Health care or wealth snare

The following are notes I took this morning on a presentation on health care fraud titled "Lifting the veil:  The Citizens Federation’s discoveries of financial mischief by insurance executives and regulators".  It was given by Buddy Robinson of the Citizens Federation at the Lake Superior Freethinkers meeting.

His talk was based on "Who Is Minding the Store", a report by the Citizens Federation.

Added up numbers and found that non-profits took profits.  Put into reserves which became excessive – twice the safe amount and four times the required amount.

Reserves went into investments which in turn increased reserves.  Insurance companies didn't report this to Minnesota legislature.

Several Minnesota counties are dealing directly with the state for employees' health care.  Some are now considering opening to public.

Strange things found about financial reporting.  CEO compensation reported at half actual - Health Partners

Money from state increased at greater rate than payments to providers.

Overpayment reimbursement not in contracts but if fraud involved then overpayments can be recovered.

Insurance companies don't want to divulge payments to providers.

State allowed companies to police themselves.

Motivation?  Medica contracts with former parent UHC, giving it 2/3 of income.

Insurance companies use government money to subsidize commercial policy losses.

Private insurance was to save money; it wound up costing a lot more.

Are HMOs too big to fail or jail?

End of my meeting notes.

So much for the efficiency of private enterprise.  Efficiency (sometimes) in lining corporate management pockets!

I gave as my comment Adam Smith's "The proposal of any new law or regulation of commerce which comes from this order…"  See "The Invisible Adam Smith".

FEMA - A smart conservative speaks

FEMA does need reform, many states should look out for themselves, and the private sector can do things for disaster relief.  But instead of a broad brush attack on the Federal Government or a broad brush defense of business as usual, we need calm deliberation of the facts and of where the best resources are available.

See "How a Smart Conservative Would Reform FEMA", Jordan Weissman, The Atlantic, 2012-10-31.

Maybe Matt Mayer could be a catalyst for a "Real Republican" party?

Cost savings – Penny-wise, pound-foolish?

Wisconsin has a cost-cutting commission of some kind in operation. One of the recommendations was that schools could save $177 million by getting cheaper health insurance.

But what is the true cost of cheaper health insurance? Do employees pay more for premiums? If so, won't they want higher wages to offset their increased costs? Do employees pay more health care costs out of pocket? If so, will they be less willing to get needed medical care? If they get less medical care, will they be taking more sick days? If they take more sick days, will costs of staffing the schools go up or the effectiveness of staff go down? So, will the savings from cheaper health insurance be more than offset by higher costs elsewhere?

If any government wants to reduce costs, I have a couple of suggestions. Let's take away computers from police cars. Even assuming they cost as little as $1,000 each and if we have 1,000 police cars across the state, that would be one million dollars in savings. Let's stop using full-size especially equipped sedans for police cars. Let's replace them with Tatas from India. Instead of $30,000 plus sedans we could replace the police cars with $3,000 mini-cars. Gosh, if we have 1,000 police cars across the state, that would be a savings of 27 million dollars! Wow! Of course, what would be the cost of less effective law enforcement? I bet it would exceed 28 million dollars.

I have a better suggestion. Legislatures should write fewer and simpler bills. Then they could spend more time considering the costs and benefits to all of their constituents rather a select noisy or high-paying few. I think this would really make our 18th century politicians proud.

Here we go again with "fair share" undefined

President Obama has been speaking of "fair share" with regard to taxes, but as many other proponents of "fair share" he does no more than talk about percentage of income paid in taxes.

But this is the wrong argument.

Suppose we have a small town with most people earning a decent income and one person earning over a million dollars a year. The town is small enough that it uses the county sheriff for law enforcement, the regional fire department for fires and first responders, the regional school system, and the county library. Its only major expenses are its streets and a city park. All of its revenues are paid by property taxes. The property taxes are based on market value.

So what is a fair share for everybody?

The millionaire lives in a house whose valuation is such that he pays five percent of the city budget. The town is large enough that most people pay one percent of their income in city property taxes. However, the millionaire only pays a half percent of his income.

Now let's assume that the millionaire earns all of his income investing online in national corporations. He doesn't use any of the city services more than anyone else and maybe even less. In this case, isn't his paying a larger portion of the city taxes a fair share irrelevant?

On the other hand, let's assume that the millionaire earns most of his income being the CEO of a large company in the state. What is his fair share of tax at the state and federal level? He is now using a long list of government services, sometimes directly and sometimes indirectly. If he depends on moving goods from place to place, isn't his income dependent on a good road system? If he has many educated employees, isn't his income dependent on a good school system that will educate future employees? On and on it goes that this millionaire is dependent on a long list of government services to be successful, even some he doesn't like. For example, if he processes food the state or federal inspections may seem bothersome, but he also wins because his customers have more assurance of the safety of the food his company produces. Few have any idea what his "fair share" of state and federal taxes is.

It could be far less than some fixed percentage. It could be a far greater percentage than most people pay. Nobody knows for sure and very few are even considering the real meaning of "fair share".

More wealthy calling for more taxes

Bill Gross, a founder of PIMCO, an account management services company, added his voice to those of Warren Buffett and Bill Gates that the wealthy should pay more taxes.

"Add PIMCO founder Bill Gross to the list of wealthy Americans who think they aren't being taxed enough, already.  'Of course we should' pay higher taxes, Gross says. 'Higher income groups have enjoyed an enormous privilege ever since the Reagan tax cuts...and actually ever since Kennedy began the process back in the ‘60s.'"

See "Bill Gross: 'Of course' the Wealthy Should Pay Higher Taxes, Corporations Too", Tech Ticker, 2011-03-07.

Nowhere in the interview did he mention any rationale besides that they can pay more.  I wish he had mentioned all the services of a civil society that make it possible for the wealthy to become wealthy.

Maybe some clever economist or accountant could come up with a cost-benefit ratio to show that those who can afford to pay more should pay more taxes; if they pay less taxes they will get less benefit from a civil society.  Maybe even their overall costs will go up because they pay less taxes.