is destined for a slow ignominious demise and (2) my Day Job supervisor has made it crystal clear what my true priorities are during quarter close. And they aren't blogging. But I do just want to say that I think that both the defenders and detractors of ObamaCare are missing some critical points by getting lost in the partisan weeds of denying President Trump a win or trying to ascertain who is up and who is down in the Byzantine politics of Washington D.C.

Numbers don't lie. PPACA is a bad deal for younger healthier people. It doesn't reflect their expected value or risk. It's mispriced. They will, all else equal, continue to avoid enrolling in the expected or promised numbers. That's not going to change. The other thing which isn't going to change is that some of the very people who for the past seven years ran around spitting at ObamaCare, waving "Obama is a monkey" signs and voting for people who swore blood oaths to rip up the PPACA root and branch, turned out to have a different feeling about ObamaCare when Uncle Bud was covered for the cancer meds he needed or Cousin Sherri finally got enrolled in a program to help with opioid addiction. There are relatively few people who will, if push comes to shove, place their ideology over their survival. They won't brag about this. It's not the stuff of heroic stories. But it is human nature. And even a lot of big bad Republicans who wanted to kill Obamacare still flinched away from taking away popular benefits.

Now that there is Republican control of the executive branch with all of the awesome discretionary prerogatives of that come with it, Trump and his minions could accidentally on purpose help along ObamaCare to an early grave. And there wouldn't be too much that Democrats could do about it. Or given Trump's desperate need for acclamation, he could attempt to reshape the PPACA via executive fiat and administrative choice into something that keeps coverage for many voters but slows skyrocketing premium and deductible growth. I don't think this will work even if Trump were a detail oriented policy wonk, which he is most assuredly not. So the most likely scenario is that the PPACA continues to limp along until the next midterms and then the one after that and so on. It's never going to be unpopular enough to kill. But it will never be popular enough to fix either. 

ObamaCare Revisited: Premiums Go Up

Surprise, Surprise Surprise! The premiums for most 2017 ObamaCare policies will go up even higher than expected. For example some non-profit companies are considering 60% premium increases. 

Blue Cross Blue Shield of Texas, which has about half the state’s exchange customers, wants to increase premiums almost 60 percent for 2017. Scott and White Health Plan wants to ratchet up premiums over 30 percent, and Cigna, 24 percent. Aetna and Oscar are planning double-digit increases, too. UnitedHealth, the country’s largest insurer, is pulling out of the exchange business in Texas and over a dozen other states. In justifying its rate increase to state regulators, the company said it paid $1.26 in claims for every $1 in premiums collected last year. For the state’s largest insurer, that resulted in a loss of $770 million in the individual marketplace. And Blue Cross is projecting another loss this year for its exchange business.

Every day there is a new story about this or that insurance company raising rates, leaving the exchanges or halting expansion plans.

Insurers want to crank up the cost of health insurance premiums by as much as 45 percent for Illinois residents who buy coverage through the Affordable Care Act's marketplace. Blue Cross Blue Shield of Illinois, the most popular insurer on the state's Obamacare exchange, is proposing increases ranging from 23 percent to 45 percent in premiums for its individual health-care plans, according to proposed 2017 premiums that were made public Monday. The insurer blamed the sought-after hikes mainly on changes in the costs of medical services.

Aetna (AET) said Tuesday it is canceling plans to expand into five more states next year and will reassess its involvement in the 15 states where it currently offers coverage on the individual exchanges. Aetna -- which expects to lose $300 million (pre-tax) on its Obamacare business this year -- must conclude its review by the end of September and notify states where it intends to withdraw.
"...in light of updated 2016 projections for our individual products and the significant structural challenges facing the public exchanges, we intend to withdraw all of our 2017 public exchange expansion plans, and are undertaking a complete evaluation of future participation in our current 15-state footprint," said CEO Mark Bertolini in a second-quarter earnings statement.

More health care co-ops are failing. We now know that it is not possible to offer gender specific free services to half of the population, prevent insurance companies from charging age or gender based actuarially accurate insurance rates, force insurance companies to cover anyone with preexisting conditions, increase reporting requirements and transaction costs and still make premiums drop by $2500 for a family of four. Who knew?  Who could have guessed this? Wow! If only someone realized that despite good intentions it's not possible to revoke the law of supply and demand. If only someone could have pointed out that insurance packages priced for older people or those with families or chronic conditions will lack allure to younger people, childless people, single people or healthy people. And so, all else equal, those people won't buy overpriced policies. Or they will game the system to get coverage when they're sick and drop it later. So it goes. I just hope that the next time someone demands that the federal government do something right now because we have an "emergency", that we realize that not all of those opposed are inbred mouth breathing bigots who take perverse prideful pleasure in preventing policy progress. Some are obviously. But others really have examined the facts and reached different conclusions. The people who predicted that contrary to the President's claims, that all else equal exchange and individual deductibles and premiums would rise, not fall, were correct. The PPACA supporters were wrong. This bears repeating. One side was right. The other side was wrong. Sometimes even a broken clock is right. This doesn't mean that PPACA detractors were right about all aspects of the law. They weren't. PPACA supporters can still argue that there were several other reasons to endorse the PPACA. I don't say no to that. But cost of coverage for people who are not 100% subsidized wasn't one of them.

It's not simply a question of loving or hating the President, his political party or his rivals. This is an empirical issue now. People on the exchanges who are not completely subsidized will pay more for health insurance. Unless they all happen to come into inheritances, get themselves a Sugar Daddy or obtain job promotions with salary increases outpacing their increased insurance costs, they will need to make cutbacks elsewhere. Presumably, they won't like that. Some may drop the policies. And although those customers who are subsidized won't be paying the full increased cost, the government (which is to say the rest of us) will be. There's no such thing as a free lunch. Note that the President is not talking loudly about the PPACA cost benefits. Instead he's focusing on expanded coverage and the "moral rightness" of the PPACA. I've always said that the honest and fair policy decision would have been to directly raise income taxes to provide health care coverage for the needy. That path would have had fewer market dislocations. But what's done is done. The PPACA is here to stay for the near future, at least until it collapses under its own contradictions. If you are paying more for a policy on the exchange, I hope that you think it's worth it. Perhaps belatedly recognizing that PPACA cost increases are unpopular some PPACA supporters have retreated to their fallback position that things are fine because areas of the health care market that PPACA hasn't reached yet are doing well. This argument is unconvincing. I work in IT. I create and approve changes to critical company processes. If I delay or break my department year end processing I can't defend the resulting chaos by pointing to the other departments which I didn't wreck. Supervisors wouldn't be sympathetic to that line of reasoning. And the American public shouldn't be either. 

The next President will have the opportunity to make changes to the PPACA. He or she (most likely she) will need to take into account that people respond to incentives, good or bad. Just because it would be nice if people behaved in a way opposed to their economic best interest doesn't always mean they will. You can cajole them I guess but good luck with that. It would also be "nice" for PPACA diehards if companies just agreed to continue losing money for the greater good but life doesn't work that way. To paraphrase Bon Scott, even the kind man is going to ask his friends, what's in it for me? For too many people the answer in regards to ObamaCare will be not much. 

Is ObamaCare Really Falling Apart?

Many people complained about higher premiums during the first Patient Protection and Affordable Care Act or PPACA (hereafter referred to as ObamaCare) enrollment period. With impressive celerity some media analysts and other ObamaCare supporters haughtily declared that all of those people were liars, frauds or Republican stooges. They were just too stupid to understand the good deal they were getting. Well you may have noticed that we are in the middle of a new ObamaCare enrollment period. And this time the profusion of complaints about sky-high premiums, high deductibles and co-pays, high drug prices, narrow networks or limited coverage simply can't be ignored or dismissed any longer. There's simply too much data available from the public, HHS, the various state insurance commissioners and the insurance companies themselves. Too many people are discovering that caveat emptor remains excellent advice when it comes to ObamaCare. Roughly half of the health co-ops have gone out of business while many insurers are requesting and obtaining double digit percentage increases in premium prices. If you, like most workers, are not receiving double digit raises at your workplace, an 11% increase in your monthly or bimonthly insurance premium presents a problem. Other insurers are hinting that they may leave the exchanges all together. The idea is to make money, not lose money. United Health is estimating an exchange loss of as much as $500 million. The best that supporters of ObamaCare can claim in response to this parade of horribles is that well things always cost more; this is probably the Republicans' fault somehow, and dammit we need single payer now. With the exception of a long shot funding question case argued by liberal apostate law professor Jonathan Turley and another frivolous dispute over who must sign a note saying they disagree with birth control coverage, all of the legal avenues to repeal or destroy ObamaCare have failed. Legally, anyway, ObamaCare is here to stay. The Supreme Court has twice declined to invalidate ObamaCare. Liberals met these Supreme Court decisions with transcendent joy, a Bronx cheer to conservatives, and internalization of the idea that legal victories meant that ObamaCare was a good thing. After all the Supreme Court said so. Anyone who questioned ObamaCare obviously hated people without insurance and wanted them to die. That is what many of the smart compassionate humane people told themselves. 

This is something of a deflection. In the C.S. Lewis Narnia book, The Magician's Nephew, Queen Jadis (The White Witch) tells the story of how, when faced with defeat in a civil war, she used a Deplorable Word which destroyed all other life on the planet besides herself. When questioned about the morality of this act Jadis responded that she won and winning is the only thing that counted. Fortunately there are no Deplorable Words for anyone to use. Still, like Jadis, ObamaCare supporters seem to have forgotten that a project's success can't be measured by just one variable. The only metric which they want to discuss is the number of people covered. What good is it to have people "covered" if they can't afford to use their "coverage"? Just because ObamaCare has been upheld in the the courts doesn't mean it will succeed. The problem with ObamaCare is (besides what I think of as an intolerable diktat to purchase a private good) is that the economics don't make sense. I said before that this ObamaCare program wouldn't work as designed. And it hasn't. ObamaCare framers attempted to ignore reality. Whether we like it or not, all else equal the population of older people costs more to insure than the population of young people. The population of women costs more to insure than the population of men. It's not possible to increase the coverage that insurance companies must provide, prevent them from charging gender and age based actuarially accurate rates, force them to cover pre-existing conditions, and think that consumer costs will decline. Costs won't decline! It's not politics. It's just math. 

BlueCross BlueShield of Tennessee said the 36 percent rate increase was necessary because it had lost money on its marketplace business after underestimating the use of health care by its new customers. In Minnesota, officials approved increases averaging 49 percent for Blue Cross and Blue Shield of Minnesota, the largest insurer in the market. Even with the increases, the company said, “Blue Cross is likely to experience continued significant financial losses through 2016.” Gov. Mark Dayton of Minnesota, a Democrat, said he was “extremely unhappy” with the high rate increases.

The Iowa insurance commissioner, Nick Gerhart, approved rate increases averaging 29 percent for Wellmark Blue Cross and Blue Shield, the state’s dominant health insurer, and 20 percent for Coventry Health Care. The higher rates, he said, were justified based on the plans’ experience. Rates will rise next year by an average of 4 percent in California, one of the few states that actively negotiate prices, state officials said. In New York, state officials said rates would rise by an average of 7 percent. In Florida, consumers will see increases averaging 9.5 percent, the state said. But in Hawaii, the insurance commissioner this month approved rate increases averaging 27 percent for the Hawaii Medical Service Association and 34 percent for Kaiser Permanente health plans.

LINK

Premiums, deductibles and co-pays have risen and will continue to rise. Younger and healthier people, faced with premiums and deductibles that don't reflect their risks, will be less likely to buy costly health insurance simply to subsidize someone else. The people who will purchase this insurance are also the people most likely to use it. That's adverse selection. Well that's great for the customer. But it's bad for the insurance companies who will raise premiums to offset their exchange losses which will drive more young and healthy people away which will make companies raise their premiums to offset their losses and hello Mr. Death Spiral. The entire program starts to unravel. The company can't afford to sell insurance and the customer can't afford to buy it. It's incredibly important to emphasize that if this happens it will not be because of Republican malfeasance. No Republican voted for ObamaCare. Any death spiral will occur because of ObamaCare's internal contradictions.

What should have taken place was an expansion of Medicare and Medicaid for the impoverished/aged population who wanted health care coverage and couldn't get it. Then there should have been tax changes to provide greater funding for people with chronic or pre-existing conditions who could not otherwise obtain coverage. And obviously there were other moves the country could have taken. What we did instead was to implement tax increases and other social changes thru the marketplace and thus cause greater distortions than a general tax increase would have done. Politically the Obama Administration didn't want to own a middle class tax increase, thus the imprudent claims that average premiums would drop by as much as $2500 per family per year. Well that didn't happen did it. Tax increases would have been painful and unpopular but they also would have been more transparent and honest. When I purchase a product I am seeking to get the best deal for me and mine. When I pay my taxes I understand that I am helping the larger society, including people in situations I may never experience or those in situations I am not old enough or poor enough to experience yet. Paying taxes and buying insurance are completely different transactions. Trying to pretend that they are the same doesn't work. If I am in the individual marketplace I do not want to purchase an insurance product priced for someone much older that includes maternity/pediatric coverage, birth control coverage, or other useless add-ons. And I won't buy it--especially if you're charging me 30% more than you did last year. I don't have the money to pay for 10% premium increases let alone three times that amount. Multiply that decision by a few million people and that's where we are today. For too many people it makes more sense to forgo coverage and theoretically pay a penalty.

ObamaCare isn't going anywhere just yet. ObamaCare (or at least the most critical portions) can still be saved. But saving it would require a Republican House and Senate that was interested in doing work instead of hurling invective and a Democratic White House that could admit, however obliquely, that it got some very basic assumptions completely wrong. Neither of these things will happen now. But with more and more union leaders complaining about the implementation of the Cadillac Tax and more insurers worried about losing money on the exchanges the next President likely will have both the opportunity and the political space to make some much needed changes. Hopefully the next time someone builds a new program, he will pay closer attention to economic incentives.  There are some worthy things contained within ObamaCare. There are also things which make no sense. Again, it's not about politics. I'm not on the Right. I would support a program that helped people to get coverage who needed it and couldn't pay for it. But I wouldn't support a program that did this at the cost of messing up everyone else's coverage. 

Why ObamaCare Won't Work As Designed

The PPACA (ObamaCare) launch, has been an unmitigated disaster. The infamous Healthcare.gov website does not currently work anything close to specifications. Anyone who initially worked on its design, coding, management, testing or quality assurance should be embarrassed to list that on their resume. Some places will fire you because your boss didn't like your looks. In other organizations you literally have to fall asleep at your desk frequently before management reluctantly asks you to leave. Time will tell which model the President prefers but right now it looks closer to the second than the first. The President's claim that he was out of the loop on website issues stretches credulity. Now we find out that he was indeed briefed on problems. Whatever. I believe that eventually the website will work well enough for most to obtain insurance and/or subsidies. By eventually I mean I don't know when. An administration official recently admitted that 30-40% of the backend development that supports the malfunctioning website has also not been completed, including the sections which handle the accounting and delivery of payments and subsidies. The government and contractors haven't coded or tested that functionality yet. The hits just keep coming. I already knew that there are some incompetent people in government and IT consulting firms. What I only suspected before but has increasingly become obvious is that ObamaCare will not work as designed. Let me tell you why.

Because people across the political spectrum tend to jettison critical thinking and become blindly partisan on this issue, let me say upfront that though I oppose the individual mandate, I want every American citizen who needs health care to be able to get it. The pre-ObamaCare insurance and health care system didn't work well for many people. I have no problem paying higher income taxes to cover the uninsured. I am not now nor have I ever been a member of the Tea Party. I do feel a certain sadness and frustration that a law which funnels millions of people into the caring arms of insurance companies and even has provisions for insurance company bailouts has in a weird world become the liberal call to the barricades. This attack dog mentality by some progressives towards anyone that would question ObamaCare confuses me, especially when President Obama is telling CEO's that he doesn't see a lot of policy differences between Republicans and Democrats and that their battles are mostly around rhetoric. His words, not mine, folks. ObamaCare "fixes" the issue for a minority by making things worse for everyone else. It does this because the law's authors placed an extremely high premium on "equality" while placing a low value on "freedom". The law also hides command and control values in free market drag. 

Let's examine this.
Insurance is based on expected value. All insurance works this way, whether it's auto insurance, home insurance, life insurance, or health insurance. Both you and the insurance provider are making bets about the possibility of uncertain future events and/or catastrophes. If you "win" the bet and something bad happens well then you get a payout. If the provider "wins" the bet and nothing happens then they keep the premiums you've paid. Obviously the provider has an incentive to define a payable event in the most limited way possible while the purchaser's interests lie in the opposite direction. There is room for government regulation around this. No insurer wants to pay out more than they have to. And no one who thought they had medical insurance wants to stagger into the hospital only to discover that the fine print in their policy excludes payouts on any day ending in "y".

If you believe I like working hard every day/Just step on my shoes and take my pay 
-"Just Got Paid" ZZ Top

But ObamaCare changes health insurance into something closer to a social insurance/entitlement program. It forces health care plans to offer items that not everyone wants or needs. It limits the insurer's ability to price actuarially based on 

• gender: women use more health care than men and live longer than men do 
• age: as we get older we get sicker and use more health care
• pre-existing conditions: someone who already has medical issues will use more health care than someone who doesn't 

The law's architects consider this "fair". Some claim that anyone who disagrees supports "discrimination". These requirements mean that not only will costs rise for most people but that also that there will be cost shifting. Younger people, men, and healthy people of both genders will on average be paying more for insurance than they were before ObamaCare. There's no such thing as a free lunch. That's worth repeating. If you require insurers to cover more conditions and more people the additional cost will need to be paid by someone.
Those required to pay more for insurance may not think this is good, especially when they were repeatedly told that they could keep their health plan and doctor. From either political reasons or hubris, President Obama and the law's designers were silent about additional costs. The mass policy cancellations and the sticker shock of higher premiums and deductibles for new ObamaCare compliant policies finally made the law real to many Americans. They didn't like what they saw. And they said so.

See the blind man on the street /Looking for something free
See the kind man ask his friends/Hey, what's in it for me?
-"Dog eat Dog" AC/DC

This is when the friendly face of ObamaCare morphs into something a little nastier. People opposed to paying hundreds extra per month for coverage they'll never use are derided by the law's supporters as Fox news watchers or drooling morons who can't comprehend their great deal. Suddenly all their previous plans are "substandard" or they're just selfish greedy people. Right. ObamaCare's fatal flaw is that it requires people to make economic decisions which are not in their best interest. People generally act in their own interest. And if I am a single man, or a woman who doesn't want, already had or can't have children, the purchase of maternity and pediatric coverage makes no sense for me. If I abstain from drink and drugs I don't need a policy which includes substance abuse coverage. And if I am a natural foods/alternative medicine enthusiast I will probably not be thrilled about paying for policies with prescription drug coverage. The government can tax these people and give their money to other folks. That would be honest. But telling people to enter a marketplace and purchase coverage they don't need so that other people can pay less is an economically illiterate idea. So far the numbers bear this out. New Medicaid enrollment is far outstripping private enrollment. If I couldn't afford or didn't want insurance before PPACA why would I buy a more expensive policy after the launch?  The President has also been stretching the concept of separation of powers as he and executive branch shot callers constantly delay enforcement of or provide waivers from this or that element of ObamaCare as another bad outcome becomes visible. I'm wondering if the President will postpone some ObamaCare requirements until 2020. Seriously. The law isn't supposed to be based on Presidential caprice. Congress needs to fix or delay the law. The President's forced and grudging declaration that people can really keep their, in his view, "substandard" cancelled policies for another year, provided the insurance companies and state commissioners agree, was a nakedly political move, which could cause exchange premiums to skyrocket even further. The policy cancellations are a feature of ObamaCare, not a bug.

If ObamaCare were a good deal then insurance companies could offer PPACA compliant policies alongside their previous policies without any government arm twisting to eliminate the older policies. Consumers could make their own choices. But that can't happen because not enough people would purchase the new policies. That tells me everything I need to know about the PPACA. Sooner, rather than later, it will implode from its internal contradictions. We needed to prevent the most outrageous insurance company abuses, expand Medicaid, raise taxes to create subsidized risk pools for those with pre-existing conditions. Instead we have the PPACA. The fact that many Republicans are rabid, racist and insane doesn't change the fact that the PPACA isn't working now and won't work as designed. And that's on the Democrats.

Money It's a crime/Share it fairly 
But don't take a slice of my pie
-"Money" Pink Floyd

President Obama and ObamaCare Change

Well what do you think?
  

President Barack Obama said the Obamacare rollout has been "rough so far" and he has been deeply concerned about it.

Under a fix offered by Obama on Thursday to address a controversial provision of the Affordable Care Act, the President said Americans who received cancellation notices may be able to keep their individual insurance plans for one more year.

The deal is meant to cover millions of people who have had their insurance policies canceled because the policies do not meet Obamacare requirements. The uproar has ensnared the White House for weeks, shining a spotlight on Obama's earlier promise that people who liked their insurance plans could keep them.

But the fix, as reported earlier by CNN's Dana Bash, puts the onus of the renewals on insurers. The administration is not requiring insurers or state insurance commissioners to extend the existing plans, but instead is allowing insurers to offer an additional year of coverage.

Also, insurers must notify policyholders of the difference in benefits between their policies and the Obamacare plans available on the insurance exchanges. And the companies must inform people that additional policies are available on the exchanges and that subsidies may be available to those who qualify.

This fix will not solve "every problem for every person," Obama said.

President Obama and ObamaCare Statements

The problem with simple definitive statements is that if you make them, e.g. "Read my lips, no new taxes" or "We were not trading arms for hostages, nor were we negotiating with terrorists" or "I did not have sexual relations with that woman" they need to be true. They don't need to have legal disclaimers added on at the end written in very small print or read aloud in a hurried cadence and low volume voice. And when it comes out that not only were the statements you made untrue but that also you may have had reason to know they were untrue but that you or your advisers decided that the greater good required you to continue making them, well maybe that's just good old fashioned politics. Politicians don't necessarily get elected by telling people things that people don't want to hear. Remember President Perot? Indeed. But for someone whose brand is that he's not like all the other snake oil salesmen politicians, definitive confident assurances that "If you like your health care plan you can keep your health care plan. Period." are risky things to say right before hundreds of thousands to millions of cancellation notices are sent out.

But maybe I'm wrong. Maybe my eyes and ears deceive me. Perhaps the President was, as he recently implied, merely misunderstood by people who heard him speak on the PPACA. I know sometimes that people in my circles of work associates, family or friends didn't hear what I said or claim I said something different. So I can certainly sympathize with the President if that's what happened to him.

Now, if you have or had one of these plans before the Affordable Care Act came into law and you really like that plan, what we said was you could keep it, if it hasn’t changed since the law was passed,” he said. “We wrote into the Affordable Care Act, you’re grandfathered in on that plan. But if the insurance company changes it, then what we’re saying is they’ve got to change it to a higher standard, they’ve got to make it better, they’ve got to improve the quality of the plan that they’re selling.”

Check out this video. I'm no policy wonk nor am I any sort of legal mind. But a slow Midwestern rube like me can certainly see how someone might have gotten the false idea that they could keep their health care plan if they liked it. Period. I wonder where they got that false idea from. Maybe it was John Boehner?? Hmm. Good for us that the President was here to straighten us out. After the fact of course. But better late than never I always say....

ObamaCare: Sebelius Says President Obama Was Blindsided

The federal government's website portal for PPACA (ObamaCare) has not worked very well. The federal government has not released information about how many people have been able to successfully sign up for health insurance via the federal exchange, only that millions of people have visited and that demand remains high. Well, yes I guess demand would be high once you pass a law stating that people must buy a product.

Although the rollout has so far not been very complimentary to the technical skill set or managerial know how of the people involved in overseeing the launch, I believe that over time, things will be fixed. I work in IT and have been a team lead, programmer, project manager and business analyst -- sometimes all in the same job. I've worked on projects that have proceeded quite smoothly from the first glimmer in some vice-president's mind to a low level underpaid coder (often me) migrating code to production. I've also worked on projects that were poorly designed, insufficiently tested, lacked buy-in from appropriate stakeholders, had unrealistic launch dates, lacked proper funding, had the wrong personnel, or attempted to solve problems that either didn't exist or could be fixed more cheaply and much more simply in other ways.

It's a RARE large project that meets all its target dates and deliverables and comes in on time, under budget and with no post-launch fixes. As project complexity, scope and size increase the chances of perfection or even anything close to perfection (eg. Six Sigma) decline dramatically.

I have never worked on anything approaching ObamaCare's size or scope. I have worked on legally required projects which did have (within the business world) massive national scrutiny and visibility. The general rule on any project is that EVERYONE must keep their team and their supervisor aware of issues that could impact the launch date or launch deliverables. The Company CEO may not care if you have to stay overtime for 20-30 hours over the next month to rewrite and test programs that downstream feeders use. That's your problem not his. But if you discover that not only will you need to rewrite programs but also that several databases will have to change, the project design is flawed, the chosen middleware has significant issues, the testers don't know how to test, the system lacks required data and it's impossible to meet several legal requirements by the current launch date, that's something that management at the HIGHEST level should know. God help you if you knew something like that and didn't run and tell. You don't want to see your name in the paper as the reason the stock price took a nosedive. If the Company can't do something required by federal law or the IRS, the CEO and Chairman should know ASAP.

That's why I was shocked to learn that according to HHS Secretary Kathleen Sebelius no one told the President that the launch wasn't going to work. She's somewhat coy about whether she knew and didn't tell.

Before it even launched, red flags went up about the Obamacare website. Health insurance companies complained about it, and the site crashed during a test run. But nobody told the President of any of it, the nation's health chief told CNN. Kathleen Sebelius said President Barack Obama didn't hear that there may be problems with the sign-up portal for his signature health care law until it went live on October 1. That's when the site nosedived into a technical abyss. 

It's not like no one saw this coming. When the website crashed during a test run, just a few hundred users were on it. But the Obama administration went ahead with the launch. Waiting was not an option, Sebelius said. 

A Senate GOP leadership aide called the situation "odd." "Everyone was surprised by her statement that the President was unaware of the website's failures until a few days into it," the aide told CNN. "They had been claiming that the Obamacare rollout was his top priority and that he was receiving regular updates, which was inaccurate. And he gave remarks on October 1 about how great it was and that people should go sign up," the aide said. "Assuming that he didn't know that the website didn't work, why did they let him make that speech when they knew it had crashed in testing? Did really no one recommend a delay to the President? It just seems odd." 

Before the website's launch, Republicans made targeting the program a centerpiece of their agenda. Many insisted they wouldn't vote to fund the entire government unless Obamacare was defunded or delayed. They said that the website's woes show that the Obama administration and the federal government generally aren't capable of executing what the GOP says was an ill-advised program from the get-go.

                  

Generally speaking the powers that be don't like hearing bad news. You certainly don't rise in any organization, public or private, by constantly telling your supervisors about failure, especially if the failure is yours. Some of the people I've worked with and for have made it quite clear that they want good news from their reports. But the smarter leaders value accurate news over good news. Whether you're in IT or not, you're in a job because someone thought that you could help the organization solve problems and/or make money. If a leadership team is proceeding on inaccurate information it can't solve problems. It is embarrassing to have to delay a launch or kill it completely because of issues. But it's worse (IMO) to turn in substandard work that doesn't meet specs and indeed worsens the problems that would be addressed by successful launch instead of resolving them.  You do that and you see exactly what you see now-a lot of blamestorming, desperation moves, attempts at spin, and knee jerk reactions to criticism. If the people at the top aren't careful this can add weight to rivals' claims that there ought to be a management change, or failing that a scaling back of authority, scope and responsibility.

My mantra at work is "Let's get it right. Let's tell the truth." It strains credulity to believe that the President did not know that the primary interface of his signature program would not work properly. What the heck was Sebelius talking about in Cabinet meetings? "Yes sir Mr. President, everything is going just fine with PPACA implementation. Yes sir! You have nothing to worry about. We're doing just fine. You don't need to be concerned about the PPACA."

Someone, whether it was the President, the HHS Secretary or the tech leaders overseeing the launch, made the decision to roll the dice and see what happens. And here we are. In my work if some vice-president left the CEO/Chairman hanging out there like that they'd be fired. You might as well tell the truth because there's not much room for deceit in IT. Either the process works and does what it's supposed to do for an acceptable percentage of time or it does not. Of course a good boss often takes the hit for mistakes his employees make while good employees often cover for mistakes their boss makes. That's life. I have to believe that that is what's happening here.

LINK

QUESTIONS

Do you believe that President Obama did not know of website problems?

Should Secretary Sebelius be fired?

How long do you think it will take to get website and related code fixed?

If you have a boss, do you keep him or her in the loop on major issues?

Obamacare Losers

First of all, if you've got health insurance, you like your doctor, you like your plan - you can keep your doctor, you can keep your plan. Nobody is talking about taking that away from you."
President Barack Obama
7/16/2009

President Obama's statement has been shown to be untrue. I don't ascribe ill intention to the President or PPACA supporters. PPACA may prove broadly beneficial. But those who lose their current coverage and receive no government subsidies will be worse off. The counter to the claim that they're worse off is that their new plans will have increased level of (mandatory) benefits which are better for them and society. 

I am unconvinced by this argument. It's exactly like saying that instead of driving your $12,000 compact car with minimal upgrades and a low chance of being undamaged in an accident, you MUST purchase a fully loaded $60,000 large sedan, SUV, or pickup truck with a better chance of surviving a serious collision. So the government forces auto companies to stop making the $12,000 compact that you prefer. Though you have little financial capacity and less desire to drive something large which also has voice activated commands or rear view cameras, the choice isn't yours anymore.

At least 146,000 Michiganders — and possibly thousands more — with health coverage purchased directly from insurers now are learning their polices will end Dec. 31 because they don’t meet the minimum requirements of the federal health care act. Under the law, each policy must cover essential benefits in 10 categories. Instead of beefing up these policies, insurers are opting to drop them, advising consumers to consider other policies that are now available either from the insurers directly or though the Michigan Health Insurance Marketplace, also known as the state exchange. The policies that are ending were often less expensive on the individual market because they provided limited benefits and were sold to healthier consumers.

And that was fine with consumers such as Josh Mulder. Mulder had landed a plan several years ago that cost his Wixom family of four just $291 a month. That policy will end Dec. 31, according to a letter from his insurer. The policy didn’t cover things such as maternity care or prescription drugs, but, Mulder said, his family is generally healthy and he was willing to take the risk.“I had a great rate,” he said. Rates that meet the required benefits under health reform average $762.06 a month on the Michigan Health Insurance Marketplace for his family of four..

LINK

Purchasing health care is not like purchasing an automobile but the principle is the same. The government is mandating a specific choice. Maybe this is okay because the government already requires that vehicles have certain safety features and pass certain tests. You can't purchase a new car without seat belts or air bags.  

Often people who make this argument have trouble delineating any point where the federal government can't mandate or regulate. But let's take that objection seriously. It does have some validity. A government which wants to prevent vehicular carnage can surely attempt the same in health care no? I'd say no because drivers directly impact other people. The people detailed in this article are not those fierce individualists or (in some people's minds) lazy freeriders who haven't purchased insurance. They've already purchased insurance which fits their needs and budget. 

The government is making them purchase additional insurance which they don't need and may never use in order to subsidize other people's insurance choices. If I am a sixty something worker I may no longer need to cover my child until he's twenty-six. If I am a forty something man I have little use for insurance that mandates well woman visits or contraceptive coverage. If I am a thirty something fitness guru I may not desire extra coverage which allows multiple doctor visits. If I am a woman well past her reproductive years I may skip an insurance policy that includes maternity care. And so on.

Some might argue that such people are wicked selfish folks. Perhaps. But we are all self-interested. In a marketplace people are able to pursue their own self-interest. For some, the PPACA has reduced choice and raised costs. This is not a good thing.
A utilitarian may claim that it will all be worth it if the people with increased coverage and lower costs outnumber the people with the opposite. We lack that data. But if the PPACA's goal was to give coverage to those without, it may have been wiser to do a simple transfer payment. Raise taxes on everyone and give the money to those without insurance; cut taxes on those without insurance and allow them to use the money to purchase insurance, or open up Medicare/Medicaid to anyone without insurance, regardless of age or income.

Those decisions all have their own cost-benefit analyses. But they would have been more straightforward than reducing choices and raising costs for some with insurance in order to subsidize favored groups with insurance or give insurance to those without. I have no problem paying higher income taxes to get someone else insured. I have a major problem with being forced to buy coverage I don't want and lose coverage that I like. Can you afford to pay twice as much for insurance coverage as you do now? Because I couldn't. I think a law that results in that outcome needs editing. PPACA supporters may feel differently. That's fine. I simply ask that they at least acknowledge that the PPACA does harm some people. That data is in.

What are your thoughts?

ObamaCare Employer Mandate/Fines Delayed

In case you missed the news the Obama Administration announced that by the authority vested in it from (I'm not sure exactly since the implementation date was specifically written in law) it was delaying the requirement of the employer mandate to provide health insurance or face fines until January 1st, 2015. It thus gave something of a victory to conservative and business groups who had argued that the employer mandate would cost jobs, lower wages and make the cost of doing business more expensive. Because most large companies already offer health insurance coverage for their workers the impact on worker coverage is not expected to be that great.  

Of course, many people who were against the law popularly known as ObamaCare had already pointed this out and claimed that the employer mandate was a tremendous interference in the private marketplace which was largely unnecessary. The Administration had previously ignored these complaints but for some reason recently changed its mind.

Employers who don't provide health insurance will be spared penalties of up to $3,000 per worker until 2015, a one-year delay of a major component of President Barack Obama's health care reform law, the Treasury Department announced Tuesday. Under Obamacare, companies with at least 50 full-time employees are required to provide qualifying health benefits to workers or face financial penalties called "shared responsibility payments." The provision of the law aims to shore up and strengthen the system that provides health benefits to most covered Americans. Under regulatory guidance to be published next week, the Obama administration will free companies from this mandate and from rules that they report information about their health benefits to the federal government next year.

"During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage," Mark Mazur, assistant secretary for tax policy at the Treasury Department, said in a statement. The change does not affect people who will buy health insurance on their own or small businesses that will buy coverage through the law's health insurance exchanges.

More than half of Americans, 170 million people, are covered by employer-sponsored health insurance, according the census data. Of companies with at least 50 workers, 94 percent already offer health benefits, a survey by the Henry J. Kaiser Family Foundation shows. The one-year delay of the penalties won't have a meaningful effect on jobs being the leading source of health care coverage, said Paul Fronstin, a senior research associate with the Employee Benefit Research Institute.

"The fact is, employers have been offering coverage voluntarily for how many years now. They didn't drop it before the law was passed. They offered it for business reasons," Fronstin said. "I don't think you'll see a mass exodus because of this."

LINK

I am among other things an IT project manager, albeit a relatively low ranking one. Missing the implementation date is usually a very bad thing. It normally means that the project manager, team leaders and other project sponsors proceeded on bad information or that somebody at a higher level withdrew their support. It is definitely the kind of thing which gets you dinged on your performance review. Make a habit of it and you can expect to see a few "did not meet expectations" in your 360 degree comments. Pick up a number of those and you can forget about staying on track for your next promotion or salary increase. You might not get a good project the next time and/or be exiled to an undesirable area of your company. But I digress.  

The Administration and supporters will probably wish to spin this as no big deal. And they may well be right. Things get delayed and pushed back all the time, (remember Bush's Medicaid Modernization Act ?) especially in an organization as huge as the US government. Trying to enforce employer mandates may have been a small section of ObamaCare and some supporters are arguing it wasn't even that important anyway.  And for now anyway the mandate for individuals to purchase insurance is still planned to proceed on time.  But this is at least the second time this year that the Administration has decided that what the law required wouldn't actually work and either delayed implementation or gave people a pass. In April the Administration admitted that workers at small businesses wouldn't actually be able to choose their own health care and would instead need to accept what their employers offered. I was not and am not a supporter of ObamaCare. I do not like the individual mandate. I do not think that premiums will drop for most people. But what really interests me about this latest move are two things.

1. What gives any President and/or his Administration to suspend implementation of a law. The fact that other Presidents have done this is of little interest to me. If President Obama can say well we aren't going to require this until 2015 what if anything prevents a future conservative President, as unlikely as that seems now, from saying we won't require it until 2175? So it's not technically a repeal, it's just a refusal to enforce the law. I'm not sure I'm fond of executives deciding which laws to enforce. Yes I know it may be necessary sometimes but this particular law had a hard date written into it. So let's stick to that date.
2. Am I being somewhat cynical in noticing that the new planned date for employer mandates just happens to be after midterm Congressional elections? To me that means that in the short term at least the Administration does not expect the benefits of employer mandates to be immediately obvious to voters. Because if they did they would be moving up the implementation date, not delaying it by a year. 

But who knows. Perhaps I am just a dead-ender on this issue. I don't say no to that. I do find it somewhat humorous that people who waved bloody shirts and told us that any delay to this law in its entirety would make people DIE and opponents would be responsible, are now seemingly ok with a year long delay for, what looks like to me, primarily political reasons. I think, my feelings about this law aside, the Administration is setting a bad precedent by seemingly giving in to constant criticism. Because I can absolutely guarantee that now that the employer mandate has been delayed, people opposed to other sections of the law will now gleefully ask, why don't we delay these parts as well.

What's your take?

Obamacare, Tax Incentives and Patriotism

Now that Obamacare (PPACA) is being implemented we can see what the response to some of the law's incentives have been. Because the PPACA requires employers of a certain size to provide health care coverage to any full time worker, employers have an additional incentive to limit full time workers to only those who are absolutely necessary. If you happen not to be absolutely necessary or your employer's business model does not provide for a large number of full time workers, then your employer might decide to limit your hours so that you don't get full time work.

Employers from community colleges to Darden Group (Red Lobster, Olive Garden, Longhorn Steakhouse) to Applebee's have indicated that workers' hours could be limited to avoid health care liability. Stryker, a medical device manufacturer, is not very happy about the new 2.3% medical device excise tax, paid regardless of a company's profits, and has announced that it is reducing staffing levels by 5%. Stryker had other problems already of course, but no one who makes medical devices is pleased with the new tax. Papa John's founder John Schnatter, said that while he was happy that everyone would be getting health care, nothing was for free and he couldn't predict what the independently owned and operated franchises might do.

One study claims that increased costs under Obamacare for small businesses will be negligible thanks to statutory exclusions and tax credits. The problem is that the real world data doesn't line up with the study. Only 170,000 small employers, not 1,000,000 or more, claimed a tax credit. Per the GAO report, this is far fewer employers than originally estimated. It may well turn out that the employers know their business needs and costs better than the federal government does. And if it doesn't make financial sense for them to purchase health insurance they won't do so. It may be cheaper for a company to pay a penalty or reduce staffing rather than to provide health care insurance.

Fewer small employers claimed the Small Employer Health Insurance Tax Credit in tax year 2010 than were estimated to be eligible. While 170,300 small employers claimed it, estimates of the eligible pool by government agencies and small business advocacy groups ranged from 1.4 million to 4 million. The cost of credits claimed was $468 million. Most claims were limited to partial rather than full percentage credits (35 percent for small businesses) because of the average wage or full-time equivalent (FTE) requirements. 28,100 employers claimed the full credit percentage. In addition, 30 percent of claims had the base premium limited by the state premium average.

One factor limiting the credit’s use is that most very small employers, 83 percent by one estimate, do not offer health insurance. According to employer representatives, tax preparers, and insurance brokers that GAO met with, the credit was not large enough to incentivize employers to begin offering insurance. 

In addition, since there is a good chance that taxes will increase in whatever deal the President and Congress work out, some people are making moves now to reduce their tax burden by all available legal means. This could backfire on these people because taking a smaller gain now with a lower tax rate might not net them as much as a larger future gain with a higher tax rate but each individual must make the financial decision that is right for them. If you think the future gains won't offset the higher taxes then recording income now while taxes are low could be the smart move.

Business owners and investors are rapidly maneuvering to shield themselves from the prospect of higher taxes next year, a strategy that is sending ripples across Wall Street and broad areas of the economy.Take Steve Wynn, the casino magnate, who has been a vocal critic of higher tax rates. He and his fellow shareholders in Wynn Resorts, the company announced, will collect a special dividend of $750 million on Tuesday, a payout timed to take advantage of current rates. Experts estimated that taking the payout this year instead of next could save Mr. Wynn, who owns a sizable stake in the company, more than $20 million. 

For the wealthy like Mr. Wynn, the overriding goal is to record as much of their future income this year as they can. This includes moves as diverse as sales of businesses, one-time dividends and the sale of stocks that have been big winners.“In my 30 years in practice, I’ve never seen such a flood of desire and action to transfer a business and cash out,” said Kenneth K. Bezozo, a partner in New York with the law firm Haynes and Boone. “We’re seeing a watershed event.”Whether small business owners or individuals saving for retirement, investors are being urged by their advisers to reconsider their holdings.

Along the way, many are shedding the very investments that have been the most popular over the last year, contributing to recent sell-offs in formerly high-flying shares like Apple and Amazon. Investors typically take profits in their own portfolio at year-end, but the selling appears to be more targeted this year. Stocks with large dividends, for instance, are seen as less attractive because of the perceived likelihood of a sharp increase in the tax rate on dividends.

These moves were thoroughly predictable. Some people who opposed the PPACA pointed these things out before hand but they were often ignored. These decisions seem to have incited some derision and anger among people who supported the PPACA and higher marginal tax rates. Some have argued that paying (higher) taxes is patriotic. Certainly the late NY Mafia Boss Frank Costello thought so. But regardless of your patriotism and love for your country, business is business. Nobody in their right mind sits down to do their taxes and then decides to pay more than what is owed to the Federal government. If the Federal government passes a law that says if you do x, y, and z then you owe this amount, it should not be surprised or upset if people do their best to avoid doing x, y, and z. The government might get less than what it expected to get in revenue because, ceteris paribus, people suddenly find incentives to change their behavior. If the behavior being taxed is not strictly speaking 100% necessary or otherwise unable to be changed, when you tax something you will generally get a little less of it.

And tax avoidance is 100% legal. It's tax evasion that will get you in trouble. If a state raises its income tax I can move. If the federal government tells me that capital gains are taxed more lightly than income, I can start buying more stocks, real estate and start or purchase a business. If a city tells me there is a toll involved in using a particular expressway, I can take another route. If the federal government tells me that I pay less in taxes by using an IRA or 401K to save for retirement, then I may well investigate doing so. If I am paying $2000/mth in rent and discover that I could pay the same amount for a mortgage and deduct local property taxes and interest from my federal taxes, you know I just might consider that move. And if the federal government tells me that hiring this person will cost more than I think the employee is worth, then I may do my best to get along without hiring that person. This is the essence of economics. People respond to incentives.

People supported the PPACA because they thought it was the just thing to do. And maybe it was. Time will tell. The costs involved and changes made may be quite small once all the dust settles. But that doesn't change the fact that it will cost. At the margins, some behaviors will change. I don't see this as especially surprising or troubling. What I do see as troubling is the outrage and bewilderment among supporters of the PPACA that people actually make decisions based in part on economic incentives. Just as there is an observer effect in physics, there is a taxing effect in economics. No one likes The Taxman.

Questions

1) Do companies have the right to investigate changing staffing and pricing in response to the PPACA? Are you surprised by these moves?

2) Are some companies and individuals blaming the PPACA for their own poor financial decisions? Are these just post-election temper tantrums?

3) Do you pay more taxes than you owe? Is it unpatriotic to limit your tax liability?