Sunday, February 28, 2010

Health Insurance, a Financial Tool, not a Government Entitlement

The administration keeps on telling the world that there are 40 million people in the US without health insurance. It’s as if they want it real bad and can’t get it. Are the 35 million people on food stamps a part of this group?  How about the 10 million people on unemployment?  They interviewed a gentleman the other day about health insurance. He said he was doing without, because he was putting his daughter through college. Now if they were to pass health care, he wouldn’t have the option to make that decision; the money for his daughter’s education wouldn’t be there.

Once you buy the idea that there are 40 million people that have no health insurance, then they hit you with the statement that these same 40 million people can’t afford health insurance. Back up and look at it a different way. 40 million people are self insured; they pay their doctor bills out of pocket. All insurance is, is a way of paying for future health costs in advance. Some choose to pay as they go. That plan works OK unless they have a very serious illness. Of those 40 million people that choose to be self insured, it takes a major illness for them to consider health insurance as unaffordable. It’s not the insurance that is unaffordable; it is the 20 to 40 years of missed payments that come due when you get sick. The idea that the government can manage anything cheaper than private enterprise has got to be a joke.

In my 64 years, I have spent about $4,000 total (including insured amounts paid) on doctor bills. Being self insured would have saved me quite a bundle, probably about $20,000. Oddly enough, I have spent probably over $8,000 sitting in a dentist chair. It is interesting to note, as we grow old, that Medicare doesn’t pay for dental fillings or dentures. I guess that’s why you don’t look a gift horse (Medicare) in the mouth.

Last Wednesday a Congressional committee grilled Angela Braly the CEO of Wellpoint Health Insurance (Anthem Blue Cross). House member Bart Stupak was upset that Angela was paid a million a year and the Company made 2.7 billion dollars. The fact that it was a 4 percent return on investment, didn’t sink through Representative Stupak’s head. He kept referring to the 2.7 billion dollar profit, being a lot of poor people’s insurance premiums; that was just too much profit for a private insurance company. He thought that a 39 percent increase in premiums was outrageous. As an investor, a 4% return is pretty poor also. Common sense suggests that no company would raise rates 39 percent just to make a profit. Irritating your policy holders isn’t doesn't help when it comes to renewals.

It's hard to believe that health care costs are increasing at 12 percent a year. Look at it other way; we know the government is printing too many dollars, their decrease in real value leads to the false assumption that prices are increasing. To the man on the street, if wages and prices increase together, it’s inflation. If your wages stay the same, those price hikes are real.  Ouch!

Health insurance is like buying a car, cost is an issue. If you want a Lamborghini, you need big bucks. If you want to buy a Ford pickup, it is probably well within your budget. With the government's proposed health plan, you are "entitled" to the Lamborghini. The trouble is, you order the Lamborghini and you get a Ford pickup. Gee, how did that happen?

Wednesday, February 24, 2010

Governments Can't Solve Our Problems, They are the Problem

Last week Blue Cross raised rates, some as high as 39 percent and now the nation is in an uproar; "How dare they raise rates." Nobody said anything when Lays Potato Chips went from $1.89 a bag to $3.79. If McDonald's wants to raise the price of a Big Mac 40% do you think anyone will care? Competition is the name of the game. If health insurance is such a lucrative field, how come there aren’t a half a million companies trying to sell us a plan better than the one we already have? We went from 10 mutual funds to over 10,000 today; why didn’t health insurers increase proportionally?

Our government whines and complains that it is not right to make large profits (Bill Gates and Warren Buffett's name never seem to be brought up). Congress reminds me of Claude Rains in “Casablanca” when advised that gambling was taking place, he said “I’m shocked—shocked to find out that gambling is going on in here.” Later a waiter handed him his winnings.

It is assumed that the rate raise by Blue Cross implies excessive future profits. Just maybe, the rate increases indicate what the government (by way of Congress), has done to the dollar by printing more of them. Plus with the bad economy, a lot of people are cutting corners on health insurance (if you’re not sick) it's optional—buy food and gas for work instead. The insurer's pool of young buyers is decreasing drastically.

Where does government get the power to tell private enterprise what they can charge? Obama today stated  his party platform was not advocating Socialism. But “By God, everyone deserves health insurance!” Forget that “We the People,” can’t pay for it individually or as a group. If you want to see what government price controls do, examine what rent control does to local real estate. Someone once compared it to having an atomic bomb go off in the area, the damage was the same, there just wasn’t any explosion, it just took longer.

Figure that government in its evolution, has had 3,000 years to perfect itself. The basic products supplied by government turned out to be; roads, police, fire suppression, military defense,  regulation of commerce, pretty basic stuff.

Solving problems sounds easy. But how come governments today, have the same problems as they had hundreds of years ago? Wouldn’t it seem logical that most of the serious problems facing man would have been solved by now? Let’s face it, the mind set is “We are smarter than the people from the past, now we can fix it.” I tend to doubt that premise.

As for the future, how can the government  give us back everything we paid in taxes, as a retirement and health care benefit?  Just maybe, the people that claim to have a solution to all of our problems, are part of the problem.

Sunday, February 21, 2010

The New American Dime (Reprinted)

The following is a reprint from May 19, 2007 that some of you may have missed.

Here are two coins, an old silver dime and the new Presidential dollar coin. Just for a laugh, which one is worth more? Answer; the silver dime is worth about 9 cents more.

To be a millionaire in the ‘1960’s meant something. In today’s world, a millionaire is a piker with 100K in 1964 dollars. Inflation makes people think that they are getting richer. People are making more money and their house and other investments have appreciated. What could be better?

Inflation is the hidden tax. Government spends a little more each year than they take in, probably about 3%. Over a 20 year period, the decimal point moves over one space to the right (i.e. $1,000,000 becomes $100,000). This worked pretty much OK until they passed Social Security.

When you contrast the silver dime with the new dollar, a new problem becomes visible, inflation taxation vs COLA (cost of living allowance) linked retirement benefits. What is different now, is that most of these retirement items that everyone depends on, were locked into the dime that was made of silver. So now benefits have to pay at the old dollar rate, inflation adjusted. As long as the dollar could inflate without COLA's, there was no problem. Once Congress linked the cost of living into retirement benefits, it created a monster that would bite them in the ass with every COLA increase.

Let's add to this, the health care package for seniors. Imagine, at the age of 55, your health insurance cost is $300 per month. What a relief that at age 65 it will be free. We are still talking BUBBLES, and this bubble is bigger than all of the rest, and is not going away. Give it another 15 years before it's visible. The real question to ask; "Is it possible to believe that we, the people (the government) are really going to pay for what, we the people, (as individuals) could not afford to pay?

Well, this kind of gives you an idea of where we are headed. They have super sized the dime and called it a dollar. So size does matter to your Congressman, doesn't everybody deserve a bigger dollar?

The government claims the inflation rate is under 3%, that keeps the COLA's low but kind of ruins their credibility. The real rate is probably closer to 12%, that's if you buy gas, milk, meat and beer. (Who can afford to buy all four at the same time?)

Monday, February 15, 2010

The Collapse of the Euro

There is a new acronym "PIGS" floating around. It refers to the countries of Portugal, Ireland, Greece and Spain. They all share one thing in common their currency is the Euro.

The Euro is a peculiar creation. Most currencies evolve out of the individual government and are subject to regulation by the state. In this case, a group of countries got together and formed an economic union supporting a common currency. The thing that distinguishes this currency from all others, is that there is no inflationary printing of money unless all nations agree to it.

Greece is the poster child for the Euro. Their government has lied to the people for so long that the aspect of an overthrow of the government isn’t what could be considered plan B; it’s plan A. Greece has frozen wages and increased taxes, to get in line, with what the Euro community expected them to do to get their house in order. The problem is; it doesn’t appear to be working. The people there, are fed up with the conflict between the political rhetoric and the economic reality they have to live with.

Then we have Portugal and Spain waiting to see what will happen to Greece. They too, would like a bailout. Somehow Ireland got swept under the carpet (2.39 Trillion dollars worth of debt???). The Euro is one of those concepts doomed to failure. It was a great plan to facilitate economic free trade. The trouble was that it removed the politicians’ access to the government check book. They could no longer fiddle with the currency to balance the budget, like the United States and Great Britain. This collective economic bond to the Euro prevents the politicians from spending more than they collect in taxes. Some countries promised the moon and now can’t deliver; the money isn’t there.

The Euro’s impending collapse centers around nationalism. The European confederation cannot come to an agreement. Why should a German or Frenchman take money from his kids future, to give to someone in Greece or Spain? Why should countries who acted responsibly, be taxed and have that revenue given to those that didn’t? The Germans don’t want to bail out the “shiftless” Greeks. On the other hand, the Greeks had a taste of Hitler decades back and don’t want these” Krauts” controlling their lives for a second time; telling them cut wages and increase taxes. Nationalism is a pot boiling over in Europe.

In most countries, the decision to inflate/ debauch the currency is not one that comes up for a vote--- it just happens quietly. With the Euro, that question will have to come up for a vote in the future; and it has to be unanimous. A collapse of the Greek government could make that vote a moot point. Look for the European Union to break up, they can't afford to feed the PIGS.

Thursday, February 11, 2010

A Final Letter from the Top Educator in Poway

The following email was sent to all of the Poway Unified School District Supervisors by Dr. Don Phillips Superintendent of Poway Unified Schools, February 4, 2010. If you go back to my December 11, 2009 post you can see how the problem has increased in size from his previous letter (3 months ago). I might add that Dr. Phillips has announced his intensions to retire in the coming months. I left his letter unedited. It doesn't imply great times for our childrens' future education or for the teachers who educate them.

Dear Staff,

I wish I had some good news for once. Over my past nine years as superintendent, we have made cuts in five of those years totaling over $48 million and now face additional cuts. As you know, we have made every effort to keep cuts away from the classroom by finding efficiencies in our system, narrowing our focus, and soliciting parent and community support. Through our collective efforts we have been successful, to date, in minimizing the negative impact of budget cuts on our students’ education.

As one measure of success, our Academic Performance Index ranks among the top 3 school districts in the state with 20,000 or more students, along with Irvine Unified and San Ramon Unified. Our students also excel in everything from robotics to theater and in all extracurricular and co-curricular programs, including athletics. At the heart of this success is you – our staff – who are dedicated and highly professional, working daily with our students, supporting the overall district operation, and seeking ways to make the system work, even with all of the reductions. I see evidence of this in our custodians, library clerks, administrative assistants, food service workers, instructional aides, administrators, classroom teachers, and others. Much like hospitals that cannot run with doctors only, schools need support systems to help teachers be effective and to provide a safe and orderly environment. I’m very proud and appreciative of your extra efforts during these most difficult financial times.

However, as you already know, we are facing yet another challenging financial year in 2010-11. Our initial budget projections for next year included a $17 million funding reduction due to the continuing state economic problems and the depletion of one-time federal funds, which provided some budget relief this year. Although the Governor publicly committed to “protect education funding,” his proposal actually results in over $2 billion in additional cuts to K-12 education, or an additional $7-plus million in reductions to Poway Unified. This means that instead of a $17 million shortfall for next year, we now anticipate a $24 million shortfall. As we scan the horizon, we fear there may be additional state cuts which would further impact our district.

A $24 million reduction, on top of the major funding cuts we have already made over the past two years, is almost unfathomable. We are committed to maintaining our core educational efforts, but as we keep cutting, this commitment becomes more and more difficult. We will all feel the weight of these additional reductions, both individually and collectively. We will be presenting our initial negotiations proposals to the Board of Education for all three bargaining units on Monday, February 8. We will obviously continue to look for additional solutions in order to meet our budgeting constraints. Nevertheless, most class sizes will increase and we will enter into negotiations around possible further concessions in total compensation. Additionally, we are exploring the potential of a shortened student school year from 180 to 175 days. I could never have imagined we would face such a dire picture in California and K-12 public education.

As we enter into the 2010-11 budget development process, we will be using the following criteria to help us prioritize our resources:

· Support college readiness initiatives and high expectations for all students

· Focus on student learning and student support systems

· Provide a safe and orderly environment

· Continue to seek ways to increase efficiency and effectiveness in operations

· Support and, wherever possible, minimize staff losses

On the legislative front, I am seeking state budget relief in the form of greater categorical program flexibility, elimination of class size reduction penalties, and attendance relief from H1N1 absences. We are also pushing to hold the line on additional cuts beyond the Governor’s January proposal, as the state will likely need to make additional budget cuts next year. It is essential that each of you, individually and collectively, reach out to our legislators and help them understand the impact of these cuts on our collective work and, most importantly, on our students.

I have written a letter to our community that provides more detail regarding the budget, my appreciation for your support in keeping student learning at the forefront, the fact that these cuts will impact our work, and the need for their voice in Sacramento to avoid even deeper cuts for next year.

While next year will be even more challenging than this year, great people and great organizations rise to great challenges. I know you are dedicated to doing your very best with the constraints we face from such deep budget reductions over multiple years. We will work collectively to best address these additional cuts because of our belief in the importance of the education of our students. Poway Unified is a very special school district, and we are committed to help keep it that way


(Dr. Don Phillips, Superintendent, Poway Unified School District)

Monday, February 08, 2010

The Paradox of Decreasing Consumption

When times are tough, families cut back on consumption. Last June, Vista Water District announced that we were doing such a good job of conserving water, that they had to raise rates to cover the fixed costs. People are starting to realize, a decrease in consumption raises the unit price of water, natural gas, etc. These suppliers have fixed costs no matter what the consumption level. The net effect, we consumed less and paid more.

Anthem Health Care for California, today raised rates 30 to 39 percent. The government is shocked, and by God, they are going to get to the bottom of this.

Basically families have decided to do without insurance unless they really need it. With less people wanting insurance, the rates have to go up, to pay for those claims from people who are sick. All the insurance company does is take total costs, add in a profit and divide it by the number of customers, to arrive at a billing cost. It could be argued that the insurance companies are ripping people off, but I would argue, if they show enough profit, there would be lots of competition.

Look for the same to follow with car insurance. Rates will go up. Our land line telephone just went up three dollars a month as did our cable bill. Our household has changed auto insurance providers in just the last month because of cost. We are about to drop cable and the land line telephone.

America is downsizing at a drastic rate. Costs will go up while this happens. Then follow the bankruptcies, and then we get the lower rates.

The irritating part of this is that a family can feel the financial pain of a contracting budget, just like a State government. The Federal Government still has money that they can pull from "thin air." It kind of makes you wonder. If they can pull something out of "thin air," what part of what they are doing, IS NOT a magic act?