Maggie's Farm

Ed Morrissey and Professor William Jacobson inform us about the tragic death in an airline crash of the brave Polish president and a large number of Poland’s leadership, on their way to a joint commemoration with Russia of the 1940 slaughter of 22,000 Polish officers by the Soviet Union.

For those of you who don’t recall Katyn, I wrote about it last August.

Katyn: In 1962, one of my later mentors published the first definitive book proving that the Soviets committed the massacre of Poland’s military elite at Katyn.  This is a very important key to understanding the Captive Nations outcome of WWII and the Cold War.  I just rented the film, Katyn, directed by Poland’s most famous director.  Anne Applebaum, steeped in Soviet history, has an interesting review of the film, “A Movie That Matters.” An excerpt:

"Certainly its Polish viewers know how it will end, long before they enter the cinema. Katyn, as its title suggests, tells the story of the near-simultaneous Soviet and German invasions of Poland in September 1939, and the Red Army's subsequent capture, imprisonment, and murder of some 20,000 Polish officers in the forests near the Russian village of Katyn and elsewhere, among them Wajda's father. The justification for the murder was straightforward. These were Poland's best-educated and most patriotic soldiers. Many were reservists who as civilians worked as doctors, lawyers, university lecturers, and merchants. They were the intellectual elite who could obstruct the Soviet Union's plans to absorb and "Sovietize" Poland's eastern territories. On the advice of his secret police chief, Lavrenty Beria, Stalin ordered them executed.

"But the film is about more than the mass murder itself. For decades after it took place, the Katyn massacre was an absolutely forbidden topic in Poland, and therefore the source of a profound, enduring mistrust between the Poles and their Soviet conquerors. Officially, the Soviet Union blamed the murder on the Germans, who discovered one of the mass graves (there were at least three) following the Nazi invasion of Russia in 1941. Soviet prosecutors even repeated this blatant falsehood during the Nuremberg trials and it was echoed by, among others, the British government.

"Unofficially, the mass execution was widely assumed to have been committed by the Soviet Union. In Poland, the very word "Katyn" thus evokes not just the murder but the many Soviet falsehoods surrounding the history of World War II and the Soviet invasion of Poland in 1939. Katyn wasn't a single wartime event, but a series of lies and distortions, told over decades, designed to disguise the reality of the Soviet postwar occupation and Poland's loss of sovereignty."

Obama snubbing Poland for 70^th anniversary of WWII? Poland was the most screwed over country going into, during, and after WWII.  Those of its soldiers who escaped the Nazis and Soviets were among the bravest fighters with the Allies. Poland and Poles deserve more respect.

Wonder what hollow words President Obama will utter now?

Today’s loss is devastating to Poland, to the United States, and to the world. President Kaczynski was a distinguished statesman who played a key role in the Solidarity movement, and he was widely admired in the United States as a leader dedicated to advancing freedom and human dignity. With him were many of Poland’s most distinguished civilian and military leaders who have helped to shape Poland’s inspiring democratic transformation. We join all the people of Poland in mourning their passing.

As usual from Obama, contradicted by his undercutting of Poland volunteering to host anti-missile defense and his disdain for Polish President Lech Kaczynski when alive. Israel surely gets the point.

The New York Times asks: "For Poland, the losses raise the question of how a country of 38 million can replace a whole political class."  It had to before and will again, because Poles and their leaders have clearsighted historical memory and courage.

ObamaCare’s regulation of medical loss ratios is crafted to come within a hair-width of the CBO considering  the health insurance industry as formally nationalized.  Actually, it is nationalized, at huge costs, hidden by the false cuts to providers, to the states' bearing mandated budget costs, and by those covered paying significantly higher premiums, all while the government dictates who and what is covered, how, and by whom.

One of the ways in which the insurance industry is nationalized is via an imposed medical loss ratio, at the expense of choice and quality of care.

In December, the Congressional Budget Office, tasked with costing the federal budget impact of  ObamaCare, said that imposing a medical loss ratio of 90% on insurance companies would,

Taken together with the significant increase in the federal government’s role in the insurance market under the PPACA, such a substantial loss in flexibility would lead CBO to conclude that the affected segments of the health insurance market should be considered part of the federal budget….CBO has determined that setting minimum MLRs under the PPACA at 80 percent or lower for the individual and small-group markets or at 85 percent or lower for the large-group market would not cause CBO to consider transactions in those markets as part of the federal budget.

The medical loss ratio is the percentage of premiums paid out for medical care benefits.

The 90% was the suggestion of Senator Rockefeller (D-WV).  So, the final version of ObamaCare imposed a 5% lower medical loss ratio on each plan offered by insurers, and the Democrats slimly avoided including the nationalization of the health insurance industry in the CBO costing of ObamaCare.

The federal budget cost of nationalization is not revealed by the CBO, which said it has estimates, but the costs to choice and benefits is more apparent. ObamaCare supporters simplistically assert that the portion of premiums not spent directly on benefits, administrative costs, is either wasteful or undue profits.  The profit margin of the health insurance industry, about 3%, is well below that of other industries.  Let’s, then, look at whether they are wasteful.

The CBO looked at medical loss ratios in its Key Issues in Analyzing Major Health Insurance Proposals in December 2008.

But a loss ratio is not always indicative of a plan’s efficiency or value. For example, a health plan that devotes more resources to managing the use of health care services might have a rel­atively low loss ratio but also a lower overall premium. In contrast, a more lightly managed plan might have a high loss ratio but a correspondingly higher overall premium and might be covering more services that provide limited health benefits.

According to that CBO report, the portion of administrative costs devoted to benefit enhancement and more effective delivery of services is about a third, for customer service, care management, creating and monitoring performance of provider networks, claims processing, regulatory compliance, and information technology.  In addition, one should add a portion of management overhead.

The American Academy of Actuaries analyzed the issue of medical loss ratios in February, concluding:

Minimum loss ratios do not help contain health care spending growth, en­sure that health care services are appropriate and accurately billed, or address directly the quality and efficiency of health care services.

ObamaCare supporters are accusing insurers of gaming ObamaCare by their reclassifying some of these costs to increase their medical loss ratio. In fact, insurers are more properly classifying expenses of better delivering and managing medical benefits.  The CBO report says that increased economies of scale, as may be seen in ObamaCare’s exchanges, may reduce administrative costs by up to 3%.  On the other hand, the increased regulatory compliance may eat up some or much of that.  Other elements of administrative costs that improve care may be reduced by insurers required to post an artificial statistic imposed by ObamaCare.

Another portion of administrative costs is probable to impact choice, lowered commissions to and increased duties by insurance agents.  The CBO reports (page 65):

In particular, plans that are sold to individuals and small groups are more likely to incur fees for insur­ance agents and brokers to handle the responsibilities that larger firms generally delegate to their human resources departments—such as finding plans and negotiating pre­miums, providing information about the selected plans, and processing enrollees.

Large groups also depend upon extensively trained, knowledgeable agents and brokers.  As someone with extensive earned credentials and experience as an independent broker, I wrote about the value of such agents and brokers, including beyond that directly related to the medical plan.

This delivers wide-ranging values to my clients and of the interactions of their health insurance with their broader business, regulatory and financial affairs.Does anyone expect the staff hired or created by the [government] to have this independence, experience or training? If so, get real!

Some assert that the increased number of formerly uninsured will offset lower commissions.  But most of those now to be covered will be in state Medicaid programs or other government programs.  And, lowered commissions, already low, and higher operating costs will not be offset by higher volume for most of the several hundred thousand independent agents and brokers. I’m near retirement, but many thousands of others will be forced out of their livelihood.

As the CBO said in December 2009, it’s a very slim margin in it considering health insurance nationalized.  At minimum, experts now consider the health insurance industry transformed into a public, government-run utility.  In reality, together with all the other intrusions and controls in ObamaCare, the health insurance industry is nationalized.  Some may be net beneficiaries due to, most prominently, taxpayer subsidies, those responsible having to pay for others who wait to obtain coverage until they are ill or injured, or increased government bureaucracy jobs. 

Everyone else suffers at the hands of ObamaCare.

In the rush to enact ObamaCare, the uproar from Democrats should not be surprising over the few announcements so far by major corporations of billions of dollars of charges for the elimination of part of the Medicare Part D prescription drug coverage subsidy to employers.

Indeed, the Senate Republicans had not featured this explosion in employer costs before the corporations began announcing the charges, nor had the corporations (except Caterpillar).

The Democrats’ motivation to be quiet is evident.  The Republicans had a hard enough time exposing the many real direct federal budget impacts. Major corporations are not, despite liberal assertions, conservative nor brave, probably avoiding the pillorying of them that is now happening from Democrats, heads in the sand when it may have helped avoid the ill consequences to them and their retirees by ObamaCare.

Now, corporations, already under severe pressure from retiree medical plan costs, have to face the music and have further justification and impetus to reduce or abandon their retiree Rx programs. They are imploring Congress to repeal this portion of ObamaCare, but receiving back Obama administration opposition to repeal.

Prescription benefits to employer plan retirees is broader than from Part D. The Part D subsidy to corporations is to encourage corporations to continue their benefits, at a savings to the federal budget and to retirees.

The subsidy will continue.  However, after 2012 corporations will no longer be able to deduct against income that portion of their Rx plans that are subsidized. The Congressional Joint Committee On Taxation’s (JCT) March 20 calculation (page 2) estimates that $4.5 billion higher federal taxes will be paid by corporations between 2013-2019, rising from $400 million to $1 billion a year over that period.

Let’s look deeper into the numbers.

According to the 2009 Medicare Trustees Report, about 19% of those covered by Part D are in the plans of former private employers (excludes TRICARE, VA and FEHB for military and former federal employees), or 6.3 million out of 33.2 million beneficiaries. (page 160)  The employer subsidy amounts to an average $594.54 per enrollee. (page 163)  The subsidy is about 28% of employer retiree plan drug expenses.  So, the total 2009 employer retiree Rx cost in 2009 is about $2123.36 per covered retiree, or $13.4 billion.

Congressionally mandated accounting rules require employers to take current charges for the future actuarial costs of their retirement programs. Depending on the employer’s present and forecast tax bracket, each employer offering a retiree Rx program must add up to 35% or more to their tax liability for the program for the future years.  Hence the charge that employers must now take and fund is cumulatively many multiples of the $4.5 billion initial eight year increased taxes that proponents of passing ObamaCare depended  upon.  The exact amount will not emerge until all companies finish their calculations, but the $1 billion charge to AT&T alone gives us some idea of the cumulative effect.

Now, let’s look at the impact on the federal budget if all the corporations now offering retiree Rx coverage abandon their program. They should be expected to be looking at that, even more favorably now than before ObamaCare.

According to the 2009 Medicare Trustees Report, total benefit payments, including the employer subsidy, was $50 billion in 2008 (expected to increase to $140 billion in 2018).  Subtracting the entire $3.7 billion subsidy, that leaves $46.3 billion. Divide that by the 26.9 million Part D beneficiaries not covered by a subsidized employer retiree Rx plan, and you get $1721.19 budget cost per enrollee.  Let’s subtract 10% from that as a guesstimate that retirees from employers may be healthier than the other average Part D beneficiaries, and that Medicare Part D benefits are lower (though increased by ObamaCare in future years to nearer parity), and you get $1549.07.  That is $954.53 higher than the subsidy, or would have meant $6 billion increased federal budget expense in 2008, an increase of 12% if private employers had abandoned their retiree Rx programs in 2008.

Multiply that $6 billion and increase it for an average annual 7% increase in prescription costs, 7% being the Medicare estimate, and you have literally hundreds of billions of dollars of increased federal expenses, further deepening the already intolerable projected budget deficits.

The CBO estimate of ObamaCare depended upon the JCT estimate for the initial costs of ObamaCare, and did not take into account employers consequently being motivated to cease their retiree Rx programs.

Corporate, Medicare and other actuaries will be working and reworking the actual figures as this debacle unfolds.  Actual impacts may well be less than the above worst case, but the dimensions are clear.

As we can see with regards to Part D as well as most other portions of ObamaCare, to believe in the incomplete CBO forecasts or the Democrats’ thinly veiled promises deserves a big Part D for Dummy.

P.S.: Democrats charge a "CEO Conspiracy". Actually, it's the Democrats' conspiracy to keep you poor and stupid.  Doesn't seem to be working.

P.P.S.: The New York Times editorializes that the eliminated Part D tax break is "double dipping."  The NYTs conveniently, totally ignores that it saves the federal budget many tens of billions of dollars, while helping to continue better retiree Rx benefits.  The NYTs asserts that, after all, " If some retirees do lose their company drug benefits, they can buy government-subsidized coverage in Medicare..." and the added cost to taxpayers is irrelevant to the NYTs.