words of wisdom from a local wonk, thoughts?

[Guest guest]

Looks like it will be a bit longer before we see any of that

" change we can believe in... "

 

But, it's early...

 

The most pressing problem is the

COBRA regulation BO stuck into the spending bill...it allows anyone who lost

employer-based health ins since 9-1-08 to apply for COBRA, even if they

declined the election back in Sept.  It requires employers to pay 65% of the

premium and the employee to pay 35%.  Employers can deduct their

contribution for 941's but if the IRS " rejects " the deduction (and

why wouldn't they?), the employer can " apply " for a reimb from the

Treasury dept.  If Treasury rejects the application (and why wouldn't

they?), the employer has no recourse and cannot collect from the pt.

 

So essentially, BO proposes to get

at least an interest-free loan from employers who have to pay premiums NOW, and

possibly a complete confiscation of 65% of the COBRA payment if IRS and

Treasury balk at the deductions.  It will be interesting to see how many

rejections and applications there will be...

 

This brilliant COBRA plan is very

likely to be the death knell for many small employer programs.  Those who

have to come with 65% of SEVEN MONTHS of premiums may simply not have the

cash.  The carriers who have to go back and pay claims from 7 months ago

are going to transfer that cost to the employer via the experience

rating.  Premiums will go through the roof.  The admin part of this

will be a nightmare for benefits companies...and they collect NOTHING to admin

COBRA.

 

Small employers will be better off

not offering health ins and implementing an ins allowance so employees can find

their own coverage. 

 

Soooo looking forward to the budget

tomorrow!

 

d.

 

Honesty and Accountability?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

During President Obama's

" not-quite-a-state-of-the-union " speech last night, he called for a

new era of honesty and accountability in government -- " Finally, because

we're also suffering from a deficit of trust, I am committed to restoring a

sense of honesty and accountability to our budget. " (1)

Unfortunately, he broke that promise even before he left the podium. In

discussing the need for health care reform, he said, " This is a cost that

now causes a bankruptcy in America every thirty seconds. By the end of the

year, it could cause 1.5 million Americans to lose their homes. In the last

eight years, premiums have grown four times faster than wages. And in each of

these years, one million more Americans have lost their health insurance. It is

one of the major reasons why small businesses close their doors and

corporations ship jobs overseas. "

But none of that is true. Let's look at the claims one at a time -

Health care " is a cost that now causes a bankruptcy in America every

30 seconds. "

There are 525,600 minutes in a year, so that rate of medically-induced

bankruptcy would be 1,051,200 per year. But the total number of bankruptcies in

2007 was just 822,590 (2), and only a fraction of those, possibly as low as 5%

according to a University of California study (3), were due to medical costs.

Interestingly, the population with the greatest growth in bankruptcy rates are

those covered by Medicare. Since 1991, bankruptcies have actually decreased for

people below age 65, but increased 125% for those between 65 and 75 and

increased 433% for those over age 75. (4)

" By the end of the year, it could cause 1.5 million Americans to

lose their homes. "

This one is a mystery. Sure, plenty of people are " losing their

homes, " about 3 million this year, but to think that half of those are due

to medical bills rather than ARMs or lay-offs seems like a reach.

" In the last eight years, premiums have grown four times faster than

wages. "

Actually, premiums have stabilized for the past five years at about 6% annual

increase, while wages have been increasing about 4%, according to Mercer (5).

Mr. Obama may have been thinking about the spike in 2002 when premiums rose 14%

and wages rose about 3%, but that was a one-year exception and not

representative. It's worth remembering, also, that some companies - notably

those that have adopted consumer directed plans - are seeing premium increases

well below either inflation or the increase in wages. Wyatt found that

the " best performing " companies had a two-year cost increase of just

one percent while other companies increased 10% over the same time (6).

" And in each of these years, one million more Americans have lost

their health insurance. "

That's not true, either. According to the most recent report by EBRI in

September, 2008 (7), the raw numbers of uninsured rose from 39.5 million in

2001 to 45 million in 2007. Raw numbers aren't the right way to count in any

case due to population growth. The percentage of uninsured between 2001 and

2007 went from 14.8% to 15.3% according to the Census Bureau, which is lower

than the percentage in 1995 (15.4%), 1996 (15.6%), 1997 (16.1%), or 1998 (16.3%).

(8) (9)

" It is one of the major reasons why small businesses close their

doors and corporations ship jobs overseas. "

Actually, it's not. At least not until someone mandates that employers provide

coverage. Small employers may drop coverage but they don't go out of business

because of health care costs. And the whole " ship jobs overseas "

claim is a myth. (10) When American companies set up foreign affiliates it is

generally to serve foreign markets, like Toyota and others have done in setting

up American affiliates to serve the American market. To the extent there is an

advantage in locating abroad, it has far more to do with local regulations,

taxes, and wages than health care costs.

So, let's hope that Mr. Obama starts taking his own advice and applies some

" honesty and accountability " to his own speeches as well as to the

national budget.

SOURCE:

(1)

Washington Post, text of Obama's speech

(2)

Actual bankruptcy numbers for 2007.

(3)

Article about UC study

(4)

Warren's study on bankruptcies

(5)

Mercer

(6)

Wyatt

(7)

EBRI

(8)

U.S. Census Bureau

(9)

U.S. Census Bureau

(10)

Free Trade Bulletin-- Annie SkaggsLexington, KY