The T-Rex Takes on Healthcare Reform

images “Americans have always been able to handle austerity and even adversity. Prosperity is what is doing us in.” James Reston

His emails arrive at night and land like scud missiles. He is an Old Testament retired CEO who is appalled at the state of America and as a thirty year healthcare system veteran and dutiful son,  I am expected to interpret the complicated tea leaves of the Affordable Care Act ( ACA) and warn him if Armageddon (any form of change) is imminent. He needs three hours notice to hide his coin collection.

Today, his instant messaging is in large case font; He has forwarded an email that was forwarded to him from a friend of a friend of a friend – all retirees convinced that our current President is an operative for a hostile foreign government.  I have to give high scores to his email chain author for his/her detail, veracity and creativity.  Many of the stories are purportedly authored by retired Generals, Navy Seals, and in one case, a dead President.

I often scroll down these emails to see if I can find its genesis and author – perhaps it is Karl Rove or someone incarcerated for white-collar crime.  The email offers me “the truth about Benghazi” or a grainy photo of the President giving out nuclear codes to Al Qaeda operatives behind a District of Columbia Stop & Shop.  I am not always inclined to believe these missives but I love my Dad and his loyal concern for America.  At 83, his draconian solutions are not always politically feasible and carry a decent chance of arrest if one actually tried to act on them. However, he has a 160 IQ and understands economics.

With my status as a registered Independent voter, I remain a point of frustration to my father – a lost sheep naively wandering in a forest of good intentions not understanding how close I am to the wolves of Socialism.  As an ex-CEO who made many freshman mistakes, I am a tad more sympathetic to anyone dumb enough to want to run America, Inc.  To assume the role of CEO for a company that is losing $1T a year, sitting on $17T in debt, massive underfunded retirement liabilities, a dysfunctional board of directors, angry, bargained employees and a confidence rating of less than 35% – is a job that only a masochist or megalomaniac might aspire.  And even someone as naively altruistic as moi would not have chosen to take on US healthcare as my signature legacy.  There is a reason why it has been viewed as the third rail of American politics – “you touch it, you die.”

My father and his friends have a huge stake in the future of healthcare as their day is spent inventorying each creaking part of their own frail physiology, wading through a confusion of doctor appointments, specialists and endless prescriptions. He is now messaging me wanting to understand how the inept roll-out of Healthcare.gov will impact the future of Medicare.  The email message appeared with a large “ping” as it thumped into my in-box.

“FWD: FWD: FWD: FWD: MICHAEL, IF THIS IS TRUE WE ARE ALL IN DEEP (You fill in your favorite noun)”

The note went on to ask if his Medicare policy and supplement might be cancelled as so many individual policies had in the last month.

“OBAMA SAID PEOPLE COULD KEEP THEIR POLICIES”

After two strokes, caring for my Mom with Parkinson’s and a bout with prostate cancer, he is a grizzled veteran of the system but he still does not understand it. He wanted to know why millions of policies were cancelled and now being rewritten at higher premiums.  In some cases, single men were seeing their lower cost ala carte policies replaced with higher cost coverage that included such essential benefits as maternity coverage.  Other than male sea horses, it would be hard to find someone who purchased a bare bones policy with eyes wide open willing to support a new plan that would cause their premiums, in some instances, to double.

I wrote back with earnest detail.

“Got your IM.  The botched roll-out won’t impact Medicare.  There are no provisions in ACA to modify Medicare benefits although at some point, the government will begin to change how they pay doctors for the services to try to slow spending and improve quality.  The public exchanges you are reading about are being created in every state in the US to cover the uninsured and subsidy eligible Americans.  Where a state has refused/declined to create their own exchange, the federal government is stepping in with their portal, Healthcare.gov. It’s been a disaster as the technology has not worked.  In addition, the government got an even bigger black eye because Obama promised people they could keep their policies but did not realize his own legislation would force insurers to cancel, rewrite and charge higher premiums for his new and improved minimum levels of coverage.  His announcement to delay the policy cancellations for a year will create huge problems for insurers and put them once again in the position of being bad guys if they decide they don’t want to reinstate policies they have eliminated.  It’s a huge mess!”

“A CLUSTER IF YOU ASK ME. WONT ONLY SICK PEOPLE JOIN THE EXCHANGES?”

“Yeah. The first few years you will see only those who had no coverage and those who were overpaying for policies due to age or health status will benefit by purchasing through community rated public exchanges.  Yet, community rating only works if young people join and don’t use the benefits. The problem is the penalty for not purchasing insurance is only $95 a year in 2014 and the cost to buy a bronze level plan (the lowest cost policy approved by ACA) could cost up to $300 a month. 50% of the uninsured are under 30 years old and think they are invincible.  My guess is they won’t join the pools initially and the public exchanges will have to be subsidized by the reinsurance taxes. The government expected some of this and will assess employers a reinsurance fee as of January 1st to create a fund to reimburse insurers who end up losing money on the expected adverse selection.  The taxes last only until 2016.  It will prop up the exchanges for two years possibly giving exchanges the ability to argue they are working. Once the reinsurance fees run out, public exchange loss ratios will deteriorate and costs will increase.”

”IS IT A COINCIDENCE THAT THE EXCHANGE GETS PROPPED UNTIL HILLARY GETS ELECTED IN 2016?  I NEED TO THROW UP.”

“Seems suspiciously well-timed.”

“THEN THE DO-GOODERS RAID THE PUBLIC COFFERS TO SUPPORT THE FAILED PUBLIC POOLS? LENIN WOULD BE PROUD!”

“Careful, remember you are also benefiting from this messed up system.  You and Mom are enrolled in a nationalized healthcare plan called Medicare whose cost is being subsidized by future generations.  You love the coverage because you can go to any doctor you want.  You have more specialists than Imelda Marcos had shoes and no primary care doctor calling the shots.  Your kitchen looks like something out the TV show Breaking Bad with scales, baggies, pill sorters and enough drugs to medicate all the animals in the LA zoo.

Your Medicare contributions bear no relationship to the true cost of the benefits you will receive in your lifetime. CMS still collects premiums under actuarial assumptions that expect retirees to live to age 68.   We now are living into our 90’s.  Medicare is $50T underfunded. We only have two workers for every retiree versus 6:1 when we started in 1964. Medicare makes the cost of Obamacare look like a dime store candy.  Between our sovereign debt and Medicare, we are witnessing the greatest intergenerational wealth transfer in the history of the country.”

“ALL ENTITLEMENTS ARE PONZI SCHEMES. THE ROAD TO SERFDOM IS PAVED WITH DEBT.  IT’S TIME FOR TOUGH CHOICES.  NEXT, NANCY PELOSI WILL BE PROPOSING TO MOVE ILLEGAL IMMIGRANTS INTO OUR HOMES.”

“Well, Dr. Zhivago, at least the stock market is up.”

“I’M IN T-BILLS AND BONDS. I DON’T TRUST WALL STREET”. There is a pause. I can almost hear the television blasting in the background as he cranes to hear someone yelling at him from downstairs.

“YOUR MOM WANTS TO WATCH SOME MOVIE I’VE SEEN BUT CAN’T REMEMBER.  A DIVIDEND OF OLD AGE.”

“Glad you feel better.”

“GET OFF YOUR BUTT AND DO SOMETHING.”

“Love ya.”

“You too.”

I realized he had sent me his final message in lower case font. I typed my next email in upper case.

I was now fired up.

Okay Dad, Hand Over The Credit Card!

English: Federal Debt Held by the Public by U....
English: Federal Debt Held by the Public by U.S. Presidents and party control of Senate and House, 1901 to 2010; source for debt data is Congressional Budget Office, “Federal Debt and the Risk of a Fiscal Crisis”, July 27 2010, http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf (Photo credit: Wikipedia)

The front door slams and a man with graying hair looks up from his book over rimmed glasses as he sits in an adjacent room. A young woman in her early twenties drops a duffel bag on the wood floor of a well-lit foyer.

Father: You’re home! How’s grad school?

(The girl looks irritated and says nothing)

Father: What’s wrong, baby?

Daughter: (The girl hesitates and then holds her hand out in front of him) Okay. Hand it over!

Father: What are you talking about?

Daughter: The credit card. You and your kick-the-can-down-the-road generation have bankrupted my future. (The girl drops a NY Times on the coffee table and becomes sarcastic) It says in here that the Fiscal Cliff has been averted. Ha! They might as well have announced that the Easter bunny is real. I just finished Michael Lewis’ Boomerang and Strauss and Howe’s The Fourth Turning and I’m depressed.

Father: Haven’t got to those books yet. Since November, I have turned to Merlot and escapism. I’m reading a bestseller about the 16th century. (Pointing to the newspaper, smirking) Cheer up! The Paper reports that the fiscal cliff is a bunny hill and Paul Krugman says spending our way out of the deficit is the only path back to prosperity. I hear Barney Frank may come out of retirement.

Daughter (looking incredulous): Are you kidding me? They only agreed to delay the debt ceiling discussion for 60 more days. Then they are going to ask Congress to raise my credit card limit. Even if the president got all the taxes he wanted, he’d have raised what, $80B of revenues? Where’s the other $15.92 Trillion going to come from? Government made a bunch of promises back in the 1960s in the form of Medicare that they no longer can keep. We’ve known it for a while, but we are hiding it like Enron. If the US government was a public company, the executives would be in jail for accounting fraud and the country would be in receivership. In the real world, you don’t pay as you go! There is bi-partisan dishonesty about the budgets and how dire our situation is. There is a deficit, all right. It’s a deficit of honesty, vision and courage in our public officials and it’s a deficit of public willingness to accept responsibility for managing a problem that has landed in their laps. Winter has arrived and you jerks keep spending the next few generations’ money to avoid a few cold nights.”

Father: It’s not us. It’s that damn Obama. He has created more debt in the last four years than all the Presidents that preceded him. He passed socialized medicine and now he wants to raid Medicare to pay for it. He’s added at least $7B of public debt and he wants to raise the debt ceiling and spend more money. He’s never worked a day in the private sector and can’t balance a lemonade stand.

Daughter: Dad, get real. The guy inherited a nightmare and a constituency that can’t face reality. This is about facing the fact that our healthcare system is broken and literally sinking the country. At some point, no one will lend you money. Congress and the White House have never shown fiscal discipline. We have recorded a budget surplus just five times in the last fifty years. Four of the surplus years came together from 1998-2001, President Bill Clinton’s last three years in office, and President George W. Bush’s first year in office. By the way, our publicly stated debt counts only current cash obligations. The real debt we are facing is more like $75 trillion dollars because we’re not adding in $45T in underfunding for Medicare. Every politician knows this but it is a radioactive secret. Both sides keep up their “Medi-Scare” rhetoric because they want support from retirees who fear they will lose benefits. Face it, Medicare is the biggest single drain on our budget and we have to deal with it.

Father (getting mad): There’s no damn way I’m going to let them raid Medicare to pay for nationalized Obamacare.

Daughter (smiling condescendingly): Dad, Medicare is unmanaged, fee for service, nationalized healthcare. The government controls Medicare costs by rationing reimbursement to doctors and cost shifting to the private sector. It’s the greatest generational rip-off from young to old in the history of the country. Medicare was established when there were 16 workers for every retiree and the average life expectancy was age 68. In 2030, we will have only two workers for every retiree and will have 80 million retirees, four times as many as today. The math does not work. Social Security is not the problem. We have to cut Medicare and make some tough decisions about how we deliver care in the last few months of life.

Father ( getting angry): Oh, now you want to euthanize me and your mother? This is not about Medicare. It’s about a socialist President who wants to redistribute wealth. We need to elect some fiscal conservatives. The Dems won’t make tough decisions. They are give-away artists who pander to Unions, illegal immigrants and anyone who feels they have gotten a raw deal. The GOP needs to win back the White House.

Daughter: Dad, don’t hold your breath. Try running on a platform of fiscal austerity when the new majority is being told that there was a big party from 1998-2008 that they did not attend but that they must now pay for. The demographics in America are changing and a large enough percentage of the GOP’s base has seen their standard of living decline that they have begun to identify with moderate Democrats joining an increasingly heterogeneous group of pro-Democratic voters. The GOP has not been able to convince non-Caucasian voters that they would benefit under their leadership.

Father: Jesus, you’re depressing. Do you have any good news to share?

Daughter: I’m taking Mandarin and I have a summer internship with an Indian microfinance firm that is trying to expand into China and Africa.

Father (trying to appear encouraged): Well, that’s great. Although it sounds like you are going to have a hard time finding a good cheese burger. (Looking bemused) My kid’s going to have to immigrate to another country to find a decent management job.

Daughter (hugging her father and laughing): Not necessarily. We just have to show the resolve to confront healthcare spending and the weight of our entitlement obligations. If we do that, we can be competitive as a country. The way I see it, we have four choices: default on our debt, raise taxes that only delay the day of reckoning and slow down our economy, create a centralized rationing regime in the form of a single payer healthcare system or migrate to a defined contribution premium support model where people receive help buying public or private insurance. I don’t think we want number one or two. So that leaves three or four. We’ve got to get honest – fast and (looking stern at her father), we have to cut up your credit cards.

Father (grabbing his daughter’s bag): How in the hell did you get so smart?

Daughter (smiling and putting her arm around her father): Four years of economics. I have your ear for BS and Mom’s ability to balance a checkbook.

Father (nudging daughter with shoulder): So, you going to tell me who you voted for in the elections?

Daughter (grinning): Ron Paul, I wrote in

Father (making a face) : That was a wasted vote

Daughter (pretending to look offended): Hey, last time I checked, this was still a Democracy.