Tag Archives: Medicaid

Repeal Obamacare!

(AP Photo/Alex Brandon)

 

There is no doubt that The Patient Protection and Affordable Care Act — AKA Obamacare – has failed to achieve its most fundamental objectives. The primary goal of the legislation was to make health insurance available to all Americans, with the parallel promise that this health care would be affordable. Obamacare has failed on both points and is so flawed it should be repealed.  

While 17 million Americans have been added to the rolls of those insured, there are still over 25 million who remain uninsured. Furthermore, those who have been able to obtain medical insurance are finding that the coverage is anything but affordable. Once the newly insured are signed-on, the insurance companies (unencumbered by regulation) are systematically raising the cost of coverage by as much as 30 to 50 percent annually.

There are (at least) three reasons for the failure of Obamacare: 1) Obama was willing to give up on principles in order to get any law passed. 2) To gain their support, insurance companies were allowed to participate in the design of the plan in a way that would benefit them financially. 3) The Republicans were unwilling to support any plan that would guarantee insurance coverage for all Americans.

The problems with Obamacare remain unresolved because it has become no more than a ball in a political rugby scrum. The plan’s supporters – mostly Democrats — are struggling to find ways to fix the unfixable, while Republicans remain fixated on blanket repeal. Both of these approaches to Obamacare talk at the problems but fail to offer real solutions. Have you noticed that one group is not complaining about Obamacare? That would be the insurance companies, because they are too busy piling up huge profits from Obamacare.  

As a general proposition, the Republican Party believes that medical care is a privilege not a right. They believe all Americans should have all the healthcare they need and want, just so long as they have the resources to pay for it. As a result, every single GOP presidential candidate’s position on healthcare starts with repeal of Obamacare, but none of them offer even a hint of an alternative. Can you just imagine the chaos and confusion that would ensue in the health-care arena if Obamacare was simply repealed and no viable alternative was available?  

The Democrats, on the other hand, act as though the “right” to have healthcare coverage means that it should be free; as if there was no real cost involved. Can you just imagine how costly and confusing healthcare will be if Obamacare is allowed to continue down its current path?      

The good intentions and objectives of Obamacare were admirable, but for reasons outlined above, the design and implementation of the plan were both botched and it is beyond repair. The longer Obamacare is allowed to stumble down its current path, the more costly and inefficient it will become.  The goal of insuring all Americans at affordable cost will never be met. The Republicans are right – Obamacare should be repealed. But the Republicans are callous and dead wrong to suggest that the healthcare – or lack thereof – for millions of Americans should be left to the caprices of the insurance companies, driven by profit alone. Does it seem fair to you that an individual’s access to reasonable healthcare should not be determined by the weight of their wallet?

There is a Better Path to Healthcare for all Americans

Already in place, time-tested and working effectively (as any government program can) are the Medicare and Medicaid programs. Medicare provides effective and efficient medical care to millions of Americans 65 and over. Medicaid – a combination of state programs funded by the Federal government – provides medical care to millions of low income individuals.

The point is that these two programs have processes and procedures in place and are in point of fact administering healthcare (from private hospitals and physicians) for millions of Americans, but not for all. So the question is: Why not repeal Obamacare and replace it with the two national healthcare programs already in existence and functioning effectively? The simplest and most direct way to offer all Americans basic healthcare at affordable costs is to expand and enroll everyone – at any age – into Medicare or Medicaid.

This can’t be done with a flip of the switch, but an organized expansion phase-in over time could make it happen. For example, in the first year those age 60 to 65 would be eligible for Medicare, then the next phase would include those 55 to 60 and so on until everyone was covered.

Of course, adjustments and changes would have to be made to both systems, but these would be more administrative and cost-control measures. For example, premiums and deductibles for coverage could be adjusted based upon income or wealth. There is no reason why someone making $1 million a year should pay the same premium or deductible as another making $50,000.

There is not space in this blog to delineate all the adjustments that would be required in order to make Medicare and Medicaid work for all Americans, but they are more administrative in nature and don’t go to the core of the programs. Ultimately the Medicare and Medicaid programs could be merged. The point is that we have two time-tested and functioning programs providing healthcare for millions of Americans, so why not just do the right thing and expand them to include all Americans?

Can Everyone be Happy?

Of course not everyone will be happy with these changes, but when is everyone ever happy with any action?

The Republicans are going to have to disabuse themselves of the belief that health care is a privilege and not a right. They accept basic education as a right, why not basic health care? Aren’t both of those part of the Constitutional right to “life, liberty and the pursuit of happiness”? The reality is that of the 47 largest industrial nations in the world, the United States is the only country that does not consider basic health care as a fundamental right of its citizens. But Republicans can be happy too. They can take credit for repealing Obamacare and swallow the expansion of Medicare and Medicaid. After all, every Republican president since Nixon has accepted and expanded Medicare and Medicaid. 

The insurance industry will certainly not be happy. So what?! The insurance companies have had a free-hand to provide health insurance for Americans for over 50 years. They have done a miserable job. If you had lots of money and were in good health, you could buy all the health insurance you wanted. But woe betide the individual who was poor or had a preexisting condition. Besides, the insurance companies could make a ton of money selling supplemental policies (as they do today) that pay the deductibles for Medicare, or for extra care not covered by Medicare.

The hospitals and doctors will not be happy. Don’t be so sure. I have hear many hospital administrators and doctors complain about Obamacare, but I have never heard any complaints about Medicare. Sure, they will complain about Medicare’s attempt to control costs and for not reimbursing the hospital or doctor for what they want to charge for their services. But have you ever heard of a hospital or doctor going bankrupt because Medicare or Medicaid didn’t pay enough for the services they provided?

And the Moral of the Story …

If we (as we should) want to provide effective, affordable healthcare for all Americans – despite age or resources – we have to recognize that, for all its good intentions, Obamacare is not the answer and it should be repealed. Doing nothing or “letting the market determine” who gets coverage is not the answer, either.

But the answer in right in front of us. Medicare and Medicaid has worked for millions of Americans and with just a little effort we can repeal Obamacare and replace it with these systems that have proven to work. So?

Being Too Smart May be Hazardous to Your Success

The more one knows, the more difficult it is to find a simple solution to a complex problem

If you have been following the posturing and negotiations (a term used loosely) between President Obama and the leaders of Congress seeking a solution to the budget-busting costs of Social Security, Medicare and Medicaid, you can stop following right now and start getting a life: It ain’t gonna happen. And yet, your time and effort won’t be totally wasted since there is a lesson to learn from these shenanigans that can give you a clear advantage over most others in the business world.

Finding a way to maintain the benefits provided to those who depend on these programs for their very life and survival, while, at the same time, EntitlementProtestreforming the programs in a way that reduces cost and keeps them economically viable is, most assuredly, a complex challenge. So what is the congressional methodology being used to solve to this conundrum? Well, you take those who know the most about these programs – the policy wonks – and lock them in a room with instructions to find a solution, or else.

That sounds fine, but there’s a sticker here and it’s this: Because the experts charged with resolving the problems with these benefit programs are so immersed in the byzantine and excruciating minutia of the plans, they are inclined to dance around the edges of these issues with tweaks, tinkers and minor modifications, rather than take a blank-slate, zero-sum approach that would make it infinitely easier to find a clear and simple solution.

We shouldn’t be surprised, then, when the solutions that waft from their smoke-filled rooms are as predictable as they are lame. The political leaders are now engaged in a heated debate over the value of combining Medicare Part A and B, increasing Medicare co-payments and deductibles, while putting a fixed cap on the total lifetime expenses the participants will pay. When it comes to Social Security, the recommendation so far is to reduce the amount of cost-of-living increases by changing how the cost of living is calculated. None of us may understand all the technical jargon these proposals are wrapped in, but we can understand that none of these actions will solve the fundamental problem of entitlements. Left to their own devices, these politicos will, if anything, make the plans even more complex. But that is what happens when those who know too much don’t know enough to make the complicated simple. If you filed your 1040 with attachments this week, you’ll have a small taste of what I mean.

A Widespread Problem that Creeps and Grows

It is not just the political process that allows politicos and bureaucrats to make a living by taking simple issues and making them complex. Nor are politicians the only ones who believe that the answer to a complex problem is an even more complex solution. This same idiotic philosophy permeates the business world, too.

As much as companies and organizations may talk about the virtue of innovation and change, the reality is that most are hostile to real change. This attitude encourages taking the path of least resistance to change by implementing incremental actions to “fix” the past, rather than seeking simple solutions that converts change into opportunity. The result is increasing complexity in the operations of an organization, when it is simplicity that is most needed.

As frustrating as this may be, it does have a positive side. Anyone can take a simple problem and make it complicated, but those who develop the ability to respond to a complicated problem with a simple solution will have a clear advantage over those mired in complexity. When you come right down to it, success is as simple as that.


If success in business is what you seek, the path will be easier when you focus on knowing more about the solution, than you know about the problem. The reason that Medicare seems like such an intractable problem is because those trying to fix it know more about the problem than they do the solution.

Problem-solving should start with the recognition that complexity is the coward’s way to solve a problem. It takes courage, competency and confidence to be simple. Complexity is the refuge of a weak and insecure mind. There is a culturally embedded philosophy in business – supported by the business schools and hordes of consultants – that welcomes complexity. The convoluted thinking is that making the problem more confusing is a way for the powers to be to seem smarter and better than all the rest. It is an attitude that screams out, “If I understand the problem and you don’t, then I have power over you.” Among the obvious problems that this attitude creates is that when plans, tasks and objectives are perceived as too complicated, paralysis of action sets in; people have a difficult time getting their minds around the problem, identifying a solution and putting it into place.

If you want to be successful as a manager or a leader, you first have to understand that knowing too much about a problem can actually inhibit your ability to find a solution. The key to avoiding complexity and concentrate on simplicity is to start with the solution, not the problem. This may sound too simple to work, but let me give you an example.

Problem-Solving the LifeUSA Way

When my company – LifeUSA – was just starting out, we knew that the only way to compete against the entrenched giants of the insurance industry was to clearly differentiate what we offered. It was difficult to create a distinction from a product standpoint (which we ultimately did), so the focus was on the more obvious – service.

The insurance industry has always had a very complicated administrative and processing system and companies have used this as an excuse for poor service–especially for agents selling the product. At the time LifeUSA was launched, the average time it took for a company to issue a new policy was 48 days. This was frustrating for both the agent and the new policyholder, to say the least. In an effort to differentiate the service of LifeUSA from the other companies, we promised that once the agent had submitted all the application paperwork, the new policy would be issued in 48 hours and if not, we would pay the agent $100. We called this the “48-hour challenge.” This was a simple solution . . . . a simple definition and standard for service that both those in the home office and the field could understand, if not believe was possible. Of course this promised solution drew howls of protest from systems and administrative people and scoffs of disbelief from the field.

Was the legal and administrative task of issuing a new policy complicated? Yes. But LifeUSA did not approach the challenge by attempting to make Simpleincremental changes to the existing system, but by focusing on the solution and creating a new system to achieve it. (Something that would also work to solve the problems with Social Security, Medicare and Medicaid.) Starting with the solution and working back, rather than with the problem and trying to work forward, LifeUSA broke each part of the process down to simple steps, but steps that were simple to do. And then we did them.

The result was a level of service provided by LifeUSA that was unmatched in the industry. And this played a key role in helping LifeUSA achieve unmatched growth as well. The payment of the $100 for failure to meet the 48-hour challenge was a rare occurrence, because home office personnel took pride in meeting the challenge and would go to great effort to avoid missing the benchmark of service.

The LifeUSA 48-hour challenge was an example of how a complicated problem can be made simple. The home office people knew exactly what the standards of good service were and the customers (the agents) knew what to expect. From a management perspective, the results of the 48-hour challenge were a simple way to measure the quality of service being provided.

Some would suggest that it was easy for a new company, with not much business, to offer this service, but very difficult for larger established companies. Not true. LifeUSA was still promising the 48-hour service 15 years later when receiving 5,000 applications a week, just as it had when receiving 50 a week.

The point here is that simple is better. When you focus on the problem, rather than the solution, the whole process becomes complex. The more you know about the problem – as with Social Security, Medicare and Medicaid – the more difficult it is to focus on and achieve a solution.

And the Moral of the Story …

The world is awash with complexity. For some, complexity is a defense against decisiveness or a disguise for insecurity and incompetence. Others are paralyzed by complexity forced upon them. Anyone has the ability to make simple things complicated, but it takes talent and confidence to make complicated things simple.

The irony is that the more one understands and focuses on the problem, the more difficult it is to find the solution. When it comes to problems, those with the deepest knowledge are inclined to tinker rather than transform. While those who focus on the simplicity of a solution are inclined to change the system to eliminate the problem. Those who succumb to or create complexity may manage the world, but those who neuter complexity with simplicity change the world.

There is a lot of competition on the road to success. The best way to pass by the traffic and achieve success is to differentiate what you offer that others do not. In today’s world, the best way for an individual to differentiate their ability is to take what others see as complicated and make it simple.

 

To Solve Social Security and Medicare Funding Issues – Take a Lesson from the Insurance Industry

When the insurance industry makes a mistake it simply closes the book and starts over.

The leaders (using the term loosely) in Washington don’t see eye to eye on much, but they do agree that the exploding cost for Social Security, Medicare and Medicaid is the number one culprit triggering the burgeoning federal budget deficits and the mushrooming national debt. What they don’t agree on is how to solve the problem.

At the outset, these programs were intended to be just like private insurance programs, calculated to be actuarially sound. Initially, that was the case, but over time the programs have been corrupted by the influence of politicians, not errors on the part of the actuaries. Politicians are like insurance marketing people; they want whatever sells – whatever sizzles – while insurance actuaries want whatever works: namely, solvency. As a consequence, Social Security, Medicare and Medicaid have morphed into programs the people love – especially those who depend on or benefit from them – but are dragging the country down the path to insolvency.


The federal budget deficit has been running north of $1 trillion dollars for the past four years, and there is no sign of a meaningful reduction in the near term. A trillion here and a trillion there and soon you are looking at a significant long-term national debt; like more than $17 trillion dollars. The exact figures are difficult to come by, but conservative estimates are that the mandated  benefits for Social Security (20%), Medicare (12%) and Medicaid (8%) take up 40 percent of the entire $3.4 trillion federal budget. Since mandated promises are required by law to be paid, if Congress fails to enact meaningful changes to these programs their costs could rise to 66 percent of the annual federal budget, by mid-century. That is not exactly a tenable financial equation, even in the best of times.

FDR’s New Deal Legacy

When Social Security was introduced in 1935, it was designed as a form of insurance that would provide a “safety net” for senior citizens; 50 percent of whom had fallen into poverty when the Great Depression wiped out the value of their retirement savings. The objective was to provide a modicum of monthly income to retirees, so that the elderly would not become dependent on government relief (paid by taxpayers) in retirement.

What is important to take note of is that the Social Security Act signed into law by Franklin Roosevelt was not intended to be a government welfare program. No, it was an “income insurance” plan that people would be mandated (forced) by the government to buy. Like a private insurance company, government actuaries calculated the anticipated cost of future benefits and Signing_Of_The_Social_Security_Actdivided that cost among those covered by the plan. The participants paid their “premiums” in the form of a “tax” on their income; known as Federal Insurance Contributions Act or FICA. An important distinction was that these FICA payments were not to be comingled with other government funds or expenditures, but held in reserve – like real insurance companies do – in a “trust fund” that would be used to pay for the benefits as they came due.

Initially, Social Security was so soundly designed that by the 1950s and ‘60s, significant surplus funds had accumulated in the trust fund. That’s when the marketing people (the politicians) took over and the actuaries were sent back to their cages. Rather than reduce the premiums (FICA) – as the actuaries recommended – the politicians, in full marketing mode, chose to use the surplus to increase benefits and expand the number of individuals covered; which just coincidently made them look good for the next election. Using Social Security as “voter candy” soon became addictive for the politicians. While FICA taxes were regularly increased, they were never increased by the actuarially equivalent cost of the new benefits. (The politicians also raided the FICA trust fund to pay for other government programs; causing the fiscal stability of Social Security to be further corroded.)

The upshot of the politicians taking over for the actuaries led to easily predictable results. Over the decades that followed, the surplus in the Social Security trust fund was wiped out and the gap between the costs of the benefits promised and the funds available to pay for them, widened into a virtual chasm that now not only threatens the solvency of Social Security, but the fiscal stability and credibility of the federal government itself. Since FICA taxes are not nearly enough to cover the cost of promised benefits, the federal government has to make up the difference with taxpayer funds; which contributes to an increasing budget deficit and debt.

Ditto: Medicare and Medicaid

The history of Medicare and Medicaid is much the same. Medicare was created in 1965 as a “social insurance” program that would assure the availability of health MedicareCard300insurance coverage for Americans age 65 and older and for younger people with disabilities. As with Social Security, the intention was to spread the cost of benefits by collecting a “Medicare tax-fee” levied against employees and employers. In general this tax was intended to cover about half the cost of the benefits, with those receiving them making up the difference with monthly premiums (deducted from Social Security payments) and co-pays when benefits were received. Medicaid, though not technically insurance, was implemented to provide health benefits to low income families on a “means-tested” basis. Like Social Security, Medicare and Medicaid started out as fundamentally sound programs that have been degraded by the promise of increased benefits that exceed the funds available to pay for them.

What Would Insurance Companies Do?

When an insurance company discovers it has sold a “book of policies” that is not profitable – because the benefits are higher than expected or the premiums too low – it stops issuing new policies and puts the existing ones in what is called “run-off” mode. Those who purchased the policies in good faith and paid the premiums due, receive the benefits promised; but by ceasing to issue new policies, the insurance company stops the bleeding and prevents the problem from mushrooming into a situation that could threaten the very existence of the company.

The insurance company still has to take its lumps for the unprofitable business it issued. It cannot go back on the promises to the policyholder or increase premiums to cover the losses, but by isolating this business as a “closed book,” the company can quantify the potential loss, reserve for it and ultimately – either by surrender or death – this business will “run-off” and cease to be a problem. (Insurance companies can increase premiums on most health insurance policies, but doing so is often self-defeating. Raising premiums drives away healthy people, leaving the company with higher claims and losses.)

A Common Sense Answer to the Problem

This is the type of approach the government should take with Social Security, Medicare and Medicaid. If an insurance company were in charge of these programs it would take two actions: Isolate the existing programs by not accepting new entrants and allow the existing liabilities to “run-off.” The company would design new, actuarially sound, programs with the cost of future benefits matched by new premiums collected.

In the case of Social Security and Medicare, the government could close the programs and put them in “run-off” mode by cutting off those who are more than five years away from retirement. These individuals could be given credit for “premiums” already paid and then be enrolled in the new programs.

Those currently receiving Social Security and Medicare benefits would continue to do so – with no change in the promises made – for as long as they live. But over time these participants will age and die – causing the liabilities to constantly decline and eventually end. Tax payers will have to cover the current deficiency between promises made and premiums collected, but this cost would be materially less than the rampant increase in costs that would be caused by allowing millions of new participants to benefit from clearly defective plans.

The “new” Social Security and Medicare programs would be designed on an actuarially sound basis with the future benefits balanced with the anticipated premiums (tax) paid by the participants. The benefits offered by the new programs and when they are received, may be different, but unlike the uncertainties of the existing programs, they will be there when needed – and as promised. The participants may have to wait longer to receive benefits and pay more of the cost themselves, but the big advantage is that they will have time to plan and have the certainly that the plan will be there. And, it will not bankrupt the country.

And the Moral of the Story …

In principle, Social Security, Medicare and Medicaid are much like private insurance policies. As such, they should be priced and managed the same way insurance companies manage their business; but they haven’t been and that error is at the core of our deficit and fiscal crisis.

When insurance companies discover that a block of policies is not actuarially sound and is throwing off unsustainable losses, it cordons off that block of business and Actuarial_Soundnessallows it to run off the books. The company does not continue to sell the same new policies, but rather it isolates the “bad business” so that losses do not continue to grow and eventually overwhelm the entire company. The existing policyholders receive the promised benefits, but the problem is not compounded by continuing to make the same promises to new policyholders.

Then, using the experience gained from the old policies, the company designs new plans. Plans that offer needed and attractive benefits, but based on actuarially sound principles that prevent the company from making promises it can’t deliver and in many cases allows them to deliver more than they promise.

If an insurance company does not follow this formula when it discovers it has written a bad block of business, it will soon find itself swamped in loses that will threaten its very existence; and then what good are any promises? It is a lesson our politicians would do well to learn from the insurance industry.