Relevant and even prescient commentary on news, politics and the economy.

The PPACA and Healthcare Sky is Falling Again . . .

Huh? Repeal the PPACA to Help Hispanics and African-Americans ? ? ?

Crooks and Liars carries a conversation by Repub Senator Ted Cruz with Candy Crowley on CNN. Senator Ted Cruz of Texas is making it his crusade to repeal the PPACA so as not to cause harm to the most vulnerable of America who potentially are losing their jobs, the Hispanics and African-Americans and singe moms. To real the PPACA do so, he is asking the House to pass a budget which specifically funds everything the government needs with the exception of funding for the PPACA. Factcheck.org has debunked the lost job claim here: GOPS’s ‘Job-Killing’ Whopper, Again and previously.  There is no basis for Senator Cruz’s claim for lost jobs due to the PPACA.

As we’ve said before (a few times), experts project that the law will cause a small loss of low-wage jobs — and also some gains in better-paid jobs in the health care and insurance industries.

It’s also expected that more workers will decide to retire earlier, or work fewer hours, when they no longer need employer-sponsored insurance and can obtain it on their own with help from federal subsidies. But that just means fewer people willing to work — and it will free up jobs for those who want them. If anything, that could reduce the jobless rate.

Maybe Senator Cruz is implying employers will cut hours to less than 30 per week? Our own Spencer England has done a couple of posts on the topic of cutting hours to less than 30 hours. It just is not happening as the critics and naysayers are claiming.  Obamacare, The Sequester and Part Time Employment and here: Obamacare and Employment.

Is the PPACA hurting Hispanics and African Americans as Senator Cruz says? The US Department of Health Says No.  913,000 Latino have already benefited and 509,000 African-Americans to date. If anything, it appears that more of the minorities Mr. Cruz claims are being hurt are being helped by the PPACA.

“Federal Healthcare Can Not Work” according to former Senator Jim DeMint who recently became the Heritage Pres  .  .  .

Dean Howard and Heritage Pres Jim DeMint face off on CNN as reported by Crooks and Liars. Former Repub Senator Demint: DeMint explained that Heritage Action had launched a nine-city tour to rally Americans in support of repealing Obamacare because it was an “unfair and un-American law.”

“Federal health care is not going to provide good health care to Americans,” DeMint insisted. “You can’t find a federal program that’s working effectively.”

Howard Dean Gov. of Vermont “Jim, I disagree with that,” former Vermont Gov. Howard Dean (D) replied. “I think Medicare works pretty darn well and people like it. And that’s a federal program that works very well for people.”

Demint: (Medicare) “It’s tens of trillions of dollars in debt because it’s been mismanaged, it’s going to leave huge debts onto our children, and more and more doctors won’t even see a Medicare-insured patient,” DeMint replied. “So, it is not going to work for the future.” The former South Carolina senator continued: “And as we put more people on Medicare and Medicaid, and that’s what Obamacare is going to do, is to push more people into Medicaid-style plans, fewer and fewer doctors are going to see these folks. So, we need to make sure we get health insurance that doctors will actually take.” The former South Carolina senator continued: “And as we put more people on Medicare and Medicaid, and that’s what Obamacare is going to do, is to push more people into Medicaid-style plans, fewer and fewer doctors are going to see these folks. So, we need to make sure we get health insurance that doctors will actually take.”

Howard Dean: “I’m sure it won’t surprise you to know that I disagree with that,” Dean said before he was interrupted by Bash.

CNN’s Bash: “I’m so shocked,” she snarked, promising to allow Dean to respond following a commercial break.

Howard Dean (after break): “Before we get to that, let me get a little equal time on health care,” Dean demanded. “You know, I was not a supporter of Obamacare when it passed. I am now. I think this ought to be implemented. You know, in our little medical office in Burlington, Vermont, we’ve discovered that premiums are going to be cut in half for the five people who work for my wife and her partners. So, this is going to make a big difference.”

While the PPACA is not the end all of healthcare plans, it still is a step forward in the right direction which has not been addressed since Hillarycare failed in 1993. To the question, are Doctors accepting Medicare patients? More Doctors Accepting Medicare Patients

“The number of physicians accepting new Medicare patients rose by one-third between 2007 and 2011 and is now higher than the number of physicians accepting new private insurance patients, according to a Department of Health and Human Services report obtained by USA TODAY.”

Someone is blowing smoke up  .  .  .  well, ahhh again.

Texas Representative Louie Gohmert’s Healthcare Hooey

Factcheck.org reports on Repub Texas Rep Louis Gohmert who claims under the PPACA a:

“poor guy out there making $14,000″ is ‘going to pay extra income tax if he cannot afford to pay the several thousand dollars for an Obamacare policy.’”

While there are issues with people who just exceed 400% FPL getting subsidies, Rep Gohmert of Texas claim is erroneous. A person making $14,000 in income is at 122% of FPL and would be subsidy eligible. Under the PPACA, if a citizen lives in a state which expands Medicaid to 138% FPL, the person making $14,000 would be covered under it. If a citizen lives in a state “like Texas” which chooses to not expand Medicaid, the person would be exempt from the mandate or additional income tax as Gohmert claims. A rule published July 1st granted the exemption to the mandate or citizens who live in states which do not expand Medicaid.

There is a lot of controversy about expanding Medicaid to cover people making less than 138% FPL in that the gov. could attach assets in the future. States do have that option and in fact they do enforce it when the middle class uses Medicaid to pay for assisted care and nursing home care which is nothing new and did not come about with the PPACA. Those wealthier than FPL must meet a certain income and asset standard before Medicaid will kick-in.

Obamacare by The Numbers

Factcheck.org reports on false claims by the Republican National Committee:

“Republican National Committee claims that 8.2 million Americans can’t find full-time jobs ‘partly due to ObamaCare.’”

Since the PPACA was implemented, the numbers of part time workers has been decreasing. The numeric quoted represents the total number of part time workers seeking full time work.

Part-time workers Graph

6 million retirees will also lose their:

“prescription drug coverage”

The quoted 6 million losing their prescription drug coverage are expected to go on Medicare Part D after losing Employer covered drug prescriptions. The tally by the RNC goes on for 55 more losses by citizens under the PPACA as accounted for in their RNC report:  Obamacare by The Numbers

74% of Small Business will fire workers, cut hours under Obamacare.

Factcheck.org reports on how John Boehner misquoted a recent Chamber of Commerce release of a 3 page Small Business Outlook Study. Only 13% of small businesses said they would take such actions in the study.

Speaker John Boehner Tweet, July 17 CC Study: “74% of small businesses will fire workers, cut hours under #Obamacare” http://bit.ly/12GmjgF cc @dcexaminer @uschamber

Even though some companies will cut workers to less than 30 hours to avoid providing them with healthcare insurance, the companies will still have to pay in equivalents. The government calculates something it calls full time equivalent employees. It divides the number of hours that part time workers actually work in a month ]by 120 to see what it is in equivalent. In effect, for purposes of the regulation two part time employees will count as one full time employee in determining if the firm has over 50 employees and is subject to the penalty. So actually, firms will not be able to avoid the penalty by just cutting the hours its employee work to under 30.

“Chicago issues RFP for more charter schools”

As my Chicago friend Mike (doodahman) points out in Facebook, the City has just issued RFPs for additional Charter Schools. This comes after Chicago Public Schools closed 50 schools throughout the city causing students to travel farther and over crowding other schools. The Chicago Teachers Union sees it as a union busting tactic and predicted it as such as Charter School teachers can not be represented by the union (CTU).

“Without fanfare, the district posted an official ‘request for proposals’ to its website Monday that invites charter schools to apply to open shop in what the school district has identified as priority neighborhoods—large swaths of the Southwest and Northwest sides.

Those heavily Latino areas have struggled with overcrowded schools.

The district wants what it’s calling ‘next generation’ charter schools, which could combine online and traditional teaching. It also wants proposals for arts integration charter schools and dual language charters.

Chicago is coming off a painful process to close 50 schools it said were underutilized; the district last December determined that half its schools are underenrolled. District spokeswoman Becky Carroll said Tuesday in an email that “while there were significant population declines in some parts of the city, there were also increases in other parts of the city…. There are many schools that are overcrowded or are facing overcrowding and we need to address that issue as we do any other.”

The Chicago Teachers Union and others have argued for years that school closures are about making way for charters and weakening the union.

‘We are not surprised at all by this,” said union president Karen Lewis . “We were called conspiracy theorists, and then here is the absolute proof of what the intentions are…. The district has clearly made a decision that they want to push privatization of our public schools.’

The district has been slowly shifting students to charter schools, which are publicly funded but privately run. Around 13 percent of district students—and more than 20 percent of the district’s high school students— are educated in charter schools. Teachers at charters cannot be represented by the Chicago Teachers Union.”

As one reader pointed out in the above article, the Chicago Commercial Club (ComCC) is behind much of the change going on in the Chicago Public School system. The ComCC membership consists of many of the well to do with in the City

“The blatant self-serving intrusion of the ComCC in the city’s education system is highlighted by the fact that its Civic Committee issued a report titled ‘Left Behind’ whose recommendations became the basis for CPS’s draconian Renaissance 2010. The Renaissance 2020 plan called for the closing of 60 to 70 neighborhood schools and for the introduction of up to 70 charter schools. According to DePaul University professor Pauline Lipman ‘Renaissance 2010 opens up the third largest school system in the USA to a market model of school choice, privatization, and elimination of school employee unions and elected local school councils.

The ComCC membership consists of many of the well to do from the City who exercise their influence and power regardless of who is in office. The implications of which cause one to wonder what it means for the city and schools with all of this corporate power and influence used to shape both. The bottom line is still to enhance their profits at the expense of the people they claim to be attracting.

Rahm I. Emanuel, Mayor, City of Chicago; William M. Daley, Chief of Staff, The White House; Lester Crown, Chairman, Henry Crown and Company [family wealth = $4.8 billion]; Kenneth C. Griffin, Founder and Chief Executive Officer, Citadel, LLC [wealth =$3.7 billion]; Tony W. Hunter, Chief Executive Officer, Tribune Publishing Company Valerie B. Jarrett, Senior Advisor to the President, White House; Paul V. La Schiazza, President – Illinois, AT&T Illinois; Timothy P. Maloney, Illinois President, Bank of America; J. B. Pritzker, Managing Partner, The Pritzker Group [wealth = $1.6 billion]; Penny Pritzker, President and Chief Executive Officer, Pritzker Realty Group, LP [wealth = $1.7 billion]; Thomas J. Pritzker, Chairman, Hyatt Hotels Corporation [wealth = $1.8 billion]; J. Christopher Reyes, Chairman, Reyes Holdings, LLC [wealth = $2 billion]; Michael D. Scimo, Managing Director, Chicago Office, Accenture; William Wrigley, Jr., Chief Executive Officer, Wrigley Management, Inc. [wealth = $2.2 billion], etc.

References:

Just months after closing 50 schools, Chicago issues RFP

The Biggest Shark in the Reinvention Pond: The Commercial Club of Chicago

"pensioners: 17 cents on the $; BoA, UBS 75 cents on the $"

Detroit Said to Reduce Swaps Debt by 25% in Deal With Banks . The swaps were a “bet” on the direction of interest rates. With the decline of variable interest rates, Detroit found itself owing to the banks. With the decreased credit rating to B2, the same as AIG, Detroit found itself at the mercy of the banks who demanded their money. Except, there was no President of Congress moving quickly with legislation to establish a fund like TARP did for AIG. Nor did the Fed establish the city as a Bank or buy up its municipals. Even the state of Michigan did little to help the cash strapped city.  When the first Michigan Emergency Manager Act was struck down, the Republican dominated legislature reacted quickly, far quicker than voting on the expansion of Medicaid (one year has passed since SCOTUS ruled on the PPACA); but then, this is TBTF and business we are talking about and not ~ 450,000 constituents living with incomes less than FPL. With little delay, the legislature passed a new Emergency Manager Act, Public Act 436 giving derivatives such as the Interest Rate Swaps top priority similar to what the Federal 2005 Financial Services Modernization Act did. Public Act 436 goes as far as to supersede payments to pensioners and child support payments.

Sec. 11. (1) An emergency manager shall develop and may amend a written financial and operating plan for the local government. The plan shall have the objectives of assuring that the local government is able to provide or cause to be provided governmental services essential to the public health, safety, and welfare and assuring the fiscal accountability of the local government. The financial and operating plan shall provide for all of the following:

(a) Conducting all aspects of the operations of the local government within the resources available according to the emergency manager’s revenue estimate.

(b) The payment in full of the scheduled debt service requirements on all bonds, notes, and municipal securities of the local government, contract obligations in anticipation of which bonds, notes, and municipal securities are issued, and all other uncontested legal obligations. [ As written by a Republican legislature and signed into law by a moderate Republican, Governor Rick Snyder]

Besides awarding derivative holders and bank first in line status, the Republican State Legislature also took it upon themselves to make sure Public Act 436 can not be overturned through voter referendum. Governor Rick Snyder wasted no time in signing the bill.

The winners in the Detroit crisis are the banks who have reaped $millions in fees, avoided property taxes on partially foreclosed properties (the foreclosures were never completed after driving the owners out of the houses and left the uninformed former mortgage holders on the hook for back taxes), and moved to the front of the line of Detroit debt holders. Typically these Interest Rate swaps are of the variable interest rate variety and are often exchanged for fixed rate through the Swaps. When the Fed drove down the variable interest rates, cities found themselves on the hook for the higher fixed rates. Many of the Swaps are also tied to the London Interbank Offered Rate (LIBOR) which was being manipulated by the largest banks. As a result, the banks owe little due to low variable rates and the cities are on the hook for higher fixed rate costs. Just a measly $1.4 billion of the $3.8 billion Interest Swaps tied to Detroit Pension Funds to which pensioners are being asked to accept far less than what banks are being asked to accept.

The losers?  Retirees who have pensions covered by the Interest Swaps. Workers who took and will take wage cuts. Detroit with thousands of partially foreclosed vacant houses which property taxes can not be collected on from the former owners or the banks. The state of Michigan; it will have a black eye for doing little to help the abandoned city over the decades. Without it and its trade with the US largest trading partner Canada, the state would be little more than a large vegetable farm. Banks may take a trim around the ears; but, it will not be anywhere as severe as the haircut the pensioners and workers will have taken when all is sorted out.

State Run and Free Healthcare Clinics ? ? ?

“For goodness sakes, of course the employees and the retirees like it, it’s free,” says Republican State Sen. Dave Lewis.

11,000 Helena state employees, retirees, and dependents now go to a state run healthcare clinic which is free. No co-pays, no deductibles, doctors are salaried, wait time is a few minutes, and visits are up 75%. Of course, the skepticism is high:

“I thought it was just the goofiest idea”

“If they’re taking money out of the hospital’s pocket, the hospital’s raising the price on other things to offset that,” Lewis suggests . . .

He (Lewis) and others faulted then-Gov. Brian Schweitzer for moving ahead with the clinic last year without approval of the state legislature, although it was not needed.

One year has passed and what about today’s feelings ?

“They’re wonderful people, they do a great job, but as a legislator, I wonder how in the heck we can pay for it very long,” Lewis says. (me)Someone changed his mind.

– division manager Russ Hill says it’s actually costing the state $1,500,000 less for healthcare than before the clinic opened. (me) Sounds like it will fund itself in the end.

“Because there’s no markup, our cost per visit is lower than in a private fee-for-service environment,” Hill says.

Some of this may not sit well with physicians; but, why the big difference ? ? ?

Physicians are paid by the hour, not by the number of procedures they prescribe like many in the private sector. The state is able to buy supplies at lower prices.

Bottom line: a patient’s visit to the employee health clinic costs the state about half what it would cost if that patient went to a private doctor. And because it’s free to patients, hundreds of people have come in who had not seen a doctor for at least two years.

Hill says the facility is catching a lot, including 600 people who have diabetes, 1,300 people with high cholesterol, 1,600 people with high blood pressure and 2,600 patients diagnosed as obese. Treating these conditions early could avoid heart attacks, amputations, or other expensive hospital visits down the line, saving the state more money. and lower costs over all in the end (me).

– That personal attention has proved valuable for library technician Pamela Weitz. A mammogram late last year found a lump. “That doctor called me like three or four times, and I had like three letters from the clinic reminding me, ‘You can’t let this go, you’ve got to follow up on it,’ ” she says.

This is what is meant by improved quality and better outcomes from healthcare as opposed to a services for fees scenario.The patients appear to be happier as well as the doctors employed by the state run clinic.

– Clinic operations director and physician’s assistant Jimmie Barnwell says this model feels more rewarding to him. “Having those barriers of time and money taken out of the way are a big part [of what gets] people to come into the clinic. But then, when they come into the clinic, they get a lot of face time with the nurses and the doctors,” Barnwell says

Maybe it is a fluke; but at least, one state tried it with what appears to be good results. I live in Michigan where the state Repubs have been haggling with the teacher and state employee’s unions over paying for healthcare insurance. I could see this model working here for both groups as well as Detroit workers and retirees where the city is seeking to end it for retirees and cut it for workers. In the end, it appears it could save Michigan and Detroit money which is sorely needed in “some” cases. It is interesting a state which is 50-50 in politics appears to have found a way out of the healthcare cost and insurance quagmire. Montana’s State-Run Free Clinic Sees Early Success

McDonalds’ Suggests a Budget for Employees . . .

Partnering with Visa, McDonalds’ Suggests a Budget for Employees which Ironically Shows in the End Just How Impossible It is to Get by on the Minimum Wage. The budget does not include gasoline, food, or heating expenses and incorporates $20/month for Healthcare Insurance.

Screen-shot-2013-07-15-at-9_29_08-AM

Besides skipping certain expenses and skimping on others; to meet the income levels portrayed in the budget, McDonalds suggests associates to work not one but two jobs. A full time job at McDonalds and a part time job elsewhere totally 62 hours per week (if the worker resides in Illinois where the minimum wage is $8.25/hour). If perchance, the worker resides in one of the other 48 states; the total hours needed to hit the suggested income level jumps to 74 hours/week due to a lower minimum wage (the equivalent of a second full time job). The same as Wal-Mart employees, McDonalds associates will end up seeking public aid to get by because of low wages.

If you recall Spencer’s post of Labor’s Share; Spencer pointed out how Productivity Gains have been heavily skewed towards Capital and away from Labor (wages) since the seventies. The CEPR provides a graph with a another take on Productivity Gains when compared to Real Minimum Wage. When compared to Productivity Gains, Minimum Wage has trending downward.

min-wage1-fig2-2012-03

In earlier posts, Edward Lambert addresses the loss of real wages and the potential impact on the economy. As we can see, the only real option to avert another collapse is to raise labor’s share of income. This is not likely as businesses are even now fighting an increase in just the minimum wage. Businesses are trying to maximize their profits and do not want to raise labor costs. Yet this objective of theirs is going to kill the economy. The time bomb is ticking.

If you remember in the PPACA Healthcare Debate:

McDonalds was one of the restaurant employers (Papa Johns, Olive Garden, Applebys, etc.) stating the excessive cost of the PPACA would force them to cut workers hours to <30 hours to avoid providing healthcare insurance (doing so would not alleviate restaurants from penalties as the PPACA looks at total hours worked and not just employees working >30 hours). To my point, McDonalds is advocating >30 hours at its restaurants in its budget and also providing healthcare insurance(?) which by law has to be minimally equivalent to the least costly PPACA Bronze Plan. It would be interesting to see if McDonalds could provide healthcare insurance similar to the Bronze Plan at $20/month. If the plan is not the equivalent, a McDonalds associate could go on the State Exchanges and get a Bronze Plan with all of the free preventative care for ~$97/month (215% FPL – single 21 yr. old Adult) after subsidy. McDonalds would pay a penalty if full time workers sought insurance outside of McDonalds and onn the exchanges. Workers, however, under 30 years and those unable to find affordable insurance are exempt from the mandate and could purchase substitute catastrophic coverage (ACA – Standardizing Health Plans). Perhaps too, this is McDonalds strategy for providing healthcare insurance (catastrophic) to much of its workforce who are <30 years old and working within the PPACA.

Sequester Impact: 1 In 7 Seniors Struggle With Hunger

Crooks and Liars Diane Sweet writes about the impact the Sequester is having on something I used to do when working part time at an assisted care and nuring home in Bensonville, Illinois while pursuing my first BA. “Meals on Wheels” would bring a meal a day to the elderly. Since some were apartment-bound with no way to get to a store; potentially, this was their only meal for the day. Often times, I was also the only face they might see that day. In My Datsun 510 (college transportation), I would make a dozen or so stops when I did this. I can vouch for the gratitude I received from making the deliveries.

While Social Security has kept many afloat in today’s economy, 15% of the elderly still live in poverty as determined by the supplemental measurement.

65 and older poverty

As Diane Sweet points out, the Sequester has only made it worst for seniors who depend on this and other programs to make ends meet and to bring them the simplest of things . . . a meal and a face at the door.

Sequester Impact: 1 In 7 Seniors Struggle With Hunger

sequestercuts

Sequester cuts will total $1.2 trillion through fiscal year 2021. This year there is a 5.3 percent cut, totaling $85 billion. The cuts are indiscriminate and will impact nearly every federal program. Here are some of the ways this year’s cut is affecting food and hunger programs:

Meals for needy seniors lost in programs like Meals on Wheels (MOW): 4 million

Savings from cut of 4 million meals: $10 million

Rise in Medicaid costs due to cut of 4 million meals: $489 million

Net cost to U.S. federal budget due to cut of 4 million meals: $479 million

Loss of senior meals, California: 750,000

Loss of senior breakfasts, Palm Beach County, Fla.: 240 daily

Loss of senior meals in group dining facilities, Detroit suburbs and several counties: 86,000

Loss of home-delivered and group dining senior meals, La Crosse County, Wis.: 6,000

Ellie Hollander, president and CEO of the Meals on Wheels Association of America: “The real impact of sequester is that our programs don’t have the ability to expand to meet the growing need. We should be investing in these programs to ensure our seniors have the nutritious meals they need to remain healthy and independent.”

Patricia Hoeft, director of senior center nutrition, the Mid-East Area Agency on Aging (Missouri): “How do I decide which 300 seniors aren’t going to eat that day?”

Meals on Wheels recipient, home delivery program, La Crosse County, Wis.: “These meals are sometimes the only meal that I have a day. I don’t drive, so I have to rely on others to get around to doctors’ appointments. I only get $16 a month for food.”

References:

“Sequester Impact: 1 In 7 Seniors Struggle With Hunger” Diane Sweet Crooks and Liars
“Hunger and the Sequester, By the Numbers” Bill Moyers “What Really Matters”
“A State-by-State Snapshot of Poverty Among Seniors: Findings From Analysis of the Supplemental Poverty Measure” The Henry J Kaiser Family Foundation

Medicaid Expansion in Michigan

States refusing to expand Medicaid to 133% of FPL has repercussions for those making less than 100% FPL. The PPACA was intended to setup State Exchanges where people could buy healthcare insurance and if they had an income beyond 133% FPL (Federal Poverty Level). Subsidies in the form of a tax credit would be given to each participant (sent to insurance carrier) based on their income. Remember, I said the PPACA was designed for those with incomes >133% FPL? While those with incomes >100% FPL can get subsidized healthcare insurance in the Exchanges, those with incomes <100% FPL can not get subsidized healthcare insurance in the exchanges and they would be covered by Medicaid. The states threatening to not expand Medicaid will leave a hole in healthcare insurance coverage. If the states do not expand Medicaid for single and childless married adults and expand it for married adults with children with incomes <100% FPL, they will not be able to get subsidized coverage on the exchanges either. Many state legislatures are not mentioning this to the constituency in the hope they can blame it on the PPACA, President Obama, and the Democrats. Here is how it is playing out in the State of Michigan . . . “the expanded program would cover as many as 450,000 Michiganders, according to projections. Michiagn State Senator Hune said there is evidence that about half of those in the expanded income category already have coverage of some kind” Press and Argus local newspaper. Michigan State Senator John Hune (my district) is worried about adding 450,000 more uninsured people to Medicaid if they expand it under the PPACA . I could understand the concern if:

• It was not funded. The Medicaid expansion is fully funded up to 100% for the first 3 years and gradually drops to 90% in 2020. The 90% still exceeds the unenhanced Federal Government Medicaid funding of 66% presently given to Michigan for Medicaid. Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier, State Health Facts, The Henry J. Kaiser Foundation.

• The State of Michigan already covered adults with and without children up to 100% of FPL. Michigan does not cover up to 100% of FPL for any adult. Jobless Adults with children are covered under Medicaid if they are <37% of FPL. Working adults with children are granted Medicaid coverage at <64% of FPL. Single adults were once covered at <35% FPL if jobless and <45% FPL if working. The program is closed for single adults and married childless adults. Adult Income Eligibility Limits at Application as a Percent of the Federal Poverty Level (FPL), January 2013 The Henry J. Kaiser Foundation.

Recently, the Republican dominated Michigan State Senate went on vacation rather than voting, leaving the PPACA Medicaid Expansion issue to be decided upon when they return in Fall. State of Michigan Senator Hune’s reasoning was the lack of time (two days) to decipher the Medicaid Expansion. Now this happened in an automotive state where people who work in the automotive industry usually end up losing vacation and holiday time when a production line shuts down or a shipment needs to go out. Myself, I have faced such issues when managing a $200 million/year warehouse for a major Tier One. We hung around until the issue was resolved. This is also happening 2 years after the PPACA has passed, been decided as constitutional by SCOTUS, and rolled out piece meal. So why can’t they give up a couple of days and give it a yes or no vote?

The Republican dominated Michigan State Senate and “other opponents” to the PPACA are not acknowledging the resulting hole in coverage which the PPACA will not cover. Those people who do not have an income of at least 100% FPL will not be eligible for PPACA subsidies in the State Insurance Exchanges. For example, a working women with one child making $10,000 per year is at 64% of FPL and is ineligible for a subsidy to assist in paying the ~$4,900 insurance premium levied from the State Insurance Exchange. Pre-SCOTUS PPACA June 2012 decision, the Federal Government could force states to expand the Medicaid coverage by withholding funding already allocated to states for Medicaid. Since the 5-4 majority SCOTUS ruling, SCOTUS determined the Federal Government and Congress can not force states to expand Medicaid. Using the Kaiser Interactive Subsidy Chart, one can see in the chart below, the working Michiganders caught between 36% of FPL and 100% of FPL would not be eligible for PPACA Subsidies in the eventual Michigan Healthcare Insurance Exchange.

Subsidy1

So why is Michigan State Senator John Hune so concerned about the addition of these Michiganders to Medicaid when there is no other comprehensive coverage for those with income < 100% FPL; secondly, the funding is at 100%, drops to 90% in 2020, thirdly it is a net gain for Michigan; and finally Medicaid improves upon what they may now have (telemarketed mini-meds) and would result in healthier workers? Perhaps, Senator Hune is attempting to appease a Tea Party constituency as his reasoning otherwise lacks common sense. Missing out on the funding for additional Medicaid coverage is only one aspect of the issue as there other gains to be realized from expanding. Michigan’s Economy Will Benefit from Expanding Medicaid, Families USA and Michigan Consumers for Healthcare points to a host of other benefits Michigan will forgo if it does not expand Medicaid.

• In 2016, the new federal dollars would support approximately 18,000 new jobs across all sectors of Michigan’s economy, a 0.32 percent increase over the number of current jobs in the state. This is not limited to health care jobs. Because of the multiplier effect (described above), jobs would be created in a wide range of business sectors throughout the state.

• The increased federal funding and jobs created are projected to increase economic activity in Michigan by nearly $2.1 billion starting in 2016.

• From 2013 through 2022, the Medicaid Expansion could save Michigan ~$350 million in uncompensated cost, as more people would be insured. This would offset the decreased percentage in 3 years.

• Hospitals also absorb uninsured healthcare costs. It is estimated another $317 million could be saved with the Medicaid expansion.

• In 2008, the costs of uncompensated care increased family health insurance premiums by an estimated $1,017.

• Increased state revenue from more people working.

• In this conservative get a job or get out of the state of Michigan, insured constituents would be healthier and more productive in jobs.

Solely because of politics, the Republican held Senate in Michigan is stonewalling the Medicaid Expansion at the expense of thousands (6,000 in Livingston County alone) of their constituents. Again as taken by Henry J. Kaiser Foundation, there are 1.9 million people in Michigan who have incomes <100% FPL who would not be eligible for subsidies on the PPACA State Insurance Exchange. Only adults with children are eligible today for Medicaid and only if their income is a much lower percentage than 100% FPL.

The PPACA Sky is Falling . . .

Quelle Surprise, The White House Administration has decided to give “some” companies with >50 employees a one year extension in order to prepare and comply with the PPACA mandate. Given the amount of resistance the PPACA has received from the states in preparing for it and the House of Representatives, this delay should come as no surprise at all. While everyone has rushed into the fray claiming it is proof the PPACA is failing, the delay impacts a fraction of the employers with >50 employees. 94 – 96% of the ~200,000 employers who fall into this qualification already offer comprehensive healthcare insurance. The delay was to allow the 4 to 6% of the employers (8,000 to 12,000 employers) time to decide what they will offer. Former health policy administrator Ezekiel Emanual had this to say as reported by Bloomberg Health-Law Employer Mandate Delayed by U.S. Until 2015:

“Former White House health policy adviser Ezekiel Emanuel, now vice provost at the University of Pennsylvania, said today on MSNBC’s Morning Joe that the delay of implementation of the employer mandate will impact a limited number of companies. ‘I actually don’t think this is that big a deal,’ he said.

‘The provision only applies to employers who have 50 or more employees’, Emanuel said. He estimated that there are 200,000 total employers in the U.S. impacted and that “94 percent already offer health insurance” to employees.

‘We need to look for 2020 rather than moment to moment for changes in the system,’ Emanuel said.

Obama has confronted opposition from Republicans at every turn of the law, which passed Congress with only Democratic votes and was later challenged before the U.S. Supreme Court.

Only 16 states have agreed to set up the new exchanges, or marketplaces to sell insurance to people who don’t get it at work. Twenty-four states have refused to expand Medicaid, as called for under the law, according to Kathleen Sebelius, Obama’s secretary of health and human services.

Congressional Republicans, who have vowed to try to repeal the law, have refused Obama’s requests for about $1 billion more to help enact the statute and ensure it runs smoothly. Instead, they’ve started multiple investigations into the implementation.

Nor is this the first time Obama has been forced to scale back the law’s features. In March, the administration said small businesses wouldn’t be able to give their workers a choice of health plans in exchanges set up just for them. In January, a plan to create new nonprofit insurers in states was curtailed after Congress capped funding for the companies.”

Reports of companies limiting workers to 30 hours per week to avoid offering them healthcare insurance has been in the news with food chains and WalMart leading the way. It does not quite work that way as reported by Maggie Mahar at Health Beat Blog; The Employer Mandate is Postponed: What Does This Mean For Obamacare? Is Ezra Klein Right–Should the Employer Mandate Be Repealed?. Maggie goes on to say:

As I explained in a recent post, what the critics don’t seem to understand is that the ACA requires that employers offer health benefits if they have “30-time full-time employees or full-time equivalents.” Two workers who put in 15 hours a week equal one full-time equivalent. In other words, the government doesn’t count heads, it counts hours. To figure out how many “full-time employees and full-time equivalents” a business owner has, the government will add up the hours that all of his employees work, and then divide by 30.

The employer who cuts 12 of his 40 full-time employees to part time, and hires another 12 part-time employees to fill in the holes in his work schedule will wind up with 28 full-time workers and twelve “full-time equivalents.”

He will not have to insure the part-time workers, but he will be required to offer benefits to the 28 who actually work 30 hours a week.

As far as WalMart, people are already complaining about the lack of stocked shelving and service. This plays into the hands of WalMart competitors such as Target and Costco who appear to have their employees well being in mind. Should the Employer Mandate be removed. Some interesting commentary from Maggie Mahar. In 2009, Ezra Klein argued against the employer mandate and recently the same argument surfaced again.

“Again he quotes CBPP: ‘The employer mandate and penalties ‘would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession’ Workers from low-income families would cost the firm significantly more.’

Yesterday Klein repeated the argument, writing that ‘Eliminating” the employer mandate, or at least utterly overhauling it is probably the right thing to do.’

Maggie: I disagree. I admire both Klein’s Wonkblog and the CBPP, and applaud most of what each have written about health care reform. But in this case the argument is based on the false assumption that employers will choose to pay a penalty of $2,000 to $3,000 per employee rather than provide insurance. What both Klein and CBPP overlook is what Klein himself has explained in the past:

‘People simply misunderstand why employers offer health-care benefits. They’re not doing it as a favor to employees. . . Employers offer health insurance because employees demand it. If you’re an employer who doesn’t offer insurance and your competitors do, you’ll lose out on the most talented workers. An employer who stopped offering health benefits would see his best employees immediately start looking for other jobs.’

Research also shows the health benefits improve productivity and reduce absenteeism. As I pointed out: not long ago:: “This explains why 95% of employers with more than 30 workers offer insurance.”

The sky has a long way to fall before it hits your head. Do not be fooled by the commentary lacking substance. The habitual naysayers and pols are having a field day with this revision in implementation when the problem is only a small portion of the total. Most employers are ready to go forward.

Productivity & Effective Demand: An Intriguing and Disturbing Story . . .

Edward Lambert at Effective Demand; Effective Demand = Effective Labor Income/(cu*(1-u)) points to the result of an economy left to maximize Profits at the expense of Labor. I have my own version or underlying causes of this issue and Edward gives the economic side of it.

I am going to show a graph of Productivity against Effective demand. It is an intriguing and a disturbing graph. Let me start by giving the equation for the productivity used in the graph.

Productivity = real compensation per hour: business sector/(labor share: business sector * 0.78)

The data for this equation comes from this graph at FRED.

The equation for effective demand is…

Effective Demand = real GDP * (labor share: business sector * 0.78)/TFUR

TFUR (total factor utilization rate) = capacity utilization * (1 – unemployment rate)

Let me just show the graph and then start explaining . . .

Productivity and Effective Demanda

The graph shows quarterly data from 1967 to the 1st quarter of 2013. The red dashed line is a trend line for the data. We can see that from 1967 to 1997, the plot stayed very tight on the trend line. There were deviations from this line during times of shocks and recessions. But it is very interesting how closely the plot followed the trend line before 1997.

Before 1997, the plot going below the trend line was associated with a recession. The explanation of this is that effective demand rises more during a recession because of more available capacity of labor and capital. At the same time. productivity tends to fall behind the trend line due to rising labor share, not falling real compensation.

When the plot goes above the trend line, productivity is ahead of effective demand. Productivity rises due to labor share settling down and real compensation rising. Effective demand tends to stay still during the expansionary phase of a business cycle. The economy grows up to the effective demand limit and then gets set for a contraction.

We used to have a balance between productivity and effective demand. The economy moved directly on top of the trend line for many many quarters. And now the economy has lost that balance. Since the late 90’s it is a fleeting moment when productivity and effective demand come together on the trend line.

Before 1997, there was very little movement away from the trend line. Then something unusual happened between 1997 and 2001, the dotcom bubble years. The plot went progressively below the trend line even though there was no recession. Productivity was rising during these years, but effective demand was rising at such an unusual rate that productivity could not keep up with it. Effective demand was being artificially created and inflated. The recession of 2001 followed the same unusual path as before the recession.

In 2002, the economy had to make an adjustment. Productivity had to rise or effective demand had to fall. During the housing bubble years (from 2002 to the quarter right before the 2008 recession), productivity rose, while effective demand basically stayed steady. The plot went back above the trend line showing that productivity was beyond the capacity of effective demand and that productivity was at a non-sustainable level. The economy sustained this high level of productivity in the face of low effective demand for a few years, but eventually the correction would come in 2008. The correction was a collapse.

Look at where the economy is now. Since the end of 2010, the plot has barely moved from a productivity just below 1.4 and an effective demand around $14.1 trillion. The plot is way above the trend line and has been just sitting in the same spot for over 2 years. Effective demand is too low for the current productivity in the US. This is an economic bomb building energy that will eventually go off when real GDP approaches $14.1 trillion.

A friend of mine had a dream a few nights ago, where a spirit said that the economy is dying. The graph above would lead one to think the same.
Think about it… where can the economy go now from here?
There are 2 options . . .

Option #1 looks at the equation for Productivity: You have to lower productivity by increasing labor share in relation to real compensation.

1. If you lower real compensation, labor share would fall, but it would have to fall slower than real compensation. Keep in mind though that a lower labor share would lower effective demand too, which would work against the objective. However, if labor share actually rose in the face of lowering real compensation, you would see an economic contraction. So lowering real compensation is not a good option.
2. On the other hand, if you raised labor share faster than raising real compensation, productivity would come down as effective demand increased from higher labor share. This is a safe and sensible way to correct the huge imbalance we find ourselves in.

Option #2 looks at the equation for Effective Demand: You have to increase effective demand back up to $16 trillion. There are two options here as well.

1. Utilization of labor and capital would have fall. (TFUR in the equation above would have to fall.) This would mean a rise in unemployment, which would mean another collapse.
2. Labor share would have to rise. This would also have the beneficial effect of lowering productivity, as long as real compensation rose moderately.

As we can see, the only real option to avert another collapse is to raise labor share of income. This is not likely as businesses are even now fighting an increase in just the minimum wage. Businesses are trying to maximize their profits and do not want to raise labor costs. Yet this objective of theirs is going to kill the economy.

The graph above shows that there is a bomb ticking, and it is a bigger bomb than we saw in 2008. Higher productivity in the face of low effective demand is unsustainable. Yet, we have been sustaining it for over 2 years now with an incredible expansionary monetary policy in the face of an incredibly low labor share of income.