Monthly Archives: January 2015

Intellectual (Dis)Honesty – Boko Haram

Why is the Western world apparently ignoring the mass murder being perpetrated by Boko Haram – is there any justification? I sincerely invite your comments as I find this question particularly puzzling.

In terms of background, the United States Institute of Peace has reported that the local Boko Haram is an Islamic sect that believes politics in northern Nigeria has been seized by a group of corrupt, fake Muslims. It wants to wage a war against them and the Federal Republic of Nigeria, to create a “pure” Islamic state ruled by sharia law.

Furthermore, since August 2011, Boko Haram has planted bombs almost weekly in public places or in churches in Nigeria’s northeast. The group has also broadened its targets to include setting fire to schools. In March 2012, some 12 public schools in Maiduguri were burned down during the night, and as many as 10,000 pupils were denied ability to obtain an education.

The list of atrocities goes on, and for a fleeting moment, the plight of hundreds of schoolchildren that were kidnapped achieved prominence with the western media arena. The almost constant kidnapping of women and children, however, seems to go almost unnoticed.

By contrast, the January 7, 2015 attack and murder of twelve people in Paris at the offices of Charlie Hebdo and thereafter the murder of five innocents relating to the attack at a kosher food establishment (which may very well have been related) resulted in a march of over one million people with participants from forty countries.

Incidentally, on January 3, 2015, Boko Haram destroyed two Nigerian towns, Baga and Doron Baga. In Doron Baga alone, more than 3,100 buildings were damaged or destroyed. In Baga, at least 620 buildings were shattered.

While the number of casualties has yet to be established, the United Nations Refugee Agency confirmed that over 7,000 Nigerian refugees arrived in western Chad on January 9, 2015.

The big question is why?

Why is there such a great disparity between the media reports of the massive carnage and devastation occurring in Nigeria at the hands of Boko Haram, and the almost unprecedented level of media coverage regarding Paris?

Why is there such a great disparity between the public outcry for the plight of many thousands of people who were brutally murdered, maimed and displaced in Nigeria (almost nil) and the million plus participant public outcry for less than 20 innocent victims who were brutally murdered in France?

I have spoken to a number of colleagues, and while we are all puzzled, the range of answers within the universe of possibility seems even more troubling.

1. The Western world is much more sensitive to terrorism and/or loss of life in its own backyard.

2. The Western world can easily say that we will not stand up for events occurring in a foreign nation until its own citizenry stands up for itself. I believe that this position represents the view of the uninformed, because the citizens in Nigeria under attack are hardly able to stage protests, and the military seems to be trying to fend off Boko Haram without any meaningful international support.

3. The Boko Haram issue is viewed as an internecine fight between different factions of a religion/ideology and therefore, it is either inappropriate to intervene, or alternatively, exceedingly easy to turn a blind eye. In light of the fact that Boko Haram roughly means “Western education is forbidden” it seems difficult to take the position that this is “their” problem.

In the final analysis, I think the question we are forced to ask, particularly as Americans is if in the year 2015, we truly believe that “all men are created equal.”

While I generally write about healthcare, its attendant law, the United States government’s attempts to provide healthcare for all, I think it only fair to include a post of this sort as part of our collective and collaborative view on “healthcare.”

I would be particularly thankful, and would probably sleep a lot better, if the readers of this post were able to shed some light and help to reconcile how or why this disparity can be justified. Frankly, I fail to understand it.

What do you think?

Intellectual (Dis)Honesty Part II

What are the parameters of a term that has recently been bandied about, namely, “addressing income inequality?”

As with many other areas, life is simple at the extremes. An uber-wealthy man walks down the street and sees fellow citizens starving; any sense of humanity dictates that he should give the starving people some food.

Obviously, when the government gets involved, we call it tax.

At the other extreme, if a person was required to divest himself/herself of wealth by sheer virtue of the fact that someone else had less, we would call it socialism.

It is the middle ground that might cause someone to scratch their head. To what degree do we want to address income inequality?

If the solution is giving the people earning less the ability to earn more, one would expect, and rightfully even demand, a comprehensive plan. That plan, however, would have to factor in personal issues like motivation, financial or time investment, delayed gratification, etc. not to mention intervening forces like globalization and offshore labor, as well as technology taking a bite out of unskilled labor employment.

I believe that any statement regarding addressing income inequality must be comprehensive, achievable and realistic if it is to be meaningful. Examples of a scattered approach to dealing with income inequality are the ACA, junior college for all, and seeking to raise taxation on capital gains. The issue is complex, and therefore, the solution deserves at least as much attention as the underlying issue.

On the other hand, if we are simply talking about taking from the rich and giving to the poor, which would essentially amount to 21st-century governmental Robin-Hoodism, I would at least expect to hear the degree to which this redistribution of wealth was appropriate in the aggregate, rather than hearing a sprinkling of willy-nilly ideas. Obviously, this approach would also need some type of economic plan, substantiating that the level of redistribution did not create a disincentive for people to make the investment and take the risks that generally precede their accumulation of wealth.

In either case, it would really be refreshing to take a lesson from GPS, where the first question asked when embarking on a journey is — what is your destination?

What do you think?

Intellectual (Dis)Honesty, The Affordable Care Act (ACA), and the Redistribution of Wealth

A reasonable analysis of the ACA illustrates that one of the major issues is that it entails is a functional redistribution of wealth, except that in this case, it does not exclusively seek contributions from the wealthy. 

In order to best understand my point, I ask the reader to think in terms of homeowner’s or other property and casualty insurance.

One of the fundamental principles of insurance is that it redistributes risk, which from the point of view of the insurer, necessitates getting a large enough pool comprised primarily of low risk participants, so that the premiums it receives will be enough to pay for the risk it undertakes and its operational expenses, while allowing for a profit. 

From the insured’s point of view, they recognize that there is a certain level of risk — fire, storm, theft etc., for which they are not willing or able to undertake the risk of loss, and accordingly are willing to pay a certain amount of money (“wealth”) to buy peace of mind and security. What they are really doing though, is redistributing their wealth. If they ever have a large claim, they will receive money (“wealth”) that was contributed by other people, whereas, if they never have a claim they will contribute their wealth to other people who are victims of fire, theft etc. In the final analysis, they are either a net payer or a net receiver. 

Insurers are very careful to make sure that the pool of insureds, are not subject to “adverse selection,” which means that a disproportionate number of people who are especially risky, or know they will have claims, seek insurance. For example, if there is a forecast for a hurricane in a particular region, one typically cannot buy homeowner’s insurance. The insurance company does not want the responsibility of payment for those people who seek insurance when the risks are especially high.

For whatever reason, individuals are not troubled or not cognizant of the fact that when they purchase homeowner’s insurance, they are engaged in redistribution of wealth. In fact, the term “redistribution of wealth” is rarely used with respect to homeowner’s insurance. If you think about it I think you will agree that when insurers pool risk, they are to some extent, redistributing wealth.

Now let’s look at healthcare insurance. Essentially, it follows the same principles, and from the point of view of the insurer, one would want a large enough pool of healthy people so that the premiums would pay for the sick and infirm, operational expenses and yield a profit. The distribution of risk and receipt of premiums and payments to the insured is, functionally, redistribution of wealth.

As a general rule, albeit with some exceptions, those who receive a net benefit are most likely to favor the redistribution, and those who are net payers, are more likely to oppose it. 

Now let’s look at the ACA.

To the extent that some of the fundamental underpinnings of the ACA are to require coverage for pre-existing conditions, and take away caps on coverage (both of which increase the potential risk to the insurer), it is an absolute necessity to broaden the rolls of the insured to a pool of less risky participants, e.g. the young and healthy. Essentially, allowing for pre-existing conditions and taking away caps necessitates that the healthier segment of our society join the ranks of the insured. In fact, it necessitates a mandate for insurance either at the individual level or at the employer level. Without a mandate (obligation), an individual could wait until he/she were faced with a catastrophic illness and then sign up for insurance. It would be the absolute most extreme case of adverse selection – a situation insurers could not withstand. 

As such, the ACA mandated employer-sponsored insurance, individual insurance and/or fines for failure to obtain coverage. To the extent that we want to cover pre-existing conditions, raise caps on coverage, and broaden coverage, the mandate is necessary. Let’s not forget that insurance is all about redistribution of risk, and redistributing premiums (“wealth”). 

The problem is that the insurance mandate affects young and healthy people that do not recognize the need for insurance (especially at today’s premium prices) and bristle at the thought of paying premiums (that they often cannot afford) for the benefit of others. Clearly, they are not ready for a redistribution of wealth before they have achieved any level of wealth.

For better or worse, however, that is what the ACA mandates.

Of course, a significant portion of the ACA relates to expanding eligibility for Medicaid, which means that our government is now subject to (at least to some degree) the same issues set forth above. The difference, though, is that the government has tools that are not available to the private insurers – namely, taxation.

It is no surprise that the Supreme Court allowed our government to surcharge people/companies who did not buy insurance under its ability to tax. One could strongly argue that any tax that goes towards entitlements is a redistribution of wealth, or that it is self-evident that tax (at least in part) is a redistribution of wealth.

It is also not surprising that President Obama will seek to increase capital gains taxes with a carve out for couples earning less than $500,000 to pay for certain initiatives to boost the effective income of individuals in the lowest earning brackets, and to ensure that it is only the more affluent that participate in this new redistribution of wealth.

My point is that whether you are pro or con, let’s at least call it what it is. The ACA must incorporate a redistribution of wealth by obtaining net contributions from young, healthy and probably not wealthy people, as well as net contributions from more wealthy in the form of increased taxes.

What do you think?


Would You Sue your Doctor for Medical Malpractice?

I was recently reminded of an incident that occurred to a fellow (who we will call Mr. X) approximately 20 years ago. I pose the question of whether you would have sued for medical malpractice.

At that time, I was involved in a real estate deal and met with a rather affluent aristocratic fellow, Mr. X, who sought to buy an industrial property. My involvement in this matter had nothing to do with healthcare, but he asked that our meeting take place at his home. When we met, he explained that he was a post-cardiac surgery patient and that an unfortunate incident had occurred of which he was only vaguely aware of in real time as he was significantly addled with various drugs. His wife later clarified his foggy recollection.

Apparently, during his first cardiac surgery, his heart was moved and successfully replaced. Protocol required that before he was closed up, an x-ray be taken to ensure that none of the various surgical devices were left in his body. Despite the counting and the x-ray, unfortunately, a sponge was left inside of him. As a result, he required another round of surgery and his heart had to be moved and replaced once again. Mr. X happily reported that he survived both surgeries. Clearly, he was not billed for the second surgery.

When I met him, he had already gone back to his cardiologist and explained the whole story to him. Mr. X  believed that the second surgery posed a real danger to his health,  that his recovery and incapacity were increased, and that he had additional pain and suffering because of this incident.  His cardiologist told him that he could sue, but that he should recognize that a well-qualified surgeon (who was probably not at all at fault for what happened) as well as others would be distracted from their important work of saving lives. The question he posed was did Mr. X really want to inflict the rigors of litigation on a doctor, medical team and hospital, people who essentially had dedicated their lives to helping others. Mr. X decided not to pursue any potential claims.

Due to my involvement in the healthcare arena (although my firm does not handle medical malpractice), and because we represent healthcare providers in other areas, I am often asked for my opinion. My particular opinions are not relevant to the question, but I can say that most people believe that if they do not achieve the result they expected, there must be someone on the other side who is subject to being sued.

When I began to think about patients being stakeholders in our healthcare system I was reminded that when it comes to one’s personal health, it is “life at all cost.” With the cost of universal healthcare, if that ever happens, we may not be able to embrace that philosophy.

My question to the reader is “What would you have done, and why?” Even if Mr. X did not accurately present the situation or that with the passage of time I may have forgotten some of the finer points, the question still remains.

The Ying and Yang of the Affordable Care Act (ACA) Part II

In the previous segment, I touched upon both the high cost and the various competing interests relating to lowering the cost of the provision of healthcare.

The number of people eligible for health coverage has increased, and to that extent, the ACA gets a check in the plus column.

If, however, the newly covered people use emergency rooms in situations for which there are significantly less expensive avenues of treatment available, e.g. urgent care centers or primary care physicians, the already staggering cost of healthcare will increase.

Frankly, there are conflicting reports as to how this will play out, and the truth is that it is very hard for anyone to predict the future.

That said, I am reminded of a letter I wrote to the Washington Times in 2008 [ – Scroll to the bottom of the page – letter with the heading Health Crisis] when healthcare costs were 16% of the GDP, as opposed to the current 17.4%. I think some of the issues raised then are still unanswered, as we must have a multidimensional approach in which a plan answers how coverage will be implemented,where the money is coming from, and how to effectively reduce the real aggregate cost of healthcare. I believe that we have not yet achieved the balance necessary, or the 360 degree view that healthcare reform demands.

It is readily apparent that there are various stakeholders (often with competing or divergent interests) involved in healthcare. These include:

1.  The government (which includes those charged with fiscal stability as well as those charged with a social/ethical mandate allowing for medical coverage.)
2.  Insurers.
3.  Healthcare providers (including hospitals, surgical centers, urgent care centers,primary care doctors, support staff and specialists).
4.  Medical equipment suppliers.
5.  Pharmaceutical companies.

In addition, we also have to deal with the voters, plus the apparent fundamental disagreements between the executive branch and Congress (along with their own internal disagreements).

It is no wonder that there is no simple answer or silver bullet.

As a predicate matter, and in an effort to remain both accurate and intellectually honest, the emergency room visits that need attention are those that could be dealt with in a less costly setting. The best barometer (giving it rough justice) would be to measure the emergency room visits for which a hospital admission was not necessary.

The big question is where will newly insured individuals seek treatment? I believe the most scientific study (albeit limited to Oregon, and possibly, Portland) was a Harvard study done over a number of years in which 25,000 Medicaid patients went to the emergency department at the Portland area hospitals, on average 1.43 times over 18 months, while those who were not insured only made an average of 1.02 trips to the emergency room in the same time frame. This leads to the conclusion that those on Medicaid avail themselves of the emergency room 40% more than the uninsured. While this may be an oversimplification of a very detailed study, from the media’s perspective, that was the takeaway.

Obviously, if the study is indicative of forward-going and national trends, President Obama’s belief that increased coverage of the populace would drive people away from emergency rooms (more expensive) to doctors (less expensive) should be revisited.

On the other hand,it will take time for people to realize that not only is it cheaper, but it is probably more convenient and advantageous to take minor medical issues to a doctor’s office or urgent care center rather than an emergency room.

In fact, recent reports from Los Angele’s for the first few months of the new healthcare system’s operation seem to indicate that the Oregon study may not be an accurate predictor. There are reports that emergency rooms visits that did not require hospital admissions grew by 3.9% in Los Angeles County for the first half of 2014, which was well within the average 3 to 5% increase for the prior three years.

An interesting fact is that while the county’s three large public hospitals that historically cared for uninsured patients saw a 9% drop, several private hospitals reported double-digit increases in outpatient visits. This would indicate that even if there was no net increase in emergency room visits attributable to the ACA, there may be a significant shift from public to private hospitals.

This possible shift raises another issue which arguably will put significant strain on the not-for-profit hospitals. The ACA initially placed certain requirements on the not-for-profit hospital sector, which comprise approximately half of the hospitals in the United States. Failure to finalize and implement these various measures means risking their not-for-profit status or making them subject to excise taxes. This can only increase their cost of operation.

While one might argue that the measures are fair, that does not mean that they do not come without financial cost.

The requirements of charitable hospitals include limiting charges to patients eligible for financial assistance to those that are generally billed to patients with insurance, affirmatively establishing and posting financial assistance policies,significant limitations on billing and collection, including an inability to garnish wages until reasonable efforts are made to determine if the individual is eligible for assistance, and performing community health needs assessments.I am not certain if this is limited to the not-for-profit’s community, but if it is, my question is why? In any case,my focus is not on the propriety of these measures, but merely to point out that they invariably will increase the cost of operation.The tax on medical devices is a total enigma to me. Other than raising revenue, how is this in anyway supposed to help affordable healthcare?

All of this discussion, however, maybe for naught if the Supreme Court decides that the ACA does not cover the approximately 5 million people who signed up on the Federal Healthcare portal with the expectation that they would get tax credits. Under normal circumstances, if the Supreme Court were to disallow the tax credits, the legislation would go back to Congress and it would be rewritten. As we all know, however, the Congress that the ACA will return to, is not the same Congress that passed the legislation in the first place, which means that there is a distinct possibility that the ACA may be dealt a significant blow from which it may not recover, which will send us back to the drawing board.

It is clear to me that there are many divergent interests, and it will take significant open communication and dialogue as well as a singular and uniform interest in affording at least a certain level of healthcare to everyone to achieve what the ACA set out to do.

The Ying and Yang of the Affordable Care Act (ACA) Part I

The ACA has changed the landscape of healthcare in the United States. The change, however, is ongoing, has many competing interests, and what the long-term future holds is really guesswork. The consequences will have a huge effect, not only on the provision of healthcare but, I believe, on the U.S. economy.

The cost of healthcare in the United States, which was $2.9 trillion dollars in 2013, remained the same 17.4% of the GDP that it has been since 2009.

Some actuaries predict that National Healthcare spending will increase and that by 2023 it will rise to 19.3% of the GDP.

While experts may have varying definitions of the GDP, I believe it means that we are headed toward a course where almost one-fifth of everything produced in this country will go to pay for healthcare. Even at today’s 17.4% rate, it is truly alarming when we realize that we don’t have a plan where everyone is insured, and we have not yet determined what “insured” really means (which is a discussion for another day).

There is no doubt that the ACA has increased the number of individuals who either have or are eligible for healthcare coverage.

Larry Levitt of the Kaiser Family Foundation has stated that “The fundamental impetus for the law was to the lower the number of uninsured, and it has clearly done that … but simply getting people insured doesn’t mean healthcare is affordable.”

The affordability issue is best underscored by an analysis conducted by McKinsey and Co. that, on a nationwide basis, the median deductible for individuals was $4,100 for bronze plans, and $2,500 for silver plans.

If one follows the reasonable assumption that the purchasers of bronze plans are people who either cannot afford a more expensive plan, or in some cases, choose to seek the cheapest plan, a $5,000 out-of-pocket expense could drive them away from seeking medical care.

A recent poll has indicated that as of November 2014, 46% viewed the law unfavorably and 37% were in favor, which is an increase in the “disfavor” column of Americans’ opinion from just four years ago.

For better or worse, it is likely that more people will be driven to seek health insurance coverage as 2015 is the first year in which tax returns require people to report if they had health insurance for the previous year. If you don’t qualify for one of the approximately 30 exemptions (once again, our government deserves an advanced degree in complexity), you face fines of either 1% of your household income above the threshold for filing taxes or $95, whichever is greater. The following year it will at least double, and by 2016 the average fine, (or as the Supreme Court recently classified, the average tax) will be approximately $1,100 based on current estimates.

As more people become eligible for Medicaid and more people are driven to obtain insurance, the looming question becomes, will doctors accept the increased or even the current level of Medicaid patients?

The reason why this question arises, is primarily because there were enhanced Medicaid reimbursements allowed in 2013 and 2014, which will (as it currently stands) not be available in 2015.

Primary care physicians, the people that I believe are at the epicenter of healthcare, will probably be the most affected by these cuts, or more accurately, the end of enhanced reimbursement. Call it what you want; as it currently stands, doctors will earn less on Medicaid patients in 2015 than they earned in 2014.

A significant study conducted by the nonpartisan Urban Institute indicates that Medicaid payments for primary care services could drop by 50% or more in California, Florida, New York, Pennsylvania, and many other states.

It is well within the realm of possibility that many doctors will not accept new Medicaid patients, possibly stop treating Medicaid patients, or in some cases, simply retire.

If that is not enough, on March 4, 2015, the United States Supreme Court is scheduled to hear King v. Burwell, which questions if the Obama administration is improperly providing tax credits to the almost 5,000,000 people who purchased health insurance through the Federal Exchange. Obviously, these tax credits were a major inducement to the enrollees, and a major consideration for the purchase of insurance through the Federal Exchange which currently serves 37 states.

I hope to continue with some additional factors playing into the mix in the next segment, and respectfully request my readers to post their comments as there are so many stakeholders who have intelligent and meaningful perspectives.

It will be interesting to see how the ACA plays out in 2015, particularly with the shift in Congress and the various competing interests facing off.