I use words and concepts to help reader’s better understand the subject that I may be writing about. But words can be very confusing and depending upon the context in which they may be used, may have many different meanings. For example, today, kids say something is “bad” to describe something which is really very good. The word “phat” has nothing to do with your weight, but is really slang to describe something which is “highly attractive or gratifying”. But this is not a new phenomenon. I vividly remember talking to my mother about my first date with my wife, over 47 years ago, and describing her as “cool” when I really meant she was (and still is) very hot.
Not too long ago, in Washington, DC, there was a debate over the meaning of the words “is” and “sex”. Now we all know what these words really mean, and how they should be used, but President Clinton and many of our elected officials, seemed to be confused. If you still have questions, I suggest that you ask your wife, as I did. With a clarity and directness that I have come to expect from her, she let me know exactly what ”is” and “sex” meant , what they would never mean, and what would happen to me if I chose to do further research on the subject!
Even today, we seem to be very confused over the meaning of words. Toxic Assets, the words used to describe high risk and underperforming bank assets became Legacy Assets. Does that mean Toxic Waste will soon become Legacy Waste and Toxic Dumps will become Legacy Dumps? Even the troubled auto industry is confused. Retiree health benefits, the results of unsustainable union contracts, recently became Legacy Benefits, because it was a better and more descriptive phrase. Unfortunately, it appears as though the American auto industry is headed for a legacy bankruptcy which will leave their retirees with a legacy of unfulfilled retirement promises.
Conundrums and imponderables only add to the confusion. Has your wife ever asked you whether a particular outfit made her look fat? That is a conundrum and may be toxic. But the best imponderables, outside of Washington, come from kids. I have two grandsons, five and four, and they ask some of the best and most innocent questions. “Papa Steve, when do fish sleep? Where does God live? Where do babies come from?
We all know that fish sleep when we sleep. That is why their eyes are never closed when we are looking into the fish tank. God lives everywhere, but mostly in our hearts, but I really don’t have a snappy answer for the baby question. Not because I don’t remember, since I still have a distant memory. However, the boys are so innocent and accepting that they are still satisfied with “babies are Gods gifts to us” and who could argue with that?
Wouldn’t life be easy if everything was viewed through the innocent eyes of a child and if people said what they meant and meant what they said? Unfortunately, that is just not reality in our daily lives or in our political process. Washington is not a normal place and it seems as though our elected officials speak with a singular goal; to get re-elected. They use their own language and what may appear clear as a bell to us, is confusing to them. What they say, and often legislate, is confusing and illogical to us. The $240 million dollar bridge to nowhere and over 8,000 pork projects in the “no more pork budget” are two prime examples.
Our elected Washington officials are currently crafting complex healthcare legislation, far more difficult to understand than the imponderables about fish, God and babies. Moreover, they are using words and concepts which have multiple meanings, are unclear. Yet, when passed, will have dramatic impact on the way Americans receive healthcare services in the future. That is why we must carefully examine the real meanings behind their words and concepts.
• The Players – While it may seem as though every Senator and Congressional Representative has developed their own version of healthcare reform, there are really only three credible players, in my opinion.
President Obama, in a brilliant political move, used a great deal of his political capital by drawing a line in the sand and supporting healthcare reform, beginning this year. He developed certain broad based principals, but, left the details up to Congress to work through. Brilliant, in that, if healthcare reform is not passed, it’s the fault of Congress, not Obama.
The two other players are Senator Ted Kennedy, Chairman of the Senate HELP Committee. (Health, Education, Labor and Pensions) and Senator Max Baucus, Chairman of the very powerful Senate Finance Committee. Kennedy has been the champion of Universal Health, seemingly, forever. He favors a Medicare for All Program with Medicare acting as the single payor. In his program, the Employer Based System of providing health benefits ends and is replaced by a government sponsored and operated program. His program does not have broad based Congressional support and is not a likely final plan, but Senator Kennedy is such a powerful force in the Senate, his ideas will not be easily dismissed. The wild card is his health. If Senator Kennedy passes away due to his serious illness, Congress could decide to honor his many years of service to the country by implementing his program.
Senator Baucus, Democrat from Montana, has taken the lead in the development of a program that has a very legitimate chance of passing. He favors retaining the Employer Based System, employer mandates to finance the program, the creation of an Insurance Exchange to assist participants in purchasing health insurance, reducing healthcare costs through the creation of Electronic Medical Records, transparency throughout the health delivery system and creating incentives promoting wellness and prevention. Hot dogs, apple pie and perhaps Chevrolet, if GM survives, but the devil is always in the details and if you are interested in all of the details you can see his complete plan at: http://finance.senate.gov/healthreform2009/finalwhitepaper.pdf.
• The Employer Based System of Providing Benefits – More than 170 million Americans currently receive their benefits through their employers. When surveyed, the vast majority of employees are happy with this system, although it is costly and has resulted in almost 47,000,000 uninsured Americans. In the richest country in the world, we should not have any uninsured. In the pursuit of that goal, is it logical to place the employer based system at risk, or even replace it with another government bureaucracy? Is this a conundrum, simply illogical, or maybe, I just don’t get it?
• Play or Pay – No, this is not a college drinking game. It is the mechanism that Senator Baucus and others, intend to use to finance their healthcare programs. All employers, above a yet to be determined minimum size, will have to provide all employees with a yet to be determined minimum health plan or have to pay a yet to be determined tax to the government. Ostensibly, the tax, predicted to be seven percent of payroll, will be used to fund the cost of health coverage for the uninsured. Got a headache yet? If not, just wait.
A percentage of payrolls have many potential problems, especially if you believe that one of their goals is to preserve the Employer Based System.
- If the percentage is too low, employers will dump their plans and go to the cheaper government plan. This will destroy the Employer Based system. The Lewin Group, a Washington based think tank, owned by United Healthcare, estimates that about 112 million participants, currently covered through their employers, will migrate to the governmental plan within 12-18 months. (about 170 million participants are covered through the Employer Based System)
- There are fundamental problems with a flat percentage of payrolls for all employers. Why? Because all employers are not the same. Take a 50 employee law firm and compare it to the payroll of a 50 employee landscape firm. The same percentage rate, perhaps seven percent, will produce wide variances in the amount paid, because their payrolls are significantly different. It is not unreasonable to think that if an employer could save money by opting for the government plan, that they would. That can’t be their goal, or is it?
- Lastly, a little bit of Underwriting 101 needs to be applied to the process. Today, medical inflation is running at close to 10 percent. Let’s assume that it will reduce to only 5% under the national plan, however. Is your payroll growing at a rate of 5% per year? Clearly mine is not and I believe that most companies are trying to keep theirs flat, or reducing it. If payroll is flat and medical inflation is 5%, in just three years the proposed program will have been underfunded by 15%. Is Washington unaware that we are in the middle of a significant recession, or are they developing their program in a vacuum?
• Health Insurance Exchange – The Baucus plan will provide guaranteed access to affordable health coverage for individuals and small business. The mechanism that he proposes is the creation of a Health Insurance Exchange. The stated goal of the Exchange is to “connect individuals and employers to insurance offered at local, state ,regional or national levels”.
Let’s take a closer look at the details of the Exchange:
- I envision that the Exchange will be nothing more than a web portal through which health insurance coverage will be offered by private carriers. They will be heavily regulated and required to offer mandated plan designs at statutorily mandated rates, without any coverage limits, such as pre-existing conditions, etc. One has to wonder how carriers will survive having to accept everyone, without limits, at rates determined by Washington. However, since we all know that health insurance executives make too much money, at least in the eyes of politicians, who really cares about the carriers and the millions of their employees? We should, because if the private insurance marketplace becomes another auto industry, what is left? I am afraid that it’s the government plan, which is scary.
- There is another potential problem. If the Exchange contains a Public Plan, as well as, private sector plans, how will the private plans survive? Who can compete with the governmental plan? A public plan offered through the Exchange has to be a non-starter, as it will destroy the insurance industry and flies in the face of one of Baucus’s primary goals, to preserve the Employer Based System of Benefits. Need proof? Just take a look at the State of Florida. Citizens Insurance Company, created and owned by Florida, is now the states largest Property and Casualty insurer, and many of the private insurers are fleeing the state because they no longer can compete with Citizens.
- Lastly, if plans buy their coverage through the Exchange, what happens to the 500,000 health agents nationally? If you feel that they are useless, perhaps you do not care. However, if you are realistic, think about all of the problems which your agent has solved for you and contemplate how much work you will have to do on your own in a governmental program. Be careful of what you may wish for!
• Comparative Effectiveness – The 2009 Stimulus Bill included over $1.1 Billion for Comparative Effectiveness Research and the program will undoubtedly be included in any healthcare legislation. In general, it creates a governmental bureaucracy which will conduct research to determine the most cost effective procedure or method for treating a condition, as a means of controlling costs through the promotion of best practices. In principal, it’s long overdue since we often waste money on treatment protocols and drugs which do not improve the medical outcome or the quality of a patient’s life. Nevertheless, what is feared, is that Comparative Effectiveness will ultimately be used to control costs through rationing of care and medical services, and will interfere with the normal physician/patient relationship. We all need to be vigilant with respect to this entire process.
Confused? If you are, don’t be embarrassed because it is very confusing, unless you speak Washington. But I have been taking Washington language courses since 1992, and I personally question the motives, as well as, the details of all of the various Healthcare Reform Bills. Some of their proposals are just plain ”bad” and others are “bad”, but not “phat”. The devil is always in the details, so be very careful what you support.
We will definitely have some sort of healthcare reform legislation signed this year, perhaps as soon as early summer. Wouldn’t it be a real conundrum if in the pursuit of healthcare reform, we threw the baby out with the bathwater? Twelve to twenty four months from now we could be talking about what to do with the 47,000,000 participants that are still left in the employer based system. That would be an imponderable!