"Medicare For All?"

The new cry is for the United States to adopt a "Medicare For All" healthcare program.  The latest polls say a majority of Americans support just such a program.  It sounds good, doesn't it?  But do they really understand what that would mean?

I'm now old enough to be covered by Medicare so why wouldn't I be in favor of "Medicare For All"?

I started my first job in Healthcare Finance at Doctors Hospital in Conroe, Texas back in August, 1976.  It was a small hospital attached to the Sadler Clinic and part of the Hospital Affiliates International chain.  I was about to get my Masters in Accounting from the University of Houston.  In a short 10 months I was promoted to be the hospital's Controller.  (The controller was the highest level of finance professional at a HAI hospital as there were regional and corporate staff to handle investment and borrowing responsibilities.)

One of my duties was to develop the information necessary to complete our Medicare and Medicaid cost report.  Both programs were in their initial forms and were designed to reimburse the cost of caring for their patients.  The cost reports were complicated reports designed to determine the "correct" costs associated with each program.  Payments were actually made in bi-weekly amounts and a final settlement was made once the cost report had been completed and audited.  As you can imagine, the process of completing, filing and going through a cost report audit was complicated and added to a hospital's administrative expense.

It wasn't long before Congress became alarmed at the rate of increase in outlays for the Medicare program.  To help control it they began defining some of hospitals' actual costs as "non-reimbursable".  Non-reimbursable costs were eliminated on the cost report.  That didn't change the fact that they were actual costs for the hospital, but just the fact that Medicare and Medicaid wouldn't pay for them.  The most famous, or was it infamous, of those was the cost of telephones and televisions in patient rooms.  Because hospitals weren't reimbursed for those costs they instituted per diem charges if patients chose to have a telephone and tv in their room.  When other actual costs were disallowed, it meant hospitals had to increase their charges to other patients to make up for the lost revenue.

Soon Congress found there weren't enough expenses they could disallow and in the 80's they came up with a new scheme to bring control to the cost of the Medicare & Medicaid programs.  They devised a system that would reimburse hospitals a blended rate that included a hospital specific component, a regional component and a national component.  Over time it was designed to reimburse all hospitals a similar rate eliminating the huge difference that was paid for Medicare patients throughout the country.  It took Congress one year to back off the transitioning to the national rate, despite many hospitals already incorporating that new scheme into their strategic planning.  The percentage of actual cost of caring for Medicare & Medicaid patients reimbursed by the programs continued to decrease resulting in more shifting of costs to other patients.

In the early 90's Congress came up with a brand new scheme for prospective payment rates based on Diagnosis Related Groups (DRGs).  This scheme was designed to reimburse all hospitals the same amount for similar care given.  At the same time there were new administrative burdens placed on hospitals and doctors, increasing their costs.  Hospitals that wanted to participate in the Medicare program were also forbidden from transferring patients without insurance to county facilities.  That was the despite the fact that most county facilities were established to care for uninsured and had tax support to help cover their operating costs.  These changes not only increased the operating costs of the hospitals, but saw the percentage of actual costs of care reimbursed by Medicare and Medicaid decrease.  Obviously that resulted in even more cost shifting to other patients.  There have been many other changes made in an attempt to slow down the overall growth of the cost of those programs to the Federal Government and each time it has resulted in more cost shifting.  Its gotten to the point where the Medicare and Medicaid reimburse far less than full cost to providers.

To step back and summarize, the history of the Medicare and Medicaid programs has been one of reducing the percentage of actual costs of caring for those programs' patients, while increasing the administrative burdens borne by the providers, to the point that reimbursement levels are well below average cost.  And despite all that, the Federal outlays for those programs has gone up dramatically.  In fact, nearly 50% (48.8%) of all the outlays for those programs (1966 to 2017) was spent in just the last ten years.

So what would happen if we went to a "Medicare for All" system of healthcare for the United States.  One of two things would occur.

1. The Federal Government would have to dramatically increase the level of reimbursement it made to providers since their current level is well below the cost of caring for patients.  This would dramatically increase Federal outlays at a time we're running huge deficits.

2. The level and amount of healthcare provided to patients/the public would have to be decreased dramatically.

In all likelihood, the real result would be a combination of the two.

Is the public really expecting a dramatic decrease in the quantity and quality of the healthcare they receive when they support a "Medicare for All" healthcare program?  And are they willing to support the level of taxes necessary to fund the increased Federal Outlays.  In just the last ten years the increased outlays for the current Medicare and Medicaid programs accounted for 70% of the $10.2 trillion added to the Federal Gross Debt!

Equal Pay for Equal Work?

We hear a lot of talk about the fact that women on average make less than men.  That brings out calls by Democrats for new legislation.  And it's used to portray Republicans as anti-woman when they oppose the legislation.  To really understand the topic, you have to look past national averages.

Equal Work:  By the very nature of national averages you don't get results that reflect equal work.  Look to most any school and you'll find more female teachers than male teachers.  Look to a construction site and you're likely to see more men than women.  Look to any hospital and you're likely to find more male doctors than female and more female nurses than male.  Look to the NFL and MLB and you find more males than females (especially since they're exclusively male.)
So to get an accurate reflection on pay statistics based on equal work you need to look to a particular profession, say physicians.  But even that doesn't give you "equal work" results.  The last time I worked in a hospital female physicians were more likely to be primary care doctors while specialties like surgery were more likely to be filled by males.  Should a pediatrician and a surgeon be paid the same?

Should there be any allowances made for why someone doing equal work might be paid less?  Let's take the case of basketball players.  We have professional women's and men's basketball leagues.  They both play basketball, a competitive game for a season.  Should the women be paid the same as the men?  If the case for Equal Pay for Equal Work demands it in any case, it would seem to be most applicable in the case of professional basketball.  However other factors create an environment where the pay differential between the two leagues is HUGE!

So how do you measure "equal work" with national level statistics?  You can't.

Equal Pay:  It's currently against the law to pay men and women unequally for the same job.  We no longer have different pay scales for women and men.  So the question really isn't related to that issue, there are already laws that apply.  The real issue is how do you set a value for differing types of jobs since there is a natural tendency for females and males to gravitate towards different work.

I came from a family with six children, five females and one male.  I gravitated towards a degree in accounting, became a CPA and served most of my career in senior management positions.  Four of my sisters became teachers.  Each got a masters degree in education and were good teachers.  How do you value their "work" verses the "work" I did.  Since none of us were paid by the hour, did we work the same number of hours a year?  Should we have gotten equal pay per hour or equal pay per year?  To ensure "Equal Pay for Equal Work" on a national average you have to ignore hours worked in salaried jobs and assign all work, regardless of what is involved, equal pay.  Until that happens there will be an "Equal Pay for Equal Work" issue.

It's just one more way Democrats attempt to maintain an advantage in the women's vote.

NC Senate Debate (10/7/14): Questions Sen. Hagan Should Have Been Asked

Sen. Kay Hagan and Speaker Thom Tillis debated on a variety of subjects, many of which they would have little control over as a Senator.  But some of the most important topics never came up.  Topics like Budget Deficits, National Debt and Social Security.  For a Republican to leave them on the table is like leaving your best players on the sidelines in your state championship football game.

- Sen. Hagan took office in 2009 and has watched Majority Leader Harry Reid violate law by refusing to pass a budget in the Senate.  What is Sen. Hagan's position on her party leader's refusing to pass budgets?

http://washingtonexaminer.com/with-elections-looming-and-debt-rising-senate-democrats-wont-put-out-fiscal-2015-budget/article/2544889

- Sen. Hagan took office in 2009 when the National Debt had just exceeded $10 trillion.  By the end of December it will exceed $18 trillion.  Yet according to the 2014 National Journal Almanac of American Politics (page 1239) Sen. Hagan voted "No" in the 112th Session on a Balanced Budget Amendment bill.  (As did every other Democrat.)  $8 trillion in additional debt adds between $400 billion and $480 billion per year in additional Interest Outlays at normal interest rates.  What is Sen. Hagan's position on rapidly increasing debt, interest outlays and a Balanced Budget Amendment?

- Each year since Sen. Hagan took office the Social Security Trustees have urged Congress to act in a timely manner in passing reforms to the program.  They've included that urging in the conclusion section of their annual Trustee Trust Fund report every year beginning in at least 2005.  Yet Senate Majority Leader Harry Reid is on record saying he won't allow the Senate to consider reforms until 2031 (2011 + 20 years).  With the WH OMB's projections for the next 10 years showing that Social Security Outlays will exceed Social Security Payroll Tax Receipts by $2.1 trillion, what is Sen. Hagan's position on Social Security reforms and how would she keep it solvent for future years?

http://www.thefiscaltimes.com/Articles/2011/03/28/Hands-Off-Social-Security-Harry-Reid
http://www.ssa.gov/oact/tr/2014/index.html
http://www.ssa.gov/oact/tr/2005/index.html

Aren't these the questions that Sen. Hagan should be asked to answer in their third debate?  But I won't hold my breath waiting for that to happen.

"If it's not broken, don't fix it."

I was listening to my local radio station which carries news by Fox News.  They had a piece on the LA Senate race with comments from two voters.  One of them said he had made up his mind and his decision was based on the saying "If it's not broken, don't fix it."  That seems to mean he thinks two things:

1. That he has a Senator who is voting on his behalf.
2. He will be supporting Sen. Landrieu.

After hearing that, I couldn't help but wonder what it would take for him to think things were broken? I also wondered what kind of race the Republicans are running.  After all, just a few of the things that someone might think are broken include:

- The national debt is approaching $18 trillion and there is no sign of a balanced budget coming soon.
- Senate Democrats refused to pass a Balanced Budget Amendment in the 112th session.
- The Social Security Disability Trust Fund is scheduled to run out of money in 2016.
- Democrats are waging a "war" on fossil fuels.
- Obamacare has driven up the cost of healthcare for millions of families.
- Millions of more families were kicked off their health insurance plans after Obamacare took effect.

While this is just a small list of the things that are "broken", it seems like there is enough there to make anyone wonder.  Senate Democrats haven't been helping solve these problems. 

So voting for a Democrat for the Senate won't help, no matter how nice they are or how conservative they act.

I wish I could have a few minutes of that voter's time to share some thoughts on this with him!

Three Important Facts for the 2014 Elections

The 2014 elections are nearly on us and three of the most important topics have hardly been covered. At least not in a way that voters can tell who to vote for.

Using the WH OMB Historical Table 1.1 we find we've only had five budget surpluses since 1965. Matching those results with who controlled the House when the budget was passed we find the last time Congressional Democrats were responsible for a surplus was 1969. Our National Debt was only $367 billion at the end of 1969! They've been responsible for 30 of the last 45 budgets, all finishing with deficits. And they continue to fight attempts to bring deficits under control while calling for more spending!

With our National Debt well on the way to $18 trillion, how do voters decide who to vote for? Looking at the how Senators have voted on a Balanced Budget Amendment would help. Senators had the opportunity to vote for one in the 112th session of Congress. Using the NJ Almanac of American Politics as my source, I found that every Democrat Senator voted against it and every Republican Senator voted for it. There just weren't enough Republicans or it would have already gone to the states for ratification.

Since at least 2005 the Social Security Trust Fund trustees have been warning us that Congress needs to act in a timely manner in passing reforms. Democrats stopped reforms from being enacted back in 2005 and again in 2011. Sen. Harry Reid is on record saying that he won't allow reforms to be considered until 2031, just two years before the trust funds run out of money. So as long as Democrats control the Senate and Sen. Reid is their leader, Social Security reforms won’t be passed.

So Democrats have a terrible record in regards to deficit spending, they rejected a Balanced Budget Amendment and they aren't willing to consider reforms to Social Security despite the fact they are desperately needed.
Knowing that makes your decision pretty easy to make, doesn't it?

No Eyes on the Real Crisis?

Have you noticed how no one in Washington or the media has paid any attention to the real crisis lately.  That's the fiscal crisis that our Nation faces.  All the attention is on ISIS, Immigration and Ferguson.  All those are important, but they are meaningless unless we very quickly fix our budget crisis and the crisis in Social Security.

 

Budget Crisis:

We've seen the WH OMB MS, the CBO update and the Social Security Trustee Trust Fund Report all came and went with little attention.  Was there anything worth noting in them?

 

WH OMB Mid Session Review:

When comparing the MSR to the original 2015 Budget we see an increase in the 10 year deficit projections of $594 billion.  That's a pretty sizable increase in just 6 months.  A close look at the summary categories shows Outlays down by $167 billion and Receipts down $761 billion.  So the economy is slowing causing tax receipts to drop sharply, accounting for all but $3 billion of the total.  The drop in Outlays is accounted for by a $180 billion reduction in the projection for Net Interest Outlays and a decrease Defense Outlays offsetting a $39 billion in Appropriated - Non Defense.  What accounts for the drop in Net Interest Outlays?  They're now using 4.8% for the maximum 10 Year Treasuries instead of $5.1 in the 2015 Budget.  Have we really seen the 10 year environment change that much or did they change the assumption for purely political reasons so they wouldn't show such a huge increase in the projected 10 deficit.  I think you know which I would vote for.  Both the Public and Gross debt are projected at over $500 billion more in the 2015 MSR.

 

CBO Review:

The Baseline analysis update shows an even more gloomy picture with a 10 year projected deficit of $7.2 trillion, $1.7 higher than the WH OMB MSR.  The big differences are $1.1 less in Outlays, but also a huge $2.8 billion less in Receipts.  Since the CBO is based on current law, the difference in large part reflects proposed tax receipt increases of $1.9 trillion!

But what is scariest about their update is they put out an Alternative Scenario. Since they call it that, no one pays attention to it.  But they should since I call it the realistic since its based on the assumption that Congress will continue its practices.  The biggest one involves the "doctor fix".  Since law requires a reduction in payments to physicians if the total physician reimbursement under Medicare goes up more than inflation.  There is just one problem.  Each year Congress passes the doctor fix FOR THE COMING YEAR!  That means they don't have to make the required cuts in that year, but the projections assume they will in the following year and each year after.  But they never have allowed the cut to take place and now the required cut is ~30%.  So the last 9 years have the cut in it though they have never allowed it to go into affect?  The CBO Alternative Scenario shows a projection `10 deficit of over $9 trillion and that is using lower than can really be expected interest rate assumption values!  If they used realistic one's and Congress' actual practices the projected deficits would be closer to $12 trillion or an average of more than $1 trillion per year.

 

As is their practice, the CBO does not show Gross (or Total Debt) but rather only Public Debt!

 

So while Democrats talk about the low deficit (~$500 billion) and the media loses interest in covering the topic, the projections are taking a serious turn for the worse!

 

Of course the real problem with fixing our Nation's deficits is clearly shown on Schedules 11.1, 11.2 and 11.3 of the Historical Tables.  They show that "Payments for Individuals" reached 69% of our Nation's Outlays in 2013 up from the previous high of only 66%.  Not that long ago (2005) it was 60% and back in 1970 it was only 33%.  Pretty easier to see that we are bankrupting ourselves by letting Congress buy votes with benefits!

 

Social Security:

The WH OMB MSR updated the projected shortfall of SS Payroll Taxes shortage compared to the SS Outlays.  Just to remind you in the 2010 Budget the shortfall was $200 billion.  By the 2015 Budget it had grown to $2 trillion.  And the 2015 MSR is now projecting it at $2.1 trillion.  It's been a steady growth in the shortfall and one the Department of Treasury told me I should expect to see continue until Congress tackles and passes reforms.  The problem will come to a head in 2015 as the Disability Trust Fund is projected to run out of funds in 2016, just two short years from now!  some fix will be needed or benefits will be cut.  But Sen. Reid is on record that he won't act on legislation to reform SS until at least 2031, just 2 years before the combined funds are due to run out of funds.

 

Wake up America!

The Nation's Real Crisis

The summer updates to the Federal Budget are out and once again it looks like the WH OMB is playing games to keep from admitting the real status of our Federal budget.

2015 MSR vs 2015 Budget:

The WH OMB's MSR showed an increase in the 10 year projected deficits of $594 billion ($$5,524 vs $4,930).  That's not good news, but the news gets worse when you look at the details.

First, the increased deficit comes from a combination of lower Receipts ($761 billion) and lower Outlays ($167 billion).  The lower Receipts is spread among the three tax categories reflecting slower economic growth and personal incomes.  This follows recent news.  The decrease in Outlays is more than accounted for by a decrease in Net Interest Outlays ($180 billion) offset by an increase in Non-Defense Appropriated ($39 billion). 

Unfortunately it appears the WH OMB is back to playing games with the economic assumptions to achieve the savings.  They have decreased the maximum interest rate assumptions for both the 10 Year and 91 Day Treasuries.  The 10 Year rate was decreased from 5.1% in the 2015 Budget to 4.8% in the 2015 MSR.  Since 1961 (last 52 years) there have only been 17 years in which the 10 Yr Treasury averaged under 5% for the year.  5 of those years occurred in the early 1960's and the remaining 12 occurred since 2001.  Not one year in between (34 years) averaged 4.8% or lower.  In fact the average for those years was 7.9%.  Taking out the extremely low and high years the average since 1961 would be between 6.5% and 7.0%.  So how do those in Washington think 10 year Treasuries won't exceed 4.8% in the next 10 years when it was never that low from 1967 - 2001?  (The same problem exists with the inflation assumption values!)  When you use higher interest rate assumption values, the Interest Outlay projections increase significantly because of our high levels of debt.

 

2015 MSR vs CBO August Update:

The CBO put out an update to their Baseline estimates that is quite different from the 2015 MSR projections.  The 10 year deficits for the two are $7.196 billion (CBO) and $5,524 (WH OMB MSR).  The CBO projections have $1.1 less in Outlays, but $2.8 trillion less in Receipts.  So the WH is counting on significantly higher tax revenues to offset somewhat higher spending?

 

CBO Alternative Scenario:

The CBO put out an "alternative scenario" in which they projected what the 10 deficits would be if Congress followed their past actions, rather than what current law requires.  (I would call that scenario the REALISTIC SCENARIO.)  That scenario shows projected deficits for the next 10 years of over $9 trillion!

 

"Debt to GDP" and Others:

Washington continues to attempt to fool the world regarding its fiscal crisis.  The WH OMB, CBO and CRFB all quote that our debt to GDP level is currently ~73%.  That's the level of Public Debt to GDP and totally ignores the debt owed to the trust funds.  They also talk about the debt being at post WWII levels.  However following WWII, 90% of our total debt was Public Debt while at the end of 2013 only 71.6% of our debt was "Public" debt.  The Federal Government has used the trust funds to finance a much greater portion of its spending that it had at the end of WWII.

 

Finally, the WH OMB continues to include meaningless ratios in their presentation.  Just how meaningless?  If I told you that they show a deficit of only $128 billion over the next ten years you'd be confused AND MISLED!  But that's what they did when they included the ratio labeled "Primary Deficit".  They've began including that ratio in their summary presentations in the 2012 Budget projections.  It  had become clear they had no intention of eliminating the deficit, so they began using a ratio that would do it for them.  The "primary deficit" eliminates the Net Interest Outlays from the calculation.  This is important as Net Interest Outlays are ready to increase dramatically in future years exploding the size of our deficits.  Coming up with a ratio that takes Net Interest Outlays out of the picture takes the focus off of the real crisis, the size of our debt!

Unfortunately the Illegal Immigrant, ISIS and  Ferguson, MO crisis have taken the Nation's focus off of our pending financial crisis.  That makes it easy for all politicians, both Democrat and Republican!