How Do You Like Them Apples?

Cover of "The Biggest Loser: The Weight L...
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“I am in shape. Round is a shape.”  – Anonymous

Across America, January has become 31 days dedicated to self-improvement. More money is spent on memberships and advertising for gyms, weight loss programs, and physical fitness equipment such as abdominizers and glute masters than any other time of year. Personal trainers are once again in high demand as disgusted, over indulged adults have moments of clarity with buttons popping, pants ripping, beds breaking, partners criticizing and television validating that something literally must change.  Time is running out as the arc of a cold winter sun climbs in the southern sky and with each degree comes the certainty that soon one must don a bathing suit or remove their shirt in public.

Perhaps more than any other program in popular culture, The Biggest Loser television show typifies the state of America parading a two ton assembly line of grossly overweight Yanks through fitness regimens directed by trainers Alison Sweeney, Bob Harper and Jillian Michaels.  With her super-hero abs, bleached teeth and prison guard chin, Ms. Michaels encourages, cajoles and berates her Team Red contestants through a physical and emotional wilderness as they seek to heal their lives and find that “inner thinner” person that is struggling to be free.  In some cases, contestants may find that they have several people living inside of  them.   Depending on your perspective, the Biggest Loser is a moving spectacle of human determination or a frightening flashback to the time you and your children were almost stampeded at a Cinnabon counter at Disney’s Epcot Center

This holiday season was a rough one for this old calorie counter.  I am not sure exactly what triggered my sudden lack of self-control – teenagers, Mary W’s famous lemon bundt cake, health reform, The Giants collapse or a pending knee operation.  I approached each dinner party and cookie tray as if I were a Hemmingway protagonist living moment to moment during the Spanish Civil war.  “Ask not for whom the dinner bell tolls, it tolls for me.” “Eat up my friend, for tomorrow, we all die – or at least have to put out the trash.”

By January 2nd, I felt like a walking “Yo Mama” joke.  “He’s so fat, when he turns around, his friends throw him a welcome back party.”  “ He’s so big, he could be married to three women and they would never meet.” “ He’s so large, his cereal bowl comes with a life guard.”. In the past, my Christmas binge would lead to weeks of self loathing and inaction.  Then something would usually happen in late January or early February.  Perhaps, it was the realization of an upcoming trip to a warm climate or the development of New Year’s photos where I could swear that I had a small moon orbiting around me.

Fortunately, over the years I learned that overindulgence could be domesticated simply by getting back on the horse – or in this case, the elliptical machine. After years of running and scoffing at people who chose treadmills and machines over asphalt and open road running, I have become a gym rat. Every January, I now watch as new inmates, pregnant with remorse and resolve wander into the gym to tackle treadmills, activate latent muscle groups and begin a path toward self-improvement.  For some, it is court ordered – – a spouse or physician has laid down the law that the consequences of an indolent and carbohydrate filled life has accelerated their advance toward chronic or catastrophic illness.  For others, it is a closet epiphany as they discover that some malicious necromancer has shrunken their entire wardrobe.

I cannot help empathize with these ardent amateurs as they attempt a bicep curl, a bench press of 135lbs, a pull-up or pull-down.  I watch in amusement as they awkwardly approach the aquamarine squishy ball with its five odd utters poking out as if to say, “ here I am fatty. Care to do a few crunches?”  Men and women approach it differently.  Women join classes and seek the companionship of others. They want encouragement and community. Men are in denial.  Most waltz into the gym and pick up where they left off in college – trying to bench 225lbs – and promptly injure themselves.  Others cautiously lurk in the shadows waiting until odd hours to avoid the jury of their better-conditioned peers who seem to be silently watching in distain. Within weeks, most are tragically gone – too discouraged, too sore or too apathetic to sustain the routine necessary to restore their bodies.

Some turn to professionals for help combining a professional trainer with portion control masters Jenny Craig or Weight Watchers.  A few nostalgic coeds revert back to college days and begin starving themselves – – drinking Tab cola, eating lettuce leaves and then secretly binging on M&Ms when everyone goes to bed.  The most well adjusted among us dismiss all of the superficial pressures imposed by our “makeover” society and declare themselves “zaftig” and proud of it.  These well proportioned kings and queens of cushion reason that they are wonderful monuments to the golden age of Peter Paul Rubens. In that gilded time of art and consumption, abs meant absence of prosperity. Thin was not in.

We can now point to Queen Latifah, the late Barry White or Kirstie Alley as successful full figured celebrities who achieved utter acceptance from a highly self conscious society.   I am actually relieved to see that our societal stigma with weight is waning and that we actually have created a new class of celebrity – the Big Handsome Man ( BHM ).  According to Wikipedia, “Big Handsome Man or sometimes Big Beautiful Man (BBM), refers to a physically or sexually attractive fat man. These men are large to extremely large. There are many subcategories of BHMs. Some are men who just happen to be large, while others attempt to become fatter. Some of these men are insecure about their size, while others embrace their larger bodies and feel confident. Women who are attracted to BHMs are called Female Fat Admirers (FFA). In the gay community, BHMs are called chubs, and men who are attracted to BHMs are known as chubby chasers.”  Damn, and all these years I have been passing on those Krispy Kremes.

Body image is a tricky thing and we all understand that the true beauty of an individual is reflected most in their actions. Yet, we all crave love and attention.  When we falter, we overreact and declare martial law on our lives through diet and excessive remedies. As I have gotten older and wiser, I have come to learn the pitfalls of pendulum swings and fads. Perhaps my favorite story concerns my very close friend, Robert whose 24 hour fit of self improvement left an indelible mark on his family, his pocketbook and his living room carpet.

It was a New Year and Bob was surrounded with the usual thousand good intentions that fell silently around his head like ticker tape confetti.   Yet, his main emotion this January 1 was utter disgust as he considered his physical condition.  Long nights and weekends spent as an analyst at a New York investment bank had rendered him pale, overweight and unable to even climb the stairs at Grand Central without heaving like a climber on his final approach up K2.  The lithe college athlete and gym rat who had spent countless hours playing pick up basketball was now an indentured, gold collared pig.

On this particular January morning, Bob was coming off a weekend spent with friends watching football – eating pizza, chicken wings, chips and sodas.  He avoided the mirror as he slipped into the shower – careful not to wake his wife, Ann, who would sleep in an additional two hours and then head to yoga class. In a troubling turn of events, Ann had recently stopped reassuring him when he would rhetorically ask her if he was getting fat.

Bob quickly dressed and slipped into suit pants that had been gratefully adjusted to 39” in the last month.  The baggy pant legs and spacious shirt made him feel like a rap performer in a woolen, pinstriped costume.  His normal commute would take him downtown where he would exit, cross to local food emporium for a breakfast burrito and a four-shot vanilla latte.  Today, everything would change.  Today he was going on a diet.

At the food emporium, he nervously passed the scones, donuts and empty carbohydrates and ventured into a new neighborhood of colorful health foods. Directly ahead of him stood a cornucopia of fruit – bananas, sliced kiwi, Red Delicious apples and plump tangerines.  He grabbed two apples the size of soft balls and poured himself a 20 ounce black cup of coffee.  By 8:20 AM, banker Bob was at his desk – having consumed his high fiber breakfast and 20 ounces of muddy Green Mountain French Roast.  He was energized.  He was prepping for a huge meeting with a corporate client who was looking to refinance almost $2B in debt.  He was getting a chance to lead the presentation.  Perhaps, his new diet and exercise regimen would give him the extra confidence he needed to finally get promoted to the capital markets team.

At 10 AM, the first intestinal rumblings began.  He shifted uncomfortably in is chair but was on the phone and unable to get up to use the restroom.  Sensing that he may be suffering from trapped gas, Robert moved again hoping that no one would notice if he engaged in a sudden but silent release of methane gas.  As the pressure was building, he could stand it no longer and eased to his left.  To his horror, a floodgate opened resulting in a very embarrassing accident.  This was not a small accident but a very substantial one that would be impossible to disguise.

His suit pants, were already bleeding dark in the seat and he was forced to shuffle to the restroom.  Once inside the lavatory, he realized his situation was dire, very dire.  So dire in fact, that he must escape the office, take a cab uptown to his co-op, and race to the office before the client arrived at 11:30AM.

Arriving at his matchbook apartment, he leapt from his clothes, showered, changed and sprinted back to complete his presentation. He arrived on the same elevator as his client and miraculously was able to complete his presentation.  He labored until 11PM that evening following up on a variety of projects that had been subordinated for this one opportunity.  He had visited the restroom seven times that day and now wondered if perhaps, he had a mild form of flu from eating unclean fruit.

At noon that same day, a leotard-clad Ann entered the co-op returning to shower so she could meet a friend for a late lunch.  Rob was working late and she was looking forward to her day in Soho. As she walked in the smell hit her – – that same aroma that grasped and assaulted her as she backpacked across Southeast Asia in the early 1990s. One problem – this was her America and her living room.  She turned and saw the pants and the first days result of her young husband’s self -improvement plan.  She gagged and retreated from the apartment. Love may be blind but it could still inhale. He is now forever known as “Regular Robert”.

Like Robert, my experience with self-improvement has hardly been a study in moderation.  However, I do keep coming back to the gym – even when every ounce of my being wants to sit in my leather chair, eat cookies and watch Cops. It’s never too late to start.  We fight a losing battle every day with time and nature but there is no reason why we cannot maintain a high quality of life well into our later years. My advice is find a trainer, get into a routine and count your calories.  Whatever you do – don’t do it too quickly.  Be patient. And remember, an apple a day, keeps the doctor away.  Two apples?  You’re on your own….

Trains, Planes and New Year Resolutions

New York City skyline from Continental Terminal C
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Trains, Planes and New Year Resolutions

Yesterday, everybody smoked his last cigar, took his last drink and swore his last oath.  Today, we are a pious and exemplary community.  Thirty days from now, we shall have cast our reformation to the winds and gone to cutting our ancient shortcomings considerably shorter than ever.  ~Mark Twain

I am standing, no, sleep walking in Penn station at an ungodly morning hour staring at the rattling tote board of arrivals, departures and assigned track numbers.  A heroin addict has just scampered out in front of me like a giant subway rat clutching a handful of C&H sugar packets – presumably to temporarily mollify the beast of addiction stirring within her.  The dank corridors, low light and my bleak midwinter Vitamin D deficiency make me feel as if I am transforming into a vampire.  Perhaps sun deprivation is causing Seasonal Affective Disorder.  I consider the year that awaits me as I carry on to Newark airport and a business trip to Ohio – – another 365 days of yo-yoing stock markets, political uncertainty and twice-as-hard-to-be-half-as-good work environments. I know I am not in a good place when an elderly woman walking by with cup of coffee makes me despondent.  Am I losing my mind in this neon and halogen habitrail underworld of planes, trains and cheap hotels?

During thirty years of laboring in the vineyards of America Inc and Europe SSA, I do occasionally experience episodes of self-pity. I refer to them as my “Talking Heads Moments.”  Somewhere off in the distance, David Byrne is jerking his shoulders and crooning:

“And You May Find Yourself Living In A Shotgun Shack

And You May Find Yourself In Another Part Of The World

And You May Find Yourself Behind The Wheel Of A Large Automobile

And You May Find Yourself In A Beautiful House, With A Beautiful Wife

And You May Ask Yourself-Well…How Did I Get Here? ”

My descent into the limbo of self-assessment is predictable.  It appears like a noon-day demon every first few weeks of a new year – brought on by post holiday blues, back to work doldrums and the frenetic pace of travel that always precedes budgets and a fresh year of earnings expectations.

The dark thoughts scratch at my mind’s door on a snowy January morning in an economy hotel outside of Toledo where I am giving a speech. The Toledo Comfort Inn is the depressing vortex of my self-reflection.  My room resembles that old couch that you purchased from a second hand store for your college dorm room or first apartment. If one were to use a black light in this den of drab, it would most likely resemble a Manson Family crime scene. My wake up call through paper thin walls is the muffled hacking and unearthly sounds of a heaving travelling salesman as he takes his first cell call of the morning.  Against a backdrop of his bellicose cursing, I step under a showerhead the size of a thimble.  The hot water is a stinging stream of pins that push me against the tiled wall like a bystander in some riot. I am not amused. In these nadir moments of life, it is best not to write a memo to your boss, make major decisions or operate heavy machinery. On these days, life just seems to be one endlessly existential, nihilistic rut.

At breakfast, I remember why I hate staying in commuter hotels as I make eye contact with an elderly man from a tour group.  He has been staring at me for over 15 minutes.  His is not one of those, ” don’t I know you? Or ” didn’t we meet at…” kinds of stares.  This is an ” I wonder what your head would look like in my sweater drawer” stare. I move to a new seat in the waiting area.  The temperature in this overheated corral is around 100 degrees.  It’s like an Indian Sweat Lodge and I am about to see my spirit animal in a dehydrated state of blue-collar delirium. I remember that someone once told me when feeling low that I should “ move a muscle and change a thought”.  I decide to write down my goals for the year.

Ah yes, the New Year resolutions. Perhaps this simple act of planning will prove cognitively therapeutic – breaking me out of my mental doldrums and distracting me from the octogenarian serial killer who is day-dreaming about holding me hostage in his basement. I gaze across this lumpy ocean of Middle America grazing on glazed donuts and coca puffs in the breakfast lounge,  and wonder what happened to my grand goals and resolutions?  Where did the upstart populist Senator go ? What became of the college literature and history professor? Was it me or my goals ?

“How did I get here?

Goals and planning were compulsory in my family. Each January, we were asked to record our goals for the year.  My father insisted at age ten that we charted our “stars to steer by”.  We were expected to focus on personal, academic, financial and community goals. We thought it was a bit odd that we were the only kids in our class with a balanced scorecard and performance appraisals.  It was bad enough that we would receive a day planner every Christmas as a stocking stuffer.  What I was going to do with a calendar when I did not even have a secretary?  I do recall attempting entries for the first few days of January only to eventually orphan the calendar and finally condemn it to the garbage. Dad’s theory was that boys were like cars with no GPS device. Goals were important touchstones and fundamental DNA for any worthwhile life journey. “For God’s sake.  You would not drive to New York from Los Angeles, without a roadmap. Would you, son?”  This query was usually followed by my best stupid face as I incredulously pondered,” Why would I ever drive to New York?”

Our family patriarch promulgated goals.  Acceptable submissions included: Get good grades, don’t hit your brother, do not be rude, pick up your clothes, set aside $ 100 to your college fund and do not steal my (father’s) underwear. My dad would smile and clap me on the back, as I tendered and posted my public objectives. He would faithfully staple my manifesto to the breakfast room bulletin board along with my brothers’ best intentions.  These lists would remain like public health inspector assessments for the entire year. They were constant reminders of our commitment to self improvement.

As we moved into high school, we created two sets of goals.  Like any worthwhile double agent, we had public goals and private agendas. Under threat of death, we would share our goals and attempt to outdo one another with wild boasts about our prowess as men. Life was not about the future but about the venal here and now. Forget next year.   Quality of life was measured in three-month increments.   Carnal knowledge, sporting accomplishments, plausible hyperbole and bouts with acne impacted your social standing greater than any grade point average, religious denomination or economic trend. My 17th year was a critical transition year and I was determined to exploit my new driver’s license and fourteen hairs flourishing like palm trees on my upper lip.  My confidential aim for the stars aspirations included:

Goal 1 – Ask the majestic Kerry K on a date (I had adored this girl since the fifth grade but would experience a mild form of verbal constipation when I so much as laid eyes on her. For several years she believed I was mildly retarded)

Goal 2 – Attend 4 Dead concerts (I was not sure how I would get the money or transportation but becoming a frequent flyer at Grateful Dead concerts was the social equivalent of being a Platinum card holder)

Goal 3 – Do not drink and drive (we all saw the film “Red Asphalt” in driver’s ed), do not drink beer on weeknights or the night before any baseball games  (In the socially liberal 70’s, boys did indeed buy pony kegs and parents were not hauled off to jail for being ignorant of this fact. Moms sometimes returned the kegs to the liquor store to get the deposit back)

My resolutions would fluctuate from ambitious to aimless with each New Year but I never failed to put pen to paper. I was always focused, like Catholics at Lent, on striving to cure my defects of character and mastering suboptimal parts of my life. As I got older, resolutions became like spiritual deductibles that instantly reset each January 1.  My goals became mountaintops that I sought to conquer to test and define my character. I did not complete many resolutions.  Like any good baseball player, I considered a .300 average as worthy of being an all-star. In some cases, I did not complete a resolution for years.

I think of my goals and resolutions.  I still have not tracked a snow leopard up the slopes of Mt Kilimanjaro, published a book, battled with a massive sailfish in the Gulf Stream or studied the great religions of the world.  I have not left footprints on every continent.  However, there is still time. As I sit in the warmth of the Comfort Inn, I realize there is time. There are mountains to be climbed, books to be read, children to be educated and a world to be changed.  William Thomas said it best when he remarked, “it would not be New Years, if I did not have something to regret.”  To which FM Knowles would glibly reply, “ He who breaks a resolution is a weakling.  He who makes one is a fool.” Personally, I think Benjamin Franklin said it best, “Be always at war with your vices, at peace with your neighbors, and let each New Year find you a better person. “

As for the resolutions of 1978, I finally asked Kerry K out but not until I was 22.  By then, the bloom was off the rose for both of us.  I did make those Grateful Dead concerts but all I can remember is some twirling girl named Golden Blossom.   I did not exactly master self-imposed prohibition but years later, I discovered my own boundaries and learned to appreciate a Saturday morning sunrise.

The snow has stopped and the Comfort Inn breakfast lounge has emptied.  It is time to get moving – into a new day and a new year.  I have miles to go before I sleep.

Who knows, perhaps this will be the best year ever.

Stalking the Public Option

Health care systems and single payer
Health care systems and single payer (Photo credit: Wikipedia)

The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple, it operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences. Stephen Dubner and Steven Levitt, Freakonomics

I hear it restlessly moving off in the distance, the way spring struggles and finally gains momentum through the mud season.  It hesitates, sending subtle harbingers of change in the form of a warm wind or the scent of new growth.  The public option is stirring like a new shoot poking out of the decay of an old stump. With it, a next stage of reform is already forming even as Managed Care 2.0 struggles to gasp its first few breaths.

It is strange to be speaking of the next stage of reform years before the majority of Managed Care 2.0 regulations are due to take effect.  However, in the land of unintended consequences, no one can predict with certainty how healthcare is likely to evolve.  We do know that no one from the political middle, left or right is convinced that this first iteration of health reform will result into a system characterized by affordable, high quality care.  Managed Care 2.0 is merely a brief stage in the metamorphosis of the last private healthcare system in the industrialized world.

Some believe that the US’ best chance to salvage its mounting public debt, socioeconomic polarity and physical vitality is to eventually yield to a single payer system that can ensure coverage all of our citizens.  In that brave new world, those capable of opting out into private care, could do so on their own dime and on an after tax basis. Critics of single payer argue that an entitlement of this magnitude only stands to propel the nation toward record deficits, hyperinflation and economic ruin. The very thing that has made the US great, conservatives argue,  is its ability to avoid safety net entitlements that eventually become hammocks. One thing is for certain: Reform in its current form will do little to alter the supply side of the business.

Change is a scary proposition for 180M Americans who believe the devil they know (employer based private coverage) is preferred to a government run system. Seniors are doing the math and wondering if Medicare will default on their watch. More than 50% of these same seniors, when polled, shared they do not want a government run healthcare system – even though Medicare is a government run system.  People are confused, angry and wary.  To attack the real crisis of affordability at this time is an even scarier proposition for politicians who want to be reelected. Yet, The Patient Protection and Affordable Care Act is now law and despite its obvious flaws and potential for unintended consequences, it is unlikely to be repealed or deconstructed.  For better or worse, it is the foundation for Managed Care 2.0.

The building blocks of the Patient Protection and Affordable Care Act are insurance market and access reforms — legislation that has little to do with moderating rising medical costs.  It’s not that those that conceived the legislation did not understand or consider more draconian steps toward achieving affordability.  However, no on wants to break that news to the American people. It would be too scary a bedtime story for adolescent, recession sick America to hear about a future where tough decisions will need to be made about who gets how much care.  The story would not have clear heroes and villains but be cast in an ambiguous gray world of ethical and moral dilemmas — do we reduce reimbursement to our revered doctors and hospitals? How can we assure that our best and brightest continue to practice medicine?  Do we cut Medicare? Will venture capital, public and private equity flee out of healthcare profoundly effecting research and development?  How do we tackle the march towards chronic illness of Americans who are obese and unable to take personal responsibility for their health? Should we ask all Americans for a durable power of attorney so we have the ability to make the hard choices about end of life care?

Is Massachusetts a Mature Version of Managed Care 2.0 ?

The next chapter of the managed care story is being read aloud in Massachusetts. Already having achieved universal coverage through reform, the Bay State is seeing costs in its merged individual and small group pool continue to surge. In an election year game of cat and mouse, Governor Deval Patrick is restricting non profit insurers to live with rate increases well below those required to cover the costs of ever increasing medical utilization.  When Massachusetts passed reform, it covered all individuals but simply did not confront the underlying factors contributing to rising costs.  Before you shout, “Those damn insurers,” remember that 95% of Mass’ insurers are not for profit.

To add insult to injury, the Massachusetts legislature has recently proposed a bill that would require any physician seeking to be lisenced in the Bay State to accept Medicare and Medicaid reimbursement levels.  It may be time for Kaiser to move into Massachusetts as the alternative employer of choice to the state.

Most new Massachusetts insureds can’t find a primary care doctor as too few are left after years of under reimbursement. This leaves our newly insureds — many of whom are chronically ill and require coordinated care — to access the system through the least efficient point of entry, the emergency room.  The state’s not for profit insurers are in a profound pickle.  They have statutory reserves that will soon be depleted if they cannot raise rates.  However, it is an election year and the governor is using an age old lever, price controls, to buy time, point fingers and escalate the debate.  If this were allowed to play out, the insurers would be unable to meet legal reserve requirements within 24 months and be out of business in the state — leaving the need for a single payer to assume responsibility.

Why is There Not More Competition Between Health Plans?

Where are the competitors you ask?  When insurers are raising rates 20%-40% for small business, why are there no new entrants to steal market share as is often the case in other industries primed by a free market pump.  Simply put, the barriers to entry are too high for new entrants.  The economics of provider contracting (which drive 80% or more of a payer’s costs) are such that a payer has to have membership to get the best economics from a provider.

In many US markets that are dominated by a handful of players, the cost of building market share to achieve similar economics to the market’s largest competitor is too high — particularly for a public company.  You essentially can only enter a new market by purchasing a competitor – – which is expensive and carries enormous execution risk for the capital being employed.

For example,  trying to unseat a deeply entrenched Blues plan with 70% market share and most favored nation pricing deals with hospitals, is an almost impossible feat for any new payer.  No insurer has the financial will to enter a new market against a giant competitor that controls as much as 50% of the individual and small group market — a market where margins are largest.   A further complication arises if that entrenched competitor is a non profit sitting on huge reserves and you are a for profit company expected to show earnings improvement quarter over quarter. No shareholder or private equity owner has the patience to wait out the price war that you would inevitably engage to take market share.

So, who can compete with a large competitor squatting like a toad with a disproportionate amount of market share? United Healthcare?  Aetna? Harvard Pilgrim?  Kaiser? Bzzzzzzz!  Sorry, wrong answer.  It is the government.

Ah yes, the dreaded public option defined by some as “Medicare Lite,” ” Obamacare” or ” Death Panels for Granny”.  Over time, it would represent a basic package of essential services consistent with so many other nationalized plans across the world.  Many believe that a public option is really the only viable way to create competition within markets where competition does not exist.  Other see it as a Trojan Horse leading to unfair competition where taxpayer dollars are used to subsidize the cannibalization of private care by a public plan.  The goal: single payer, socialized medicine.  So who’s right ?

Why Not Introduce the Public Option In Markets With No Competition?

Here’s the dilemma: If a public option were to be created, its reimbursement would likely be linked to Medicare. If a larger percentage of insureds reimburse doctors and hospitals at Medicare levels, providers would revolt contending that public option reimbursement is inadequate to cover the true costs of care. Critics argue of rationed provider reimbursement note that US providers make 8.5 times the average salary of a worker in the US and only 2 times the average salary in other Western countries.  Our best and brightest seek medicine and in doing so, deliver some of the best care in the world. ” If I get cancer” asserts one anti-reformer, ” I want to be treated in the US where I have the highest probability for survival.” Naysayers argue that our outcomes are actually worse than other industrialized countries whose reimbursement systems have created systems that are characterized by primary care and smaller secondary and tertiary care systems.  “The US is the diametric opposite”, contends one critic, ” we lag many nations in critical public health indicators. In the US, the insured live longer.  Outside the US,  everyone lives longer – not just those who can afford healthcare.”

Doctors have long contended that like it or not, their ability to cost shift to private healthcare enables a less than optimal equilibrium that holds our broken system together. With a public option tied to Medicare, doctors would find a larger percentage of their patients policies reimbursing at lower levels.  This would be abetted by the fact that insurers would be losing market share to a lower priced public option alternative.  As public companies  they would have to continue to lower premiums to keep pace with a public option that has better economics or lose market share — either way suffering an operating profit death by a thousand cuts. Supporters for the public option view this economic transformation as an inevitability of eliminating waste, inequity and over-treatment.  The dollars are there, many contend, they just need to be redistributed.

The reimbursement differences between Medicaid, Medicare and private insurance are real and pronounced. We know in New Jersey for example, there are three levels of hospital pricing reflected in state regulations.  More than 500% of the federal poverty level (FPL) is considered retail charges.  Between 300% and 500% of the FPL can be charged at 115% of Medicare and below 300% of FPL is charged at the state Medicaid fee for service rate.  The range of costs that can be charged to uninsured individuals vary dramatically.  For example, the charges for back surgery for a 500%+ FPL patient range from $185,000 to a startling low of $13,000.  The reimbursement for an under 300% Medicaid patient averages around $5,800.  How one is allowed to reimburse hospitals and doctors determines much of their fate as a payer.

Should the government introduce a single payer, it would reimburse providers at lower levels than private insurance which would allow it to capture market share through lower costs resulting in lower premiums.  In 2014, consumers concerned about the rising cost of care delivered through newly formed state insurance exchanges, would seek the lowest price plan.  If that choice was a public option, many would be likely to try it on for size.  So far, so good?

There is a scenario where a large percentage of those currently privately insured move from an exchange plan to a public option exchange alternative. The more participants that join the public pool, the greater the purchasing power the government can wield in negotiating fee increases to providers.  As the economic advantage between a public option and private insurance widens, private insurers start to withdraw from markets.

Much of healthcare cost control is achieved through provider reimbursement contracting but it only goes so far.  As physician and hospital reimbursement decreases, fewer individuals stay in or enter medicine leading to reduced capacity.  Access to care becomes an issue resulting in a delivery system that is anchored by rationing and triage.  This transformation toward rationing access is inevitable in any system where there are limited resources and infinite demand. Many economists and health policy experts would argue that our current course is untenable and that managing healthcare within a finite annual appropriation is not a bad thing.  Affordability is, after all, a zero sum game.

Can The Public Option Compete Without Medicare Reimbursement?

If a public option is introduced but not allowed to index reimbursement to Medicare could it survive ? Certainly a public option not anchored by Medicare rates of reimbursement would experience the same challenges that any insurer experiences when trying to enter a new market.  A public option may have initial advantages due to lower administrative costs and non profit status but as a level playing field competitor, it requires additional infrastructure to pay claims and administer clinical, fraud and utilization management programs to control cost. Hospitals and providers would be reluctant to give a new public option better economics than private plans for several reasons — the knowledge that a stronger public option means reduced reimbursement over time, the awareness that any government plan allows less of an ability to negotiate rates and the recognition that a public option without members has no real purchasing power.  Like credit, one has to have it to get it. Competitive contracting economics come with leverage. Leverage is membership.  The more members you have, the better the rates you can negotiate.  No members, no competitive contracts.

Fear not, the public option has the advantage of using tax payer dollars to initially price premiums at a loss (charges for care will exceed premiums received ) until the it takes on enough membership to be self sustaining.  Initially insurers would try to cherry pick against the upstart public competitor, running off poorer risks to the public option.  However, the deep pockets of a public option funded by tax payer dollars can outlast any private plan.  The balance in the market shifts and the public option gains equal or better financial footing than its for profit foes. The twilight of private insurance is at hand in a 2.0 world.

Some question whether a public option can delivery similar clinical and utilization management as private plans to ensure cost effective delivery of care and limited abuses by providers trying to make up in quantity those dollars that they are losing in reimbursement. After all, unit cost discounts can only go so far.  The holy grail of medicine is managing care in a more integrated fashion, eliminating unnecessary treatments and keeping people healthy — none of which get rewarded through today’s treat vs. prevent chronic illness reimbursement system.

History suggests Medicare and Medicaid have not been nearly as diligent as private insurers in fraud, medical management and waste prevention.  In fact, while government run plans have an administrative cost that is one-third of private for profit insurers, fraud and abuse represent an additional 10% or $$100B per year. The savings achieved through razor-thin administration are bleeding out through the thousand cuts caused by laissez faire medical management. It’s a fair question to ask whether a single payer would really be able to manage care and outcomes or just manage access and reimbursement.

What Next?

Insurers understand that Managed Care 2.0 is just that — a next stage in an irreversible process of transformation.  Their greatest fear did not immediately occur – the establishment of a federal rate authority administered by Health and Human Services.  However, if minimum loss ratio thresholds prove inadequate to contain costs ( and they will prove inadequate ), we are likely to see the two headed beast appear where we are asked to pick our poison — rate controls or a public option. Prior approval of rates are already embedded in 50% of US markets.  Rate debate is happening as we see Massachusetts and others grapple with little imagination around the reality that access without affordability is like a flashlight without batteries — it doesn’t work.

My guess is by the time health exchanges are established for individuals and small employers in 2014, costs will have risen another 40%.  The government will realize that $500B of Medicare cuts to finance access for new insureds did nothing to reduce its $38T unfunded liabilities. Medicare will continue to hurtle towards insolvency until the real cost containment legislation is passed.

The average cost for private insurance will increase with mandated coverage minimums and guarantee issue, non cancelable coverage. An individual above 400% of the poverty line will find it hard to afford coverage and may spend a large percentage of their discretionary income on health insurance.  Larger employers are likely to pull up the drawbridge and begin to slowly cut coverage.  Mid-sized and smaller business will do the simple calculus around whether they keep or drop insurance. No one will want to be the first guy to drop coverage but no one wants to be the last guy who pays for the $15,000 aspirin as cost shifting hits its high water mark. A public option could provide the air cover employers need to slowly step away from employer sponsored coverage.

The middle class will take it on the chin as they always do.  At this point, we will rally around the cry for affordability.  The pitchforks and torches will once again appear and we will look for a common enemy.  And out of the woods, crashing across the growing chasm of cost will fall the public option.  It will be hailed as the panacea for competition and sentinel control over for profit players.  It will usher in a new era and it may very well set in motion the next phase of Managed Care 2.0 – – an era characterized by the death of private insurance.

Depending on where you sit, you will either be dancing around the bonfire or burning someone in effigy.  One thing is certain, more change is coming.

Operation Kiva

Operation Kiva

On December 26, 2009 – a day where most Americans were clearing away their Boxing Day holiday debris, Army Spc. Jason M. Johnston, 24, Albion, N.Y died in Arghandab, Afghanistan, when insurgents attacked his unit with an improvised explosive device.  Jason had been assigned to the 2nd Battalion, 508th Parachute Infantry Regiment, 4th Brigade Combat Team, 82nd Airborne Division, Fort Bragg, N.C.

To quote his local Albion, NY newspaper, “Johnston lived a heroic life.  He (had) a devilish grin and how he loved to sing, dance and be goofy. ‘To most people, he’s frozen in time as a 6 year old, climbing trees, doing crazy and wacky stuff to make people laugh,’ Brett Irwin said, eulogizing his friend. The congregation laughed, but as Irwin continued, his words became choked by tears.

‘I wish I could stand here and tell you people it was all good, it was all happy, but that wouldn’t be true … he had troubles, and pain.’ The Army was a way for Jason to change his life.  Irwin joked that, when he meets Johnston again in heaven, his lifelong friend will ‘be leaning against the wall, with a Coors in one hand and a Marlboro in the other … and he will say to me, ‘There you are, brother. Why are you so damn late for everything?’

Jason had joined the military to complete his education and to find a purpose that had been missing from his life. On the day of his fatal convoy, he reassured his senior officer that he was ready to meet the challenges of the day’s mission.

As I turned from my computer and allowed myself to drift across a winter landscape of frozen snow, I considered the young men and women being mustered across our nation to follow the courageous steps of Army Spc, Jason Johnston.   I sat restless and irritated, my middle aged suburban life insulated by this gauntlet of youthful brave souls, impotent to keep them out of harm’s way.

On a frozen December morning, 6000 miles away in Jalalabad, Afghanistan, Said Pacha Mohammed Ali awoke to a knotted, sore back.  He had been working longer days — stocking the shelves of his retail store where he has recently expanded his business. Said Pacha has operated his retail shop for over ten years. His city, Jalalabad, is the largest urban area in eastern Afghanistan. It spirals from its center, swirling into a spider’s web of suburban countryside fields linked by fragile dirt roads and primitive housing.

Said is an older man who provides for an extended family and like so many, he longs for political reforms, security, peace and stability that might allow him to prosper. Pacha is a rational voice and respected elder in his neighborhood because he has known hard labor and hardship his entire life – – enduring the Russians, Taliban and the unstable Karzai regime.  He is like the rough gypsum rocks that litter the open fields and ancient geology of the jagged mountains. He endures but longs for a broader peace so his business might flourish. Pacha has suffered from the warfare, corruption and danger that has suffocated his country.  Until recently, he had been unsuccessful in expanding his business.  He desired to create jobs for relatives and dreamed of meeting the demands of a growing community. Investment, like peace, had been non-existent. Although he lacks formal education, Pascha clearly understands that a stable economy is the only sovereign capable of taming this harsh tribal land.

On the day, that Army Specialist Jason Johnston was killed, I joined a family from New Zealand, Santa Barbara, Germany and Massachusetts to loan Said Pacha 50000 Afghanis to enlarge his shop and purchase merchandise.

I found Said Pascha Mohammed Ali through KIVA – a non-profit global microfinance organization. Labeled “Barefoot Banking” by some analysts, microfinance is becoming big business for the world’s smallest businesses.  Kiva was founded in October 2005 by Matt and Jessica Flannery.  The couple’s interest in microfinance was influenced by a 2003 lecture given by Muhammad Yunus, a Bangladeshi banker and economist who founded Grameen Bank. Yunus previously was a professor of economics where he developed the concept of microcredit loans given to entrepreneurs too poor to qualify for traditional bank loans. In 2006, Yunus won the Nobel Peace prize for his efforts to spread micro-financing as an essential thread binding together a wealthy but removed Western society with a frayed network of disenfranchised individuals who subsist on less than $ 1 a day.

I had joined a Kiva loan consortia hoping to create enclaves of small consumer investment.  I labeled my end of year altruistic efforts “Operation Kiva” hoping that I could invest ahead of the next soldiers that would land in Afghanistan.  Perhaps a more stable economy and hope in a brighter future could defuse the dark arguments of those who might try to convince Said Pacha Mohammed Ali to put down his broom and pick up an IED.  Could a $100 loan save a life?

Per a recent web article on micro finance, Kiva had distributed $110,671,610 in loans from 631,345 lenders as of December 25, 2009. Kiva coordinates with established micro finance institutions around the world, called “Field Partners”, to post profiles of qualified local entrepreneurs on its website, Lenders can search the globe for an entrepreneur that they wish to fund. Kiva aggregates loan capital from individual lenders and transfers it to the appropriate Field Partners to disburse to the entrepreneur chosen by the lender. As the entrepreneurs repay their loans, the Field Partners remit funds back to Kiva. As the loan is repaid, the Kiva lenders can withdraw their principal or re-loan it to another entrepreneur. The average loan size is $401.66 and the repayment rate is 98.13%.  The best part of Kiva is the opportunity to be repaid so one might reinvest those dollars in another underserved community.

Kiva and other institutions like it, have the ability to touch over 3 billion of the world’s poorest individuals, especially women, who are often marginalized in their home societies as a result of life events that prevent them from working or providing for their families.  Kiva empowers, stabilizes and restores self-esteem and most importantly, helps create a consumer economy that can do more to stabilize and sustain a nation than any amount of foreign aid or military intervention.

Consider the case of Maria Guadalupe Licona, of Tulancingo, Mexico who needed to expand her herd. She borrowed $100 for six months from a microlender and purchased additional sheep and pigs. Or perhaps you would like to meet Wafeek,  a 53-year-old Lebanese man who lives in the Bekaa with his wife and their five children. Wafeek has been working as carpenter for over 30 years. Wafeek requested a $ 300 loan from a Kiva partner, Al Majmoua to purchase wood for his work. You could be his fourth loan and he has always repaid on time.

Someone once said, “ give a man a fish, feed him for a day.  Teach a man to fish, you feed him for life.” Kiva allows anyone willing to make a small loan the ability to reach into pockets of despair and begin to sew seeds of change and economic growth.  In regions of the world where 50% of the population is under 25, unemployed and disaffected, an investment in economic development can diffuse dangerous breeding grounds for fundamentalists or despots who prey on those who feel they have been forsaken.

Microfinance is not a panacea for poverty but it is a message of hope.  It is manna from a temporal heaven -sustaining those who desperately want the same things we want.  Economic vitality is an antidote to the poison of religious ideologues and political charlatanism.  It is a lifeline that may prove more powerful than any sentinel, drone or security force.  One might never know whether their investment saves a life by stabilizing a neighborhood in Yemen, Lebanon , Palestine, or Afghanistan.  However, we do know that a micro-loan could save a family and create a future.  Perhaps, with each future we rekindle, we breathe oxygen into a fire that burns brighter and more powerfully than any military ordinance.  Our generosity can fuel embers of democracy that push back the twilight of bitter ideology – – long shadows that one day crept across a lone road in Afghanistan and took Army Specialist Jason Johnston from us well before he had the opportunity to find his own future.