Health Care Bill — Where is the reform?

Don’t let anyone fool you — Health Care reform is essential. Why? Because from spending 1 out of $20 on health care in 1960 we have arrived at a point that we are spending 1 out of every $6 on health care now. And of course, this cost is expected to sky rocket. President Obama is right — exponentially growing health care costs, completely independent of making health care universal, will sink the American economy.

Strangely enough though, the current bill being considered by the House of Representatives is not about reform driving cost down and funding universal health care but universal health care without any meaningful reform. 

 Section 1 — CBO Report

To build the case though, allow me to start with some key facts and data points from the Congressional Budget Office’s (CBO) “Long Term Budget Outlook” published in 2007 regarding Health Care:

1. On Total Health Care Spending

A> “Total spending on health care in the United States, including both private and public spending, increased from 4.7 percent of GDP in 1960 to 14.9 percent in 2005, the most recent year for which such data are available.”  That is a greater than 300% increase in share of spending on health care obviously at a loss to other facets of life.

B> The report identifies the primary cause for this increase as, “Most analysts agree that the most important factor contributing to the growth in health care spending in recent decades has been the emergence, adoption, and widespread diffusion of new medical technologies and services.”

C> Other factors for cost increase identified in the report are rise in disposable family income, rise in insurance coverage and aging of the population.

2. On  Medicare Program

A> Overview of Medicare: “Medicare provides federal health insurance for nearly 43 million people who are aged (about 85 percent of enrollees) or disabled or who have end-stage renal disease. The elderly become eligible for Medicare at age 65; the disabled become eligible 24 months after their Social Security benefits start.”

B> Medicare is funded via various sources, payroll tax of 2.9% of taxable income, being a primary source. Think of it as money you are putting aside to be paid for medical care when you get old or, god forbid, disabled. CBO report also states, “As of June 2007, 18 percent of Medicare beneficiaries were enrolled in private health plans under the Medicare Advantage program,” i.e. were paying additional for enhanced coverage.

C> In 2006, Medicare spending totaled $382 billion.

3. On Medicaid Program

A> Medicaid is a joint federal–state program that pays for health care services for a variety of low-income individuals. The program was created in 1965 by the same legislation that created Medicare, replacing an earlier program of federal grants to states to provide medical care to people who have low income. The federal government’s share of Medicaid’s spending for benefits varies among the states and currently averages 57 percent.

B> In 2006, the total spending was $160.9B and total beneficiaries were 60.9M people. Out of which children accounted for 29.5M – approx. 50%.

Section 2 — some more key data points:

1. Americans spend $2.5T (trillion) annually on healthcare.

2. Medicaid is only 6.7% of the total healthcare bill for USA and hence hardly the cause for the crisis.

3. Kaiser Health Tracking Poll from June 2009 finds, “Struggling to afford needed care — The survey continues to find that a majority of Americans (55 %) say that they or another member of their household have put off some sort of needed medical care because of the cost over the past 12 months. About 1 in 4 say they have skipped a recommended test or treatment, and a similar percentage have chosen not to fill a prescription. 26% say they or a family member had problems paying medical bills over the past year, similar to the proportion reporting problems in our April tracking survey. This number rises to nearly half (48 %) among those suffering health problems, and is nearly as high (43 percent) among the uninsured.

Section 3 — Key observations based upon the above data

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Obama’s turn-arounds

A sizable section in the left wing of the democratic party is all up in arms about a few recent Obama decisions that appear to be turn-arounds from campaign promises. I am in favor of the decisions.

Decision 1: Stop the release of detainee abuse photographs

Torture is a terrible thing. It was institutionalized by the Bush administration and untold number of innocent people got tortured. A rather sad and dark chapter in the recent history of the USA. However, all the people who are asking for the release of the photographs sit safely ensconced in the confines of our border and are out of harms way. They have no idea what their demands will result in for the brave Americans positioned in foreign countries.  It is purely for practical and pragmatic reasons I agree with President Obama — release of such photographs inflames anti-American emotions, is played to full advantage by Al Qaeda and its ilk, and will surely result in violence against Americans and justification for torture of captured Americans who had nothing to do with torture in the first place.

The best way to prevent such abuse from happening is to clearly define what torture is and starting from the highest office down state in unequivocal terms that such practices are banned. It is surely not to make the left wing feel happy but lose Americans lives in the bargain.

Decision 2: Has denied calls for investigating the last administration on torture

The noise to investigate past deeds has grown more shrill and people are not listening anymore to the thunderous warning of the impending category five hurricane.

We need to muster all our collective energy and focus them on the Economic, Jobs Market, Health Care, Climate Change and Geo-Political disasters at our hands.

I would love to learn how all the Bushies violated the law but these are truly unique times. I want to know about the past but not if I do not have a future.

Is this why Obama went to Canada?

The likes of Mr. Rich, the New York Times columnist, are scratching their heads trying to figure out what they would do to stop the meltdown of the financial system. And of course since they can’t figure out a solution they believe President Obama must be in an equal bind. To quote from Mr. Rich’s recent article, The Ecstasy and the Agony, “Therein lies the Catch-22 that could bring the recovery down. As Obama said, we can’t move forward without a functioning financial system. But voters of both parties will demand that their congressmen reject another costly rescue of it. Americans still don’t understand why many Wall Street malefactors remain in place or why the administration’s dithering banking policy lacks the boldness and clarity of Obama’s rhetoric.”

Given Mr. Obama’s moves to fundamentally restructure the American social and economic landscape, I believe a more likely solution to the banking problems of America is what Theresa Tedasco hints at in her article the “The Great Solvent North.” She points out that the World Economic Forum ranked the Canadian Banking System at # 1 in terms of stability. The Canadian Banking system, in short, is five large banks that are very carefully regulated by the Government and prevented them from taking huge risks and securitizing their loans.  And because it was only five banks it was easy for the regulators to regulate.

I think President Obama, more than to shake Mr. Harper’s hand, went to Canada to learn from the Federal Regulators how to manage banks and save them from themselves. President Obama and Mr. Volcker, former chairman of the Federal Reserve, both have talked up the virtues of the Canadian system.

If President Obama is seriously considering the Canadian model, the interesting part will be of course the journey — the transition from thousands of banks in the US to only five to ten consolidated banks. I watch the next year with baited breath.

Obama’s Budget

I am rather conflicted about the budget that Obama administration unveiled. On the one hand it has the right investment areas — Health Care reform, alternative energy (with revenue generated from carbon emission heavy industries), and education.

It  also focuses on some of the right areas for generation of revenues — like  roll-back of tax cuts for people earning greater than 250K, cut-back of subsidies to agribusinesses, pharmaceuticals and defense contractors.

However, where it fails, in my eyes, is the cut-back required on wasteful government spending — I don’t see much of that. Another troubling sign is that the deficit for the fiscal year 2009 (that ends in Sept) will be $1.75 trillion. That is staggering addition to the government deficit. He predicts that the deficit will fall to $533 billion in the last year of his term — 2013 — but that is far off in the future.

It is a bold new experiment in trying to level the playing field between the haves and the haves not. However, neither is it trim enough nor is it immediate in reducing deficit, and I fear that entropy will take over as time progresses with positive goals less pronounced and negative factors exaggerated when all of this becomes reality.

In a very perceptive article in Washington Post titled, “A Budget Process Hijacked By Selfish Interest,” Steven Pearlstein points out that it was the drive for self interest that resulted in a pluralist approach which forced competing self interests to be looked at collectively by decision makers and helped balance out the overall outcome. He writes, “It’s hard not to see the parallel between the magic of this political marketplace and the “invisible hand” of the economic marketplace as described centuries ago by Adam Smith. It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest,” he wrote famously in “An Inquiry Into the Nature and Causes of the Wealth of Nations.””

 However, it is clear that the system can be manipulated and short term narrow interests can take away the focus from the long term issues that are more potent and dangerous. Also, the politics of Washington ensures that such sweeping, radical bills have more angles to attack it from. And that, I am afraid, will be the undoing of the budget. For, immediate, short term gains are easy for the butcher, the brewer, or the baker and hence that is what they lobby for but long term abstract gains like a balanced federal budget, reformed health care and green energy are hard to visualize. Just like Wall Street, Congressmen will continue to focus on short term gains till uncontrolled upheaval makes long term short term and then, unfortunately, change will be impossible to implement.

The audacity of hope, indeed!

President Obama’s audaciously hopeful plan outlined today in his Address to the Congress is breath taking in its ambition. He has laid out such a vast agenda that even if he accomplishes half of what he wants to, the nation will be better for it — at least all his goals are admirable and that is, already, more than what could have been said of the prior administration.

Obama restricts Executive pay!

The news is just in and I cannot be happier:  New York Times is reporting that the Obama administration plans to impose a cap of $500,000 for executive pay for any firm that will benefit from the next round of bailout money. This restriction is obviously not retroactive but many of the big banks are expected to come to the well once again given the deepening recession.

Yahoo! News reports, “Administration officials have said that the new restrictions would apply only to those struggling large firms that receive “exceptional assistance,” such as the American International Group Inc., Citigroup Inc., and Detroit automakers. They would not apply to healthy banks that receive government infusions of capital.

And Obama’s chief economic adviser, Larry Summers, has proposed that firms that want to pay executives above a certain threshold would have to compensate them with stock that could not be sold or liquidated until they pay back the government funds.”

On the same day, Obama was brave enough to admit that he made a mistake in nominating Tom Daschle for the Cabinet position — I like the courage in contrition displayed by our Commander-In-Chief. 

Hail the new President!

Why not socialism for all in bad times?

When it was reported that $18.4B were paid in bonus by the New York based Investment banks who were recently bailed out by tax payer money, the recriminations were swift: Obama called the act “shameful” and Senator McCaskill, reported Kansas City Star, called Wall Street executives “idiots” and proposed limits on some of their salaries.  For all in politics who were enraged by the mind-numbing greed and psychotically selfish behavior of these “guardians” of our financial system, the shocking part was that there were equal number of highly influential people who were supporting the bonuses!

The two that stand out are former NYC Mayor Rudolph Giuliani and the legendary former GE CEO Jack Welch.

Jack Welch said on Charlie Rose (paraphrasing), “while it might sound horrible but you have to realize that these people did not chose to cure cancer, educate kids. These people chose to make money, Charlie. And if we do not pay them bonuses they will go to other investment banks because they all know each other.”

And equally loopy logic from the egotistical Mayor Giuliani, “If you somehow take that bonus out of the economy, it really will create unemployment,” Giuliani said on CNN. “It means less spending in restaurants, less spending in department stores, so everything has an impact.” 

Mr. Welch and Mr. Giuliani, let’s start with basics: bonus is given based upon performance. The more enriching to the company an individual’s performance is, the more the bonus payout for the person. If you have sunk $1 trillion in wealth, taken anywhere from $200 to $300 billion of real cash in compensation and bonuses in previous years all under, what is obvious now, false premise of having grown money and then turned around and asked $350 billion in tax payer money to save your lousy, wretched enterprise then you should not be allowed to spell the word bonus! You should be sick to your stomach everyday on behalf of wrecking free enterprise and should be asking forgiveness of every person you have fleeced in your career.

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