Month: January 2014

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The Winter of Our Discontent

A couple of days ago I read a Reddit column that reminded me of my regrets  about the second war in Iraq. Saddam Hussein was an evil and corrupt man who deserved to be forcibly removed from power. The question was how. Part of me was skeptical that any well intentioned regime change by an outside power would ever work. The US needed to win not only the war but the hearts and minds of the people. Everything had to work perfectly in a place beset with almost intractable political problems. It sounded like a job that was too big and complicated to work. Despite the odds I put my faith that our government could make things right.

Not very long ago we had some well intentioned people in business and government who wanted everyone to have the chance to own their home. Their policies lead to a real estate bubble so big that when it collapsed, it threatened the entire financial system of the United States. Most people felt the financial companies should feel the pain by fixing the problems they created but the problem was so big it threatened the entire financial system. So with reluctant skepticism we embarked down a different path of subsidizing and consolidating the banking system. We combined banks and other financial institutions we would never allowed to happened in normal times. As part of this grand bargain we hoped the money spent on the banks would trickle down to the people who trying to own their home. These were the people whose troubled assets were the focal point of the law. When we fixed this problem the jobs would come back, too. Like most people I put my faith that our government. I wanted this plan to work.

Then there is the Affordable Care Act. It is the centerpiece of the Obama legacy and the greatest accomplishment of progressive politics in the last fifty years. It was supposed to not only expand the health insurance system to more people but it would make health care and insurance more affordable. We were constantly reminded that very few people would be affected by the changes and that if we liked our health insurance and doctors, we could keep them. Once again I felt the pangs of skepticism. Although I wanted this plan to work, it sounded to good to be true.

I look with regret at these three decisions. Even now the general population views them with a mixed sense of success and failure. We do not like to dwell on past failures. In hindsight each decision failed to accomplish its objective so we did something else. With each failure I have become more skeptical that our government can finesse its way through poorly thought out policies. Weapons of mass destruction were not found. Middle class families had their homes and dreams foreclosed on. Affordable health care is still a dream. One of the greatest features of American exceptionalism was our government’s ability to transform bad political policies into workable policies that grew middle class wealth. We took our eyes off of the ball.

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Sage Advice on Making Political Points

From Ann Althouse’s blog we have this sage advice. I hate to think we need to seek lawyer’s advice before making a political commentary but  we can probably minimize this problem if we spend a little more time looking at the problem from the other side. We seem to see a lot of “misrepresenting the facts” problems when people are in a rush to publish.

If you have a set of facts that you want to present to make a political point, you have to frame your words carefully, so that your grasping for strength of expression doesn’t result in any inaccuracy.

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From Slippers to Canters

Slippers to bootsMost of the folks who ride out of our barn are young women. On Saturdays they stumble in wearing riding clothes and what looks like fuzzy slippers. I imagine that they were asleep just a short while ago. They probably rolled out of bed, put on some clothes, and forgot about the slippers. Maybe it’s a new style. I do not know. It is an amusing site to see them putz around while they try to wake up and get their horse ready. There is no rush. They are relaxed and comfortable. This is a good way to approach riding. Then I thought, I can do that. A pair of fleece lined moccasins would feel pretty good with these cold floors. Now I go from slippers to canters. Life is good!

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Medicaid, the Free Lunch, and the Disintegrating Foundations for the Affordable Care Act

A couple of months ago before President Obama suspended the employer mandate, my local newspaper had an article supporting Medicaid expansion in Ohio. In that article the journalist interviewed a couple of supporters including a local business man who ran a janitorial firm and a hospital administrator. The local businessman wanted the Medicaid expansion because it would lower his employer mandate penalty. Since he had a significant number of employees who qualified for Medicaid and was planning on paying the employer mandate penalty, his penalty would be smaller with the Medicaid expansion. The hospital administrator wanted Medicaid expanded because some of the uncompensated care patients would be eligible for Medicaid. The businessman want Medicaid expansion to lower his penalty and the hospital administrator hopes that it will reduce hospital costs. To make matters worse “a new Harvard University study finds that enrollment in public program significantly increases enrollees’ use of emergency departments”. Since hospitals and doctors have been complaining that they are losing money on Medicaid patients, an increased amount of Medicaid services should create bigger losses.  The elephant in the room is whether Medicaid will improve health care outcomes for the poor. In hindsight it is interesting to note that the journalist did not make the argument that the Medicaid expansion was going to improve health care for the poor.  One of the architects of the Affordable Care Act, Jonathon Gruber, makes that argument at Wonkblog while trying to downplay the increased health care cost problem.

“I would view it as part of a broader set of evidence that covering people with health insurance doesn’t save money,” says Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, who has also studied Oregon’s Medicaid expansion but is not affiliated with this study. “That was sometimes a misleading motivator for the Affordable Care Act. The law isn’t designed to save money. It’s designed to improve health, and that’s going to cost money.”

One of the shinning lights of the Affordable Care Act has been the Medicaid expansion. The Medicaid expansion was the proverbial “free lunch” which for relatively little cost expanded and improved health care for the poor. It sounded too good to be true and it was. Affordable Care Act supporters might say that they expected people would be unhappy when they found out that they could not keep their health plans or doctors but they appear to be totally unprepared for the Medicaid expansion being bad for hospitals finances. In a sense we are expanding the free health care clinic market so we should expect similar reactions by the patients and health care outcomes. If free health care clinics is such a good idea, why are we expanding Medicaid? If we assume that hospitals are losing money or breaking even on Medicaid patients, then expanding Medicaid will be bad for hospital finances. It was assumed that changing patients from uncompensated care to Medicaid would be good for hospital finances. If an increased number of Medicaid visits impacts hospital finances then the hospitals will attempt to shift their costs to other patients. This is bad news for insurance premiums. State and federal Medicaid administrators should be getting pretty nervous that the Medicaid expansion might cost 40% more than expected. The Oregon Medicaid expansion study showed patients made 40% more trips to the emergency room and shattered hopes that they would start using primary care physicians for their routine health issues. Mr. Gruber might dismiss saving money as a misleading motivator for the Affordable Care Act but the Medicaid expansion is shaping up to be a disaster for hospitals, insurance premiums, and Medicaid budgets.

As Hillary Clinton might say, “What difference at this point does it make?” I doubt the Affordable Care Act will implode in 2014 since there are so many safety nets but it will be a painful subject. After the election it is likely that both sides will try to reform health care in 2015. The Affordable Care Act seems to have created more problems that it has solved. The biggest problem for the Affordable Care Act is that over half of the people in the country believe that number one issue for health care reform is that it should make their health care more affordable and it hasn’t. Their costs have gone up. When it comes to reducing health care costs the Affordable Care Act has transformed that strange coalition of big government and insurance companies into a trust problem with the American people. The cost and trust problems are cascading. The Affordable Care Act supporters sold the Medicaid expansion as a way to reduce uncompensated hospital care and cost shifting. The expansion was supposed to be an easy win-win for improving cost and trust. Now it looks like that may not be true.  It looks like more of the same old promises. Maybe by 2015 we will have some accurate cost data and smarter administrators that will allow us to make smarter decisions about expanding Medicaid and improving health care outcomes. Maybe a little less of the big government view and a little more state government and free market view will reduce the risk and improve the decision making. The old way does not seem to be making health care better and a single payer system would be far more disruptive than the current mess. The two lessons I hope we have learned from the Affordable Care Act is that the cost does matter and any idiot can expand health care if they are allowed to ignore health care costs.

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Things That Make Me Go Hmm… The Continuing Bull Market

I have been unwilling to invest more money into the stock market for the last couple of years because the stock market has this uneasy, codependent relationship with the expansion of the Fed’s balance sheet. Every time the Fed threatened to cut off the purchases the stock market had a temper tantrum. I hate this market psychology. As an old school MBA type I am much more comfortable with a market that goes up when the unit sales goes up. As a result I missed out on the stock market gains in 2013. Jeff Sauts makes a very good argument on BussinessInsider that the stock prices will continue to go up for the same reason it has since 2009.

…there has been a very tight correlation (R2) between the expansion of the Fed’s balance sheet and stock prices since 2009. If the Fed expands its balance sheet by another 12% over the coming year, it is conceivable the SPX could increase by another 12%

His argument is solid so despite my qualms I will probably test the investment waters in 2014. I would be much more optimistic about investing in the stock market if our government was reducing the policy risk on small and medium sized businesses. This is MBA advice you would have gotten in the 1980s. The government needs to get out of way so businesses can get back to their running their business. The Affordable Care Act and the increased regulations are a distraction that has increased the risks to small businesses. It is hard to grow your business with all of these meaningless distractions. I have said it before. If we want to grow middle class wealth we have to focus on making things bigger, better, faster, or cheaper.

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Stuck on Stupid Revisited

I was beginning to think I was too harsh on the State Department yesterday when I called their inept foreign policies Stuck on Stupid until I saw this story in the Business Insider. With the political pots boiling over in the Middle East and North Korea, Mr. Kerry says that climate change will be a focal point of his time in office.

The New York Times reports today that Secretary of State John Kerry is planning to make climate change a focal point of his time in office and wants to pursue a global climate change treaty in 2015.

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Is Our Foreign Policy Stuck on Stupid?

The New York Times decided to stir the pot on Benghazi and in the process showed that after a lot of work they can arrive at the same conclusion of a massive intelligence failure that most of us arrived at two years ago.  Here is a quote from the New York Times editorial.

While the report debunks Republican allegations, it also illuminates the difficulties in understanding fast-moving events in the Middle East and in parsing groups that one moment may be allied with the West and in another, turn adversarial. Americans are often careless with the term “Al Qaeda,” which strictly speaking means the core extremist group, founded by Osama bin Laden, that is based in Pakistan and bent on global jihad.

Republicans, Democrats and others often conflate purely local extremist groups, or regional affiliates, with Al Qaeda’s international network. That prevents understanding the motivations of each group, making each seem like a direct, immediate threat to the United States and thus confusing decision-making.

The report is a reminder that the Benghazi tragedy represents a gross intelligence failure, something that has largely been overlooked in the public debate. A team of at least 20 people from the Central Intelligence Agency, including highly skilled commandos, was operating out of an unmarked compound about a half-mile southeast of the American mission when the attack occurred. Yet, despite the C.I.A. presence and Ambassador Stevens’s expertise on Libya, “there was little understanding of militias in Benghazi and the threat they posed to U.S. interests,” a State Department investigation found. The C.I.A. supposedly did its own review. It has not been made public, so there is no way to know if the agency learned any lessons.

My problem with Benghazi is that it appears to be emblematic of a foreign policy stuck on stupid. Here are some of the questions that remain unanswered.

  1. What foreign policy concerns required Ambassador Steven to ignore intelligence threat reports and conduct business in Benghazi on September 11th?
  2. Does anyone at the State Department understand the concept of fourth generational warfare? Since 1989 we have talking about the “blurring of the lines between war and politics, soldier and civilian” and we are stuck nitpicking whether Al Qaeda had operational control of the attack. To its credit the NYT complains about this, too.
  3. When I look at our foreign policy in Syria it looks like the Benghazi foreign policy on steroids. Which side are we on? What are our objectives? Would someone please call Putin so we can figure out what the US policy is?
  4. If we look dazed and confused on Syria and Libya, what message does that say to Iran and the Muslim Brotherhood in Egypt? Is our sheer incompetence leading to more unrest or just more stirring of the political pot? If we do not start showing some foreign policy successes in this area maybe it is time for us to cut and run and leave the policing of the Middle East combatants to the professionals?
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What Would Paul Do?

Since I believe that the attack on Phil Robertson was primarily about the media’s distaste for Paul’s message about sin in 1st Corinthians I asked the rhetorical question, What would Paul Do? Discussing homosexuality is a tough subject but I doubt Paul would shy from the task at hand. He died as a martyr for his faith. I believe that Paul sensed that there were some “homosexual offender problems” in the church of Corinth because the NIV and NKJV translations say so in pretty definite terms. Churches seek out the broken and those overwhelmed with guilt so why is anyone surprised if a church seems to get more than its fair share of adulterers, prostitutes, drug addicts, drunkards, and people with homosexual issues. The Message and Voice interpretations of this chapter focus more on sin and less on naming names. In the context of that time in history I don’t know what homosexual offender means.  Although we are probably more tolerant to homosexual lifestyles than at any time in history, we still have homosexual problems that need to be addressed. Some of the problems are pretty complicated and uncomfortable. Was Ted Haggard a heterosexual with a homosexual obsession? On the other hand New York Mayor Bill de Blasio’s wife is complicated and comfortable with her past. She is a former lesbian who is happily married. There is probably something a church leader can learn from her.

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Affordable Care Act Loser #7 – Health Reimbursement Account

Last week my boss informed me that our Health Reimbursement Account(HRA) would be phased out at the end of 2014 and he said that the most recent interpretation of Affordable Care Act by the Department of Labor had effectively outlawed the HRA. He and our HRA administrator discussed the options and do not have a clue what they were going to replace it with in December 2014.  As of right now we do not have a company supported health care plan for 2015. Our present plan is a stand-alone health reimbursement arrangement in which I am reimbursed for paying my health insurance premium. It is a very simple, portable health care plan that worked really well before the Affordable Care Act. Since the company is small enough to be exempt from most of the Affordable Care Act I was hopeful that I could continue the HRA in the future. It is truly ironic that the people who voted for the Affordable Care Act seem to be the last people to figure out that they have condemned some of us to health care hell. Abandon hope all ye who enter here.

The sad part is that the demise of the HRA did not have to happen this way. As an example the Public Health Services (PHS) Act Section 2711 requires a health insurance issuer to not establish lifetime limits on the dollar value of benefits for any participant or beneficiary. I can see how this requirement should be applied to my insurance company, Aetna, so I am not surprised that my insurance company has already complied. This was one of the positive contributions of the Affordable Care Act that had bipartisan support. I do not understand why our bureaucrats are applying this restriction to a HRA used to purchase a health insurance policy that complies with the requirement.  The Department of Labor has grudging accepted that a flexible spending plan can be used to pay health insurance premiums if it provides preventative care as required by PHS Act Section 2713 at 100% without cost-sharing, too. Huh? Since my insurance plan already complies with both of these requirements, isn’t this redundant? Zane Benefits thinks that a new plan they call a limited Healthcare Reimbursement Plan (HRP) can be constructed to comply with the Department of Labor requirements. All of this sounds so iffy I have to ask the question why did the Department of Labor decide to screw with health insurance that was working?  It sure looks like it is deliberate malfeasance. Here are two alternatives my company is probably looking at for 2015.

  1. In an effort to avoid unnecessary employee turnover they might opt to give everyone a $5,000 raise and tell us to get our health insurance from the exchange. $5,000 was the amount they contributed to the HRA last year.
  2. As a company with less than 50 employees it is not obligated to provide me with health insurance. They might opt to drop the HRA with no change in employee compensation.

In this strange as hell health care world the “raise” option is actually less attractive because the subsidy is greater than what the raise provides after you take out the taxes. A raise will likely push my income above the 400% FPL so I will not receive a subsidy. Since I do not qualify for a subsidy and my monthly premiums will go from about $407 to over $886 per month(2014 rates) for the lowest cost bronze plan, my out of pocket costs will zoom from zero to about $6,000 a year even when I account for the raise. The second option qualifies me for a subsidy and my total out of pocket costs is just $4,800. In 2015 I have the option to pay an additional $6,000 or $4,800 for heath insurance I paid zero for in 2013. Either way I lose. The only way to minimize my loses is if I can keep the HRA just the way it was.

So for a person who went without health insurance from 1998 to 2008 it looks like there is a very good chance that my wife and I will roll the dice and go without health insurance in 2015. Until the Affordable Care Act was passed we were part of the solution. We had health insurance and we were healthy. In fact we were the perfect health insurance customer. We never made a claim.  Now we are part of the problem in this strange, strange health care hell.