House Budget Committee Chairman Paul Ryan unveiled the House leadership proposal for the 2012 budget calling for reduction in Federal spending and entitlements of $6.2 trillion over ten years. Compare that to the Obama Administration’s proposal to cut spending $1.1 trillion over the same period and you begin to see the stark contrast of views that will not only frame the debate ahead but the 2012 election as well.
Democrats are already lining up with every special interest sacred cow to call these cuts in spending draconian and accusing Republicans of sending grandma to the poor house so millionaires can keep tax breaks.
Congressman Ryan seems to understand what many others are still in denial about. The US Government faces a red ink problem that is profound and staggering. The excuse of the recession to continue spending at unsustainable rates is wearing thin. And the American people chose a mid-course correction in the last election to restore a sense of balance and proportion to our budget and our national policies.
Ryan and the house leadership had no choice but to propose a budget and lay out policy options that give the people what they want, even if they must give it to them hard. The question is whether this proposal will be seen as a serious program of reform and recovery or political grandstanding to create an issue for the next election.
We will know the answer to that question soon enough. But we do know this—Paul Ryan has done more to help restore America’s financial strength in this one action that anyone else in the last five years across both administrations.
By forcing America to look into the mirror and speak truth about our fiscal and policy realities we unleash the best in America—common sense, air play, and optimism about the future that has made us the greatest nation on earth.
There is one more truth we all know—-no serious budget or reform proposal can evade a serious discussion of the unsustainable realities of health care costs including Medicare. An entitlement is worthless if the nation is bankrupt. Piling on more unsustainable costs will not solve the problem only competition among service providers across state lines, choices among benefit levels rather than government mandates, an end to automatic increases regardless of cost, and restoring the basic soundness of our economy so that more revenue flows into the government treasury will turn things around.
So thank you, Paul Ryan, for framing the debate and the decisions ahead in terms that are practical, realistic to our needs, and honest.
- The 2012 Budget War (civicchoices.wordpress.com)
- Must Read of the Day: Paul Ryan: The GOP Path to Prosperity (bigcitizen.wordpress.com)
- GOP Budget Plan to Cut $6 Trillion (foxnews.com)
- GOP’s Ryan Prepares Medicare ‘Premium Assistance,’ Medicaid Block Grants In Budget Proposal (kaiserhealthnews.org)
- Democrats Warn That Paul Ryan’s Medicare Plan Would Reduce Federal Health Care Spending (reason.com)
- David Brooks Is Excited: Paul Ryans Kicks the Elderly While Protecting the Wealthy (businessinsider.com)
- GOP to Unveil Budget Plan Cutting More Than $6T Over Next Decade – Fox News (news.google.com)
- Now THAT is cutting the budget! (thedaleygator.wordpress.com)
- Paul Ryan budget hard-headed or inhumane? (politico.com)
Proposition 19 is making Californians nervous. The proponents for the ballot proposition to legalize marijuana for personal use in California have used every argument imaginable to make Prop 19 nonthreatening to California voters. But as Election Day draws near not even a last minute $1 million donation from George Soros may help to close the deal for voters.
Proponents say legalizing pot will drive out the drug dealers and create a tax producing market for what is now being sold anyway under the table. They compare it to ending prohibition.
Opponents including US Attorney General Holder say just because California might vote for this ballot measure won’t make pot legal under US laws. Others say we are just legitimizing unhealthy behavior and being hypocritical when California spends so much money and effort to ban smoking cigarettes for health reasons.
Ironically, some of the loudest opponents of Proposition 19 are the marijuana growers themselves who fear that the price of their products will drop and competition will expand. Nowhere is this view more widely held than in far Northern California where the place may as well be called MaryJane County instead of Humboldt County because ideal growing conditions, its rural location and easy access to I-5 make it a pot paradise.
Marijuana seizures in California have more than tripled since 2005 to record levels. But drug enforcement agents admit they are seizing only a fraction of the drug grown in the State. In fact there are so many growers and it is so easy to buy pot already in California that the market is saturated and growers and dealers are exporting increasing larger quantities anyway possible.
This information is having an effect on public attitudes and undercutting what had been the biggest attraction to the ballot measure—proponents say Prop 19 would cut the legs out from under gangs who use pot sales to fund their gang activities across California.
That George Soros would write an op-ed in the Wall Street journal and give a million dollars to make a last minute pitch for voter support for Prop 19 suggests the pollsters are right that the public is losing faith in the wisdom of legalizing pot and more likely than not to vote no.
And then there is the other ugly reality. Pot is virtually legal in California already because of medicinal marijuana clinics. The more they have sprouted in city neighborhoods the more problems the police and neighbors have discovered as unintended consequences. While not unlike the problems that bars and other establishments might cause—the reality has been that medical marijuana has been a ruse to allow some to buy pot legally only to turn around and sell it illegally on the street to get money for their other drug habits.
The truth is reducing demand is the only sure cure for drug problems in America but we are unwilling and unable to do that so we are forced to live with the ugly consequences.
Both health care and illicit drugs are driven, priced and delivered based upon the laws of supply and demand. Sixty years of employer based health insurance has not solved the social policy problem of how to insure unemployed or the uninsured without progressively driving up the cost for those who are insured stuck covering the unreimbursed costs through higher prices for health care services. Concerns over the rising cost of health care and its effect limiting access to millions of Americans gave rise to ObamaCare, but health costs are expected to continue to rise.
The “War on Drugs” has been spending money for more than thirty years to reduce drug demand without success. Last year California made more than 78,000 drug arrests most of which were misdemeanors. Along the US border with Mexico concerns are rising to near panic over violence between competing drug cartels for control of market access to buyers in the US and drug routes through Mexico. In California alone, the state estimates that growing pot is an estimated $14 billion a year business. If the state collected sales and use taxes on pot sales it might generate $1.4 billion in taxes from an industry estimated to gross about $18 billion per year in California alone.]
What do these two stories have to do with each other? You see this coming don’t you. The State needs money and Californians are going to smoke pot anyway, Sacramento reasons, so why not legalize it and tax it to help close our budget deficit.
Welcome to the progressive California Bear Republic!
So on the November 2, 2010 ballot, Californians will vote on Proposition 19 the Marijuana Legalization Initiative and decide just that question. State Assemblyman Tom Ammiano (D-San Francisco) introduced AB390 in the 2009 session to legalize, tax and regulate marijuana. AB390 passed the Assembly Public Safety Committee and was reintroduced as AB2254 in 2010, but the TaxCannibis2010 initiative campaign easily raised enough signatures to put the measure on the November ballot, and the Legislature was happy to let the people have their way on the measure without putting their own fingerprints on such a loaded question.
But before you file this as one more crazy idea from the left coast, consider this. There is growing opposition to the Tax Cannabis 2010 measure in the three far north coastal counties in California. This area is prime pot growing country and the local growers don’t want the competition. Listen to this radio story from the KCBS station in the San Francisco Bay area. http://www.kcbs.com/topic/play_window.php?audioType=Episode&audioId=4601417.
It turns out that when California legalized medical marijuana dispensaries several years back the retail price of marijuana fell from $6,000 per pound to $4,000 per pound and it keeps falling as more of these “wink, wink” medical facilities are licensed by cities. The North Coast growers cooperative does not want to lose its profits which are higher than anything the health care lobby has been able to impose on us to date.
Competition works to drive down prices and effectively manage supply and demand!
So let’s make a deal, we here in California will all vote FOR Proposition 19 if the ballot measure is amended to allow for the same full competition for the rest of the health care market. If the North Coast old hippies have it right we should expect health care to follow pot prices down, and there will be plenty of providers to deliver it, and the drug cartels will have to fight each other to INCLUDE Medicare patients instead of throw them under the bus.
Peace, Brothers and Sisters!
 Time Magazine, “Is Marijuana the Answer to California’s Budget Woes?”, July 24, 2009
Did you know ObamaCare Imposes a 3.8% Capital Gain Tax on Home Sales?
I discovered this fact on a great site I highly recommend by the Tax Foundation. On it you will lots of information that will probably turn your face from blue to red by Election Day.
The Tax Foundation blog reports that the recently approved ObamaCare health reform legislation imposes capital gains taxes on some home sales made by married couples making more than $250,000 in adjusted gross income or $200,000 if single. The capital gain must exceed $500,000 if the house is your primary residence and a married couple or $250,000 if singles. Got a vacation house? No exclusion for that one.
There are plenty of people here in California and elsewhere who dream of once again having such equity in their homes—and if you ever get there the Federal Government will want 3.8% capital gains tax if you meet these threshold tests. But just like the alternative minimum tax the “gotcha” in this home capital gains tax is that the provision is NOT indexed for inflation meaning each year more and more people become subject to the tax.
What does this have to do with healthcare, you ask?
Only the chilling reminder that the Government is going to tax everything that walks, quacks and breathes, everything you sell, invest in or play with in order to pay for the aspirations of our politicians. And if you have anything left when you finish your bucket list—and kick that bucket—the Government will want that too.
But the cure may be worse than the disease!
Health care costs are out of control. In a time when the economy overall faces pressures from deflation healthcare cost increases threaten to fully offset that risk with continued rapid increases.
To get the votes needed to pass ObamaCare, Congressional Democrats “reduced its cost” by delaying the effective date for parts of the program up to four years even while allowing some provisions to expand coverage to go into effect sooner. One consequence of this staging implementation is that health care costs—already rising faster than inflation—are going into warp speed.
The Hunt Family Story of Health Care Costs
My family is covered under my wife’s health care plan at her school district as we have been for the last fifteen years. Her plan for teachers was always better than the one offered by my employer. As parents of a diabetic child we chose Kaiser coverage because of the comprehensiveness of its diabetic management services—and it was cheaper than other options. It has proven a good choice for us.
As Carolyn prepares for another school year, she got a memo from the School District telling teachers that health care premiums were going up—way up for the coming year. Like most employers, the School District offers a range of options from HMO to PPO services.
The District-Union committee working to manage the costs of this benefit program was asking for advice on changes they can make to reduce the cost impacts like raising copays, deductibles on brand named drugs, higher emergency room visit copays, etc.
The bottom line: Kaiser raised premiums 10% but the BlueCross options for HMO and PPO services raised premiums 25%. This brings the monthly premium for those who elect the BlueCross PPO to a staggering $2867 per month or roughly 50% of the salary cost of the average teacher in California.
This has been the trend for the last several years. The result is that more employees each year switch their coverage to Kaiser from the Blue Cross plans. Blue Cross responds by raising premiums even higher to make up the revenue shortfall.
This year the benefits committee has been negotiating to add a third provider, HealthNet, to introduce more competition. HealthNet has offered premiums that represent as little as a 7.6% increase over this year but requires a substantial number of employees to switch to their plan from BlueCross, presumably, to make it work. It has high copays and more limited coverage to get the costs down. But the State of California specifies minimum coverage levels on many items.
This is Russian roulette since BlueCross responded that if subscribers switched in numbers needed to make HealthNet viable BlueCross would consider pulling out all together. This would simply transfer the non-Kaiser market share to HealthNet which would promptly raise premiums like any good monopolist.
Kaiser’s growth in market share is due to several factors and good strategic positioning. It offers the lowest premiums and the fewest benefit administration hassles for subscribers. By maintaining that relative market price position, Kaiser has grown substantially taking share from others who must then raise premiums to achieve their margins. But as an HMO it is managed assertively and you must learn to manage it right back to get the services you need. This is frustrating for those accustomed to a one-to-one doctor relationship, but the savings are serious money.
Why are health care premiums increasing by 25% per year? And even scarier what will the premium increases be when inflation from the growing Federal deficit kicks in? We could get ObamaCare not because we want it, but because there ends up being no alternatives we can afford.
Health Care Change We Should Believe in!
But it does not have to be that way, but it will require some changes we can believe in not those which benefit our politicians. What changes?
- Aggressively expand competition in the health care market by allowing insurance providers to offer a wide variety of plans across state lines including a basic “no frills” universal plan to serve as a floor for coverage and a basis for comparison of both benefits and costs in other plans.
- Make premiums paid by individuals tax deductible just as they are in group plans effectively since they are paid with pre-tax dollars to encourage aggregating customers and making competition work in the private plan market. Allow all individual plan providers to operate across state lines under Federal rules to enable scale.
- Force competition between group plans and individual plans based upon price by giving individuals in existing group plans the option of taking their current employer contribution with them if they move to a private plan by having it added to their salary base.
- Enable competition among aggregators to go after group plans thus allowing the scalable national market to compete for customers not only on an individual plan basis but offering more cost effective options to acquire entire groups.
- The role of the Government is to define fair rules of competition to assure that information is clearly presented and customers are able to reasonably compare the costs and benefits across plan offerings.
These changes would likely stop the out of control price increases by giving captive health care insurance customers options for coverage on a nondiscriminatory basis and forcing insurance companies to compete for customers. Health insurance would likely work as well as life insurance does today. Forcing each of us as health consumers to see competition as our friend rather than seeing health insurance as an entitlement is the fastest way to cure the health care cost spike disease.
Here in California the past few days, the media has been full of outrage over the proposed 39% rate increase by Anthem Blue Cross for individual health insurance policy holders. Washington DC has heard that outrage and our politicians at every level are piling on demanding an explanation. It turns out this isn’t just limited to California. The same company or affiliates raised premiums 23% in Maine, 22.8% in Oregon, and likely other places I don’t know about. I also suspect that Anthem Blue Cross is not the only insurer using this opportunity, for good or ill, to raise rates either as a “me to” tactic or in the belief there is safety in numbers.
I have two of my children who having graduated from college are no longer eligible to be on our family group health insurance plan. COBRA enables me the privilege of continuing their coverage but the monthly premiums for that privilege are about $500 per month per kid and just increased by 8%. I guess I should feel lucky compared to the Anthem Blue Cross customers. But it still is $1,000 per month I must come up with or risk having two of my graduated but “without benefits” kids uninsured. That is the trap isn’t it. We can’t afford our increasing health care insurance costs but we can’t afford NOT to have it.
I have wrestled with the ideas proposed in ObamaCare. On the one hand, a single payer system is seductively simple. On the other, government services are notoriously heavy-handed, costly, and not very user-friendly. Try visiting the DMV lately?
The US Health & Human Services Department says that healthcare spending reached $2.3 trillion in 2008, or $7,681 per person or 16.2% of GDP double the 8.1% of GDP in 1975, and triple the 5.2% share in 1960. Clearly, we have a growing problem here and our aging population bubble is going to make it worse before it gets better.
So what’s going on with these outrageous health premium increases?
This isn’t a new problem as we all know. Premiums have gone up and up and up as health spending has increased over time. It has been compounded by periods of high inflation and even when the CPI is low health costs kept rising at faster rates than other consumer prices.
No competition, a focus on billable procedures, and no incentives by each of us as individual consumers of health care services to control the costs since more and more of our first dollar costs were being covered by our plans—a vicious cycle of cost increases seemingly out of control.
“Give the People what they want, and give it to them hard!”
The conspiracy-theorist in me wonders if the stumbling of ObamaCare once thought inevitable but now seemingly dead on arrival, is provoking a backlash of a different sort. Is there a campaign to make the current system so painful, so costly, so in-your-face that we will put aside our reservations and trepidations about the single payer public option and flee to it as refuge from all this?
Health insurance companies are ranking right up there with banks and other scoundrels for our civic loathing. Yet, we can’t seem to find the right answers to the question of how we would reform the system to make it work better. The ObamaCare cure seems worse than the disease.
From Vicious Circle to Virtuous Circle for Health Care
The pragmatist in me says that the real solution to health care cost increases is to re-introduce market competition and individual responsibility to the system shifting the decisions about both spending, plan coverage, and cost reasonableness to individuals in a reformed system that creates a more “virtuous circle” for all. By modifying our tax laws and setting competitive market principles to work we could see significant improvements in both quality of care, coverage availability, and affordability.
Five Principles for Virtuous Circle Health Care Reform
There are plenty of ideas to consider as alternatives before we give up and go to the single-payer government system including but not limited to:
- Interstate competition. Congress could authorize interstate competition for health care plans of various types to allow vendors to compete to aggregate individual policyholders for their plans without the current state-by-state mandated coverage and restrictions. Such a system seems to have worked better than expected in giving seniors the ability to shop for prescription drug coverage so maybe it will work here. The problem is only about 13 million Americans buy health insurance in the form of individual plans since the vast majority still gets health plan coverage under group insurance plans through their employers. The law also effectively prohibits multi-employer insurance buying cooperatives or risk pools making it difficult for small business to afford coverage for employees. And for individuals, choice is limited, prices are very high, and there is no more assurance they will not be subjected to the same volatile rate spikes for coverage they currently see since one rationale by Anthem Blue Cross for its rate increases is that the recession means that fewer healthier Americans are buying individual coverage. DUH! Not in a captive market where ABC can jack the price up 39% and its customers’ choice is pay it or get dumped.
- Transition from Employer-based Group Coverage. We all like this because it is what we know and we don’t have to do anything about it. Group coverage is only about 50 years old begun during the WWII period to attract working to defense contractors and spread during the post-war boom times to become the norm. The system was a good way for employers to attract workers in a crowded field. Unions liked it because it gave them leverage in labor bargaining agreements. Employees liked it because it was a “benefit” and often thought of as “free” even though the practical consequence was merely shifting salary dollars to benefit costs and limiting our freedom to shop for medical and insurance coverage. The tax system also virtually enshrines this approach today making medical insurance costs tax deductible for employers as a cost of doing business, not taxable to group- covered employees while individual insurance premiums are not deductible unless they get to a high hurdle of 7.5% percent of your taxable income. Nonetheless, the current dilemma is so many employees are now covered this way they fear changes that would shift them to either a government plan or to the volatile individual market preferring the stick with “the devil we know”—until, that is, we get laid off!
- Medical Savings Accounts and Major Medical Coverage Individual Plans. Federal government data tells us that out-of-pocket payments for medical expenses has fallen from 47% of total health spending in 1960 to a record low of 11.9% in 2008. The reason is simple; our group coverage often was “improved” by paying more of the “first dollar” items we used to pay for out of pocket. Medical Savings Accounts were introduced to encourage a reverse in this shift in coverage by bundling customer paid first dollar costs with major medical insurance coverage for catastrophic care . This balancing was thought to offer the best of both worlds in individual responsibility for preventive health and routine care and insurance protection at lower costs for major medical needs. Advocates of single payer systems hated it, but it still might be the best option for many Americans. But it is very hard to do. One reason is that state by state regulation forces required coverage on many plans and thus it was impracticable for insurers to aggregate enough major medical insured to make the risk tolerable within a given state. Interstate shopping for coverage without mandated coverage features would open a new world of competition to the health market. Paying out of pocket first dollar health costs with either pre-tax dollars from MSAs or tax deductible dollars would restore individual responsibility and cost consciousness.
- Tort Reform. Let’s face it, the plaintiffs bar gets hammered for aggressive ambulance chasing lawsuits seen as driving up malpractice insurance costs to the point many doctors just stopped practicing. Balance that against the occasional horror story we all hear about medical mistakes and genuine malpractice building sympathy for the aggrieved. The trial lawyers have been major political contributors at both the Federal and State levels and have successfully preserved their options to date. But while tort reform to limit malpractice lawsuits and awards may work to reduce doctors’ medical malpractice costs it, alone, is unlikely to bring down premium costs for the individual insured. That was the experience in Texas when reform was introduced, the State saw an increase in the number of doctors practicing both at risk specialties as well as in rural areas, but insurance premiums overall for individuals and groups continued to rise.
- Pre-existing Conditions Coverage. There is a fine balance between setting premiums based upon the relative risk of the insured and using issues like pre-existing conditions to effectively deny coverage and improve profit margins shifting these individuals into high risk pools. One answer is to have bigger pools so such risks of pre-existing conditions can be partially mitigated and spread across a larger base. Another is to have a premium schedule that reflects increased risks with premium adders that are equitable across the entire pool for such pre-existing conditions but limit the discrimination on covering such individuals. California has such a policy requiring insurance plans to accept those who are forced out of group plans to transition through COBRA to private plans without considering pre-existing conditions. It seems to be a reasonable compromise of interests and builds the base of individual plan insured.
So my suggestion for the President and the Republicans flirting with bipartisanship is this:
Use these 5 principles above to craft a reform plan for the existing system that empowers individuals and creates a gradual but deliberate transition from group plan coverage to individual market based coverage. You’d do this by making all current employer group spending on healthcare taxable income to each employee. Employees could stick with their group plan or use that money to shop for a new plan in interstate commerce that better suits their needs paying any increase or keeping any savings. Their premiums for participating in either the employer group plan or a separate private plan would be tax deductible. The government should set a maximum deductible premium but grandfather a transition in over five years to allow the competitive market place to work. The role of the States and Federal Government is to assure full disclosure of plan coverage and limits and standard presentation of premiums and costs. The vendors in competition will be more than happy to build software and other solutions to encourage plan comparisons just as happens now for comparing Rx coverage.
That’s my plan and I’m sticking to it!