Recently, Warren Buffet has been bragging about how he uses his lawyers and accountants to manipulates the current tax code to pay no taxes, or just 1% in taxes, or however little he wants in taxes. He uses his situation to call for more and higher taxes on "the rich" - which would include himself. Why would he do such a thing? Obviously, he will continue to manipulate the system and only pay as much - or as little - as he likes, no matter what the tax rates are for "the rich". After all, it is common knowledge that many "rich" people and corporations are able to manipulate the tax code, find loopholes, shelters, and other means to avoid paying taxes on some or all of their income.
I'm not "rich" (unless you compare me to the truly poor in a third world nation - I have a computer, rent part of a house, own a car that usually runs, and can afford enough calories that I am overweight), but even so, I can put the same information into the online tax preparation systems of three different IRS approved tax preparers and get numbers that are vastly different (one would have had me pay twice as much in taxes as one of the others), based on how well the software matched my personal situation, exemptions, and deductions. It shouldn't be that complex. In fact, the tax for should be able to get the job done in ten questions or less.
What is needed instead is to replace our current tax code with a system that works, and is straightforward enough that anyone can do their own taxes. Herman Cain's "9-9-9" plan is interesting, and is certainly a good conversation starter on flat taxes. Of course, whether the flat tax itself will work depends largely on what exemptions, deductions, deferments, shelters, and loopholes remain in the tax code. The best policy would seem to be to eliminate everything but a personal exemption/deduction of a standard amount for the taxpayer and each dependent, and to allow certain types of savings accounts (retirement, education, and medical) to have taxes deferred until the money is taken out. No other deductions or exemptions are really needed.
A fair/flat tax system with a standard personal deduction and very few other exemptions or loopholes, coupled with a national sales tax (or VAT) would be a more effective means of increasing tax revenue, without having to raise tax rates. It would also simplify personal income taxes and allow most of the IRS to be downsized. Imagine the savings on just printing and distribution if the personal income tax paperwork was a single page form, with only one page of instructions.
Once they had the taxpayer’s personal identification information, the form would only need ten questions about income and taxes.
Of course, whenever the subject of a "flat tax" comes up, the "experts" all line up to tell us that it can't work, is unfair, and that it will put the "experts" out of work. Oh, wait, they don't mention that last part. IRS managers, tax accountants, and tax lawyers all have a vested interest in maintaining and continuing the labyrinthine, convoluted, and easily manipulated tax system that we currently endure. If the tax code were re-written to include a flat tax and a single page tax form, the IRS could be downsized considerably, and most tax lawyers and tax accountants would be forced to find new jobs - because nobody would need them for help with their personal taxes. So let's keep in mind that when a "tax expert" speaks up against a "flat tax" proposal, they have a serious conflict of interest that will keep them from being completely honest about the subject.
Here is my example of a 10 question, 1 page tax form that would improve on our current system.
For the purposes of this example, I am using a flat tax rate (including all federal taxes - income tax, Social Security, and Medicaid taxes) of 20%. And an income exemption of $10,000 per individual. The tax rate and income exemption would be set by Congress, and could even be 9%, if the numbers work that way. The personal exemption could be set at a different rate, and could even have two tiers - one for adults, and the other for dependent minors (for example, $10k per adult and $5k per dependent minor).
Taxpayer's name and Social Security Number:________________________________
Income:
1. How much money did you make in wages, tips, retirement payments, pension payments, interest income, sale of property (including real estate, stocks, bonds, or other property), or investment income during this calendar year (Failure to report all income from all sources may lead to severe penalties)? Any income generated while in the United States (and territories) or while you were a resident/citizen of the United States (and territories) will be included. Do not count money placed into tax deferred retirement, education, or medical savings plans - that money will be taxed as income in the year it is withdrawn.
Deductions:
2. How many dependents do you have (remember to count yourself)? If your spouse had no income, they may be counted as your dependent, if they had income, they must file their own tax form. Warning: both you and your spouse can not claim the same dependent/s - if you share custody you may count each as .5 of a dependent. You must provide the names and Social Security Numbers of all dependents on the reverse of this form.
3. Multiply your number of dependents (line 2) by $10,000. $10,000 is the individual income deduction, and is the only exemption/deduction allowed on your personal taxes.
Determine your taxable income:
4. Subtract line 3 from line 1. This is your taxable income. If line 3 is greater than line 1, you have no taxable income. If you have no taxable income, had no estimated taxes withheld from your pay, and paid no estimated taxes, you are finished.
Determine your fair tax:
5. Once you have determined your taxable income, multiply that amount by .20, this will give you your amount of tax owed (20% of taxable income).
Determine how much was already withheld for taxes:
6. Did you volunteer to have estimated taxes withheld, or make estimated tax payments? If "yes", continue to line 7. If "no", pay the amount on line 5. You are finished.
7. How much did you pay in estimated taxes or withholding? If you had taxable income, continue to line 8. If you had no taxable income, you need to be refunded the full amount withheld. You are finished.
8. If line 7 is less than line 5, subtract it. The difference is the amount you owe. Please pay that amount. You are finished.
9. If line 5 is less than line 7, subtract it. The difference is the amount you need to be refunded.
10. Would you like your refund to be credited against future tax bills?
Thank you for paying your taxes this year.
End of form.
How can a flat tax be progressive? If the flat percentage rate tax is applied AFTER the standard personal deduction is taken out of the income, then the percentage of actual income paid as tax increases as the income increases.
As an example, a single worker makes $35k a year, and his supervisor (also single) makes $60k a year. Given a $10k standard deduction, the worker is paying taxes on $25k, so pays $5k if the flat rate is 20%. Meanwhile, the supervisor pays taxes on $50k a year, so pays $10k at the same 20% rate. In this example, the supervisor pays twice as much in taxes as the worker, but is not making twice as much money. The supervisor is paying 1/6th of her income in taxes, while the worker pays only 1/7th of his. While this is not as draconian as the progression that some favor, it is still progressive. Combined with a removal of the many loopholes and exemptions that the wealthy are more often able to use, this would make taxes much more fair/consistent.
Why a combination of a “flat” tax and a national sales tax/VAT? Because sales taxes are a way to get tax revenue from people who aren’t paying taxes in other ways – either because they are working “under the counter” or are otherwise not reporting income.
So the flat tax is "fair" because everyone pays the same rate on their taxable income. It is also "fair" because wealthier people pay a higher percentage of their total income in taxes. In combination with a national sales tax or VAT it is "fair" because it gets people who hide their incomes to pay at least some taxes. It is also "fair" because it would eliminate the loopholes and special rules that often allow certain individuals and businesses to avoid paying any taxes.
Please note that I am not suggesting that this flat tax replace current business taxes - which leaves a market for at least some of those tax experts to stay in business.
Saturday, October 15, 2011
"Fast and Furious" an assault on liberty and common sense
A comparison of "Gun Walking" programs during the Bush and Obama administrations.
The program under Bush was small, and relied on the Mexican authorities to cooperate, since the arrests of the "big fish" would have to take place in Mexico. The program was designed to track guns purchased in America to criminal gangs in Mexico, and lead to arrests of gang leaders. The program didn't work, because the (often corrupt) Mexican authorities failed to do their part.
Under Obama, the failed program was repeated, but expanded to include many more guns, and the Mexican authorities were not involved - so there was no way that the "big fish" could ever have been found and arrested. The Obama/Holder plan had no possible benefit, since there was no plan to actually arrest anyone, with or without the help of the Mexican authorities. Since the program had no possibility of leading to arrests of criminals (unless we were planning to invade Mexico in pursuit of criminals, as we did when pursuing Pancho Villa), it is logical to look for other reasons that it was conducted, and only one possibility remains. Based on the facts of the program and the statements made by Obama, Holder, and the ATF, the "Fast and Furious" program was designed solely as a propaganda campaign against American gun owners, and had no legitimate law enforcement aspirations. Once again, the ATF "leadership" allowed their agency to be used to advance a partisan political agenda and endanger American citizens, rather than to enforce laws and protect the public. The administration and ATF clearly lied to cover up their part in this criminal conspiracy against the civil rights of Americans, that resulted in the deaths of American and Mexican citizens, to include at least one American peace officer.
This means that the program under the Bush administration was a failure, due to problems coordinating with Mexican law enforcement. Why would anyone want to repeat and expand a failed program? Why would you repeat and expand that failed program, and leave out the Mexicans entirely - thus making it impossible to have any arrests at all?
The program under Bush was small, and relied on the Mexican authorities to cooperate, since the arrests of the "big fish" would have to take place in Mexico. The program was designed to track guns purchased in America to criminal gangs in Mexico, and lead to arrests of gang leaders. The program didn't work, because the (often corrupt) Mexican authorities failed to do their part.
Under Obama, the failed program was repeated, but expanded to include many more guns, and the Mexican authorities were not involved - so there was no way that the "big fish" could ever have been found and arrested. The Obama/Holder plan had no possible benefit, since there was no plan to actually arrest anyone, with or without the help of the Mexican authorities. Since the program had no possibility of leading to arrests of criminals (unless we were planning to invade Mexico in pursuit of criminals, as we did when pursuing Pancho Villa), it is logical to look for other reasons that it was conducted, and only one possibility remains. Based on the facts of the program and the statements made by Obama, Holder, and the ATF, the "Fast and Furious" program was designed solely as a propaganda campaign against American gun owners, and had no legitimate law enforcement aspirations. Once again, the ATF "leadership" allowed their agency to be used to advance a partisan political agenda and endanger American citizens, rather than to enforce laws and protect the public. The administration and ATF clearly lied to cover up their part in this criminal conspiracy against the civil rights of Americans, that resulted in the deaths of American and Mexican citizens, to include at least one American peace officer.
This means that the program under the Bush administration was a failure, due to problems coordinating with Mexican law enforcement. Why would anyone want to repeat and expand a failed program? Why would you repeat and expand that failed program, and leave out the Mexicans entirely - thus making it impossible to have any arrests at all?
Monday, May 24, 2010
Thoughts on "Merit Pay" for teachers
The idea of giving bonuses to the best teachers, and the teachers who work the hardest is a good one. The problem arises when you seek to determine what constitutes the "best" or "hardest working" teacher. The solution that appeals to many is simply to use student test scores as an indicator of teacher proficiency. Unfortunately, using one set of test scores doesn't give an accurate picture of what's going on in the classroom.
We all know that some teachers get to teach AP and Honors classes, other teachers get a lot of English Language Learners, some get a lot of 504 and IEP students (students with exceptional behavioral problems, disabilities, or who have special educational needs), and a few actually do get an "average cross section of the student body". This means that great care must be taken to accurately rate teacher performance, as you will often have "apples to oranges" comparisons.
Which of these teachers will have students with great test scores? Obviously, the AP and Honors students will test higher.
These also tend to be the better behaved and easier to teach students - which means that teaching them is often easier than working with struggling, or academically/behaviorally challenged students. So the teachers who get the most challenging students (who also tend to be teachers who are lower on the seniority scale, so already earn a lower base salary) would be the ones least likely to be able to earn the "merit" bonuses.
If I am a 9th grade English teacher, and have a student come to my class in the fall reading at a 3rd grade level, and leave in the spring reading at a 7th grade level, am I a great teacher for helping them make up four lost years in one year, or a crummy teacher because my student won't be at grade level next fall (when they "age" into the 10th grade)?
Unless we create a program that tracks each child individually, and use the individual improvements of students in the class (weighted for how many days the student was actually in attendance), there is no accurate way to measure how much your students have improved, or how “meritorious” a teacher you are.
The "Combat Pay" concept is much better than the "Merit Pay" concept.
This idea was for the state/federal government to step in and offer bonuses and incentives to teachers that worked at high needs schools. This would attract more (and theoretically better) candidates to those districts and schools that are underperforming.
In my local area, the lowest paying schools tend to be the “urban”, Title 1 schools that have the lowest achievement scores, as well as large numbers of (hard-working and caring) beginning teachers who aren't being given the chance to gain experience in successful school environments. It is common for teachers (those that don't leave the field in the first few years) to move to the more upper-middle class districts in the area after spending a few years clearing their credential.
I am distressed to hear that one of President Obama's plans for "improving" education is to create a program that puts brand new administrators into underperforming Title 1 schools. This is like having the new law school graduate work on the murder trial, while the firm's partners do simple boilerplate contracts, or having an intern fresh from med school do the open heart surgery, while the senior surgeon son the hospital staff deal with minor scrapes from a bicycle accident.
We all know that some teachers get to teach AP and Honors classes, other teachers get a lot of English Language Learners, some get a lot of 504 and IEP students (students with exceptional behavioral problems, disabilities, or who have special educational needs), and a few actually do get an "average cross section of the student body". This means that great care must be taken to accurately rate teacher performance, as you will often have "apples to oranges" comparisons.
Which of these teachers will have students with great test scores? Obviously, the AP and Honors students will test higher.
These also tend to be the better behaved and easier to teach students - which means that teaching them is often easier than working with struggling, or academically/behaviorally challenged students. So the teachers who get the most challenging students (who also tend to be teachers who are lower on the seniority scale, so already earn a lower base salary) would be the ones least likely to be able to earn the "merit" bonuses.
If I am a 9th grade English teacher, and have a student come to my class in the fall reading at a 3rd grade level, and leave in the spring reading at a 7th grade level, am I a great teacher for helping them make up four lost years in one year, or a crummy teacher because my student won't be at grade level next fall (when they "age" into the 10th grade)?
Unless we create a program that tracks each child individually, and use the individual improvements of students in the class (weighted for how many days the student was actually in attendance), there is no accurate way to measure how much your students have improved, or how “meritorious” a teacher you are.
The "Combat Pay" concept is much better than the "Merit Pay" concept.
This idea was for the state/federal government to step in and offer bonuses and incentives to teachers that worked at high needs schools. This would attract more (and theoretically better) candidates to those districts and schools that are underperforming.
In my local area, the lowest paying schools tend to be the “urban”, Title 1 schools that have the lowest achievement scores, as well as large numbers of (hard-working and caring) beginning teachers who aren't being given the chance to gain experience in successful school environments. It is common for teachers (those that don't leave the field in the first few years) to move to the more upper-middle class districts in the area after spending a few years clearing their credential.
I am distressed to hear that one of President Obama's plans for "improving" education is to create a program that puts brand new administrators into underperforming Title 1 schools. This is like having the new law school graduate work on the murder trial, while the firm's partners do simple boilerplate contracts, or having an intern fresh from med school do the open heart surgery, while the senior surgeon son the hospital staff deal with minor scrapes from a bicycle accident.
Monday, March 29, 2010
Different medical problems may require different solutions
One problem with the "health" care "debate" is that there are many different varieties of medical care. These include catastrophic injury/illness where there is a large, short term expense, followed by a return to fairly normal life, long term disabling conditions that require various levels of cost over various levels of time, regular and predictable costs (periodic check ups , eyeglasses, teeth cleanings, etc.), and minor injuries and illnesses (flu, sprained ankle, broken arm, strep throat, etc.). Throwing everything together into one category (except dental and optometry - which are somehow not "health related" in some people's minds) just doesn't work.
Short term catastrophic care is probably best handled by a risk pool, since anybody could get hit by an uninsured motorist (or hit and run driver), have a building collapse on them in an earthquake, or be struck by certain sudden onset severe illnesses. This is where government sponsored, provided, or mandated coverage makes the most sense. Even then, there are some cases where the problem is entirely created by the patient, who is behaving in an antisocial/illegal manner that makes the medical problem likely, and the community as a whole shouldn't be expected to pay for their treatment. For example: A drunk driver with previous DUI convictions who is injured while driving drunk, shouldn't have their medical bills covered by anybody but themselves.
Our current emergency room system partially does this, providing emergency care regardless of the patient's ability to pay. Unfortunately, ERs are often used as clinics by people who have non-emergency conditions, yet who wish to get free care.
Perhaps we need more "public" clinics where people can be seen for non-emergency conditions, with a low payment. One summer when I was a poor student in Kentucky, I had occasion to visit the County Health Clinic to have a suspected brown recluse spider bite looked at. The problem turned out to be an infected cyst, rather than a bite, and I was charged $25 for the treatment, since it was simple enough to be performed at the clinic, and my income was in a certain range (the university's health services plan couldn't take care of me because it was summer break, so I had a "gap" in coverage). This was the same clinic where I received a $10 TB test to medically qualify to work with young children.
Long term conditions present a different problem. In these cases, it becomes a matter for cost/benefit analysis - unless the supply of money for medical care is unlimited, tough choices have to be made. There are various levels of treatment, that have different costs and benefits to the patient. Some conditions may be treated surgically, others with medication, and still others with various treatments (such as radiation or physical therapy). In some cases, superhuman measures might be taken to keep the patient alive, while in others, the decision might be made to control the worst of the pain, while allowing the patient to die a natural death.
It is my belief that the best person to make these choices, in terms of benefit, is the patient, or the patient's next of kin. The best person to make these choices, in terms of costs, is the person paying the costs. If people/families are not paying their own costs (or for their own elective coverage) in these situations, then some bureaucratic board, committee, or panel will decide who gets money for care, and who gets to die. If we do not keep the costs for such care in the control of the patient, then the decisions must be made by others (i.e. "death panels").
With medical savings accounts and medical tax credits (see below), a person with a long term, but manageable condition, could pay for their own treatment (or that of a family member or friend) for an extended period of time.
A person who has smoked two packs of cigarettes a day for the past 20 years (blowing their second hand smoke into the faces of others the whole time, and ruining the smell of their environment and clothing) shouldn't expect anyone else to pay for their lung cancer treatments (except maybe the cigarette company who made the cigarettes so addictive). Again, since they are participants in a behavior that is known to significantly increase the risks of harm, the public shouldn't be expected to pay, and non-smokers should actually be getting reimbursed by the smoker for the extra costs (fire, medical, and cleaning) that are created by smokers.
Similarly, a person who uses illegal drugs should have to pay (or repay) for treatment they receive for any medical problem resulting from their illegal drug use. The same would apply for criminals who are injured or who become ill as a result of committing crimes. Felons should receive a level of care in prison infirmaries that is no greater than the level of care a homeless citizen of the same state would receive. If the felon desires better care than that minimum level, they (or their family/supporters) should pay for the additional level of care. It is absolutely immoral that convicted felons in prison often receive better medical care - at public expense - than do working Americans. Felons who are on "Death Row" should receive only minimal and palliative care, since dying from illness would save the taxpayers the cost of executing them.
Medical savings plans would be a great way to assist people to save enough to cover known, recurring, and predictable expenses. Just as we have tax exempt and tax deferred plans to help people save for retirement, or for college, we could have similar plans to help people to save to pay for routine or predictable medical expenses. These plans would have to be long term, and transferable - meaning that the money would not be "lost" if it were not used by the person placing it into the account. They should be able to use it to cover their own medical expenses, or medical expenses for a family member. They should also be able to transfer money from their medical savings account to another person's account - a friend for example, and should be able to leave their account to others after they die.
Medical savings accounts should be tax free, and employers should be able to make matching contributions - as they currently are able to do with 401k type plans.
The other thing that would make medical care more affordable would be to have tax credits/exemptions for medical care (treatment and medication). This would make it more affordable for people to seek routine care, and could ease the financial burden of high cost medical conditions.
Short term catastrophic care is probably best handled by a risk pool, since anybody could get hit by an uninsured motorist (or hit and run driver), have a building collapse on them in an earthquake, or be struck by certain sudden onset severe illnesses. This is where government sponsored, provided, or mandated coverage makes the most sense. Even then, there are some cases where the problem is entirely created by the patient, who is behaving in an antisocial/illegal manner that makes the medical problem likely, and the community as a whole shouldn't be expected to pay for their treatment. For example: A drunk driver with previous DUI convictions who is injured while driving drunk, shouldn't have their medical bills covered by anybody but themselves.
Our current emergency room system partially does this, providing emergency care regardless of the patient's ability to pay. Unfortunately, ERs are often used as clinics by people who have non-emergency conditions, yet who wish to get free care.
Perhaps we need more "public" clinics where people can be seen for non-emergency conditions, with a low payment. One summer when I was a poor student in Kentucky, I had occasion to visit the County Health Clinic to have a suspected brown recluse spider bite looked at. The problem turned out to be an infected cyst, rather than a bite, and I was charged $25 for the treatment, since it was simple enough to be performed at the clinic, and my income was in a certain range (the university's health services plan couldn't take care of me because it was summer break, so I had a "gap" in coverage). This was the same clinic where I received a $10 TB test to medically qualify to work with young children.
Long term conditions present a different problem. In these cases, it becomes a matter for cost/benefit analysis - unless the supply of money for medical care is unlimited, tough choices have to be made. There are various levels of treatment, that have different costs and benefits to the patient. Some conditions may be treated surgically, others with medication, and still others with various treatments (such as radiation or physical therapy). In some cases, superhuman measures might be taken to keep the patient alive, while in others, the decision might be made to control the worst of the pain, while allowing the patient to die a natural death.
It is my belief that the best person to make these choices, in terms of benefit, is the patient, or the patient's next of kin. The best person to make these choices, in terms of costs, is the person paying the costs. If people/families are not paying their own costs (or for their own elective coverage) in these situations, then some bureaucratic board, committee, or panel will decide who gets money for care, and who gets to die. If we do not keep the costs for such care in the control of the patient, then the decisions must be made by others (i.e. "death panels").
With medical savings accounts and medical tax credits (see below), a person with a long term, but manageable condition, could pay for their own treatment (or that of a family member or friend) for an extended period of time.
A person who has smoked two packs of cigarettes a day for the past 20 years (blowing their second hand smoke into the faces of others the whole time, and ruining the smell of their environment and clothing) shouldn't expect anyone else to pay for their lung cancer treatments (except maybe the cigarette company who made the cigarettes so addictive). Again, since they are participants in a behavior that is known to significantly increase the risks of harm, the public shouldn't be expected to pay, and non-smokers should actually be getting reimbursed by the smoker for the extra costs (fire, medical, and cleaning) that are created by smokers.
Similarly, a person who uses illegal drugs should have to pay (or repay) for treatment they receive for any medical problem resulting from their illegal drug use. The same would apply for criminals who are injured or who become ill as a result of committing crimes. Felons should receive a level of care in prison infirmaries that is no greater than the level of care a homeless citizen of the same state would receive. If the felon desires better care than that minimum level, they (or their family/supporters) should pay for the additional level of care. It is absolutely immoral that convicted felons in prison often receive better medical care - at public expense - than do working Americans. Felons who are on "Death Row" should receive only minimal and palliative care, since dying from illness would save the taxpayers the cost of executing them.
Medical savings plans would be a great way to assist people to save enough to cover known, recurring, and predictable expenses. Just as we have tax exempt and tax deferred plans to help people save for retirement, or for college, we could have similar plans to help people to save to pay for routine or predictable medical expenses. These plans would have to be long term, and transferable - meaning that the money would not be "lost" if it were not used by the person placing it into the account. They should be able to use it to cover their own medical expenses, or medical expenses for a family member. They should also be able to transfer money from their medical savings account to another person's account - a friend for example, and should be able to leave their account to others after they die.
Medical savings accounts should be tax free, and employers should be able to make matching contributions - as they currently are able to do with 401k type plans.
The other thing that would make medical care more affordable would be to have tax credits/exemptions for medical care (treatment and medication). This would make it more affordable for people to seek routine care, and could ease the financial burden of high cost medical conditions.
Thursday, March 25, 2010
Forget the uninsured, let's help the homeless!
As an exercise, let’s apply the Health Care Reform logic to home ownership. I think that we can all agree that having a place to live is as basic a “human right” as having health care.
According to HUD:
There are 3.5 million homeless people in America.
Over 32% of Americans don’t own the homes where they do live.
That’s over 96 million Americans who don’t own the homes they live in, and who could be tossed out on the street at any time. Added to the 3.5 million homeless Americans, that’s about 100 million people who need homes.
That’s 100 million Americans whose rights are being violated.
Obviously what is needed is a huge federal program to make sure that every American family unit or single adult owns their own home. This means that people with lower incomes will have homes given to them – at taxpayer expense
People who invested in real estate and already own more than one home should be forced to sell the additional homes – at rates set by the government, of course – or have them taken away and given to the needy, because there are a finite number of homes available, and nobody really needs to have more than one home. These people can’t really even complain because they will still have a home, and may even get to choose which one they retain – hey, it’s not our fault that they chose to invest in real estate, instead of investing in something else.
People who own “Mansions” will need to be assessed with a special tax, because their “Cadillac” lifestyles are more than they “need”, and unfair to others who live in smaller or more poorly located homes.
Since many young adults traditionally don’t buy homes, parents (or their employers, or the taxpayers) would be obliged to provide housing for children until the age of 26.
Anyone who doesn’t own a home will be subject to fines.
Members of the House and Senate, the President, and the Vice-President would be exempt, of course, and home taxes in Nebraska would be guaranteed to never go up.
We could even claim that the bill would be financed through savings from current HUD programs (such as housing subsidies), the elimination of the costly Fanny May and Freddie Mac programs, and by confiscating all student loan repayments in perpetuity. We could also claim that this would be a 50% increase in the property tax base – since it would be a 50% increase in the number of people paying property taxes. We would justify this by pointing out that only two thirds of Americans currently own their homes and pay property taxes on them (never mind that landlords pay property taxes, this is the kind of annoying “assertion” that will only be brought up by Fox news and other “nutcase” and “fringe” opponents of progress), so getting all Americans into their own homes would increase the property tax base by 50%.
********
Personally, I'm a guy who invested many years of my life into a military career. I never made more than $30k a year until I retired from the military, and my retirement check is less than $700 a month, but I actually chose to return to active duty in my early 30s because I weighed my options and decided that the medical benefits package made up for the fact that the salary wasn't going to be enough to buy a home or invest heavily.
I "invested" in lifelong medical care through my employer. Yes, through my employer - which just happens to be the government.
Now I see people who made other choices wanting to get the same medical benefits that I get, but to do it at taxpayer expense, without giving up 17 years of their life (and acquiring a 40% disability) in the service of our nation. They tell me that I am not losing anything, since I will keep my health care (although I may end up being taxed on my benefits, depending on how mush they decide my employer contribution is). I tell them that it is the same as if a housing program allowed them to continue to stay in their home, and continue to pay their mortgage, while the government gave me the house across the street for free - they aren't losing anything, except when they look at what they pay for something that someone else is getting free.
If it's going to be government subsidized healthcare for all, then I think I am owed a different compensation package for my military career - say about five times the salary/retirement. I'm not holding my breath though, because Congress and the President don't care about fairness or equity for vets.
According to HUD:
There are 3.5 million homeless people in America.
Over 32% of Americans don’t own the homes where they do live.
That’s over 96 million Americans who don’t own the homes they live in, and who could be tossed out on the street at any time. Added to the 3.5 million homeless Americans, that’s about 100 million people who need homes.
That’s 100 million Americans whose rights are being violated.
Obviously what is needed is a huge federal program to make sure that every American family unit or single adult owns their own home. This means that people with lower incomes will have homes given to them – at taxpayer expense
People who invested in real estate and already own more than one home should be forced to sell the additional homes – at rates set by the government, of course – or have them taken away and given to the needy, because there are a finite number of homes available, and nobody really needs to have more than one home. These people can’t really even complain because they will still have a home, and may even get to choose which one they retain – hey, it’s not our fault that they chose to invest in real estate, instead of investing in something else.
People who own “Mansions” will need to be assessed with a special tax, because their “Cadillac” lifestyles are more than they “need”, and unfair to others who live in smaller or more poorly located homes.
Since many young adults traditionally don’t buy homes, parents (or their employers, or the taxpayers) would be obliged to provide housing for children until the age of 26.
Anyone who doesn’t own a home will be subject to fines.
Members of the House and Senate, the President, and the Vice-President would be exempt, of course, and home taxes in Nebraska would be guaranteed to never go up.
We could even claim that the bill would be financed through savings from current HUD programs (such as housing subsidies), the elimination of the costly Fanny May and Freddie Mac programs, and by confiscating all student loan repayments in perpetuity. We could also claim that this would be a 50% increase in the property tax base – since it would be a 50% increase in the number of people paying property taxes. We would justify this by pointing out that only two thirds of Americans currently own their homes and pay property taxes on them (never mind that landlords pay property taxes, this is the kind of annoying “assertion” that will only be brought up by Fox news and other “nutcase” and “fringe” opponents of progress), so getting all Americans into their own homes would increase the property tax base by 50%.
********
Personally, I'm a guy who invested many years of my life into a military career. I never made more than $30k a year until I retired from the military, and my retirement check is less than $700 a month, but I actually chose to return to active duty in my early 30s because I weighed my options and decided that the medical benefits package made up for the fact that the salary wasn't going to be enough to buy a home or invest heavily.
I "invested" in lifelong medical care through my employer. Yes, through my employer - which just happens to be the government.
Now I see people who made other choices wanting to get the same medical benefits that I get, but to do it at taxpayer expense, without giving up 17 years of their life (and acquiring a 40% disability) in the service of our nation. They tell me that I am not losing anything, since I will keep my health care (although I may end up being taxed on my benefits, depending on how mush they decide my employer contribution is). I tell them that it is the same as if a housing program allowed them to continue to stay in their home, and continue to pay their mortgage, while the government gave me the house across the street for free - they aren't losing anything, except when they look at what they pay for something that someone else is getting free.
If it's going to be government subsidized healthcare for all, then I think I am owed a different compensation package for my military career - say about five times the salary/retirement. I'm not holding my breath though, because Congress and the President don't care about fairness or equity for vets.
Thursday, August 13, 2009
Eight ways Obama wants to kill competition in health insurance
Eight ways Obama’s proposed reforms will drive up costs for consumers and drive private insurance companies out of business *
1. Ends Discrimination for Pre-Existing Conditions: Insurance companies will be prohibited from refusing you coverage because of your medical history.
For you: This means that there will be no economic benefits to those who make healthy life choices. Non-smoker? You’ll pay just as much for insurance as that three pack a day chimney.
For your insurance company: This means that insurance companies will be required to take on bad risks.
2. Ends Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays: Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.
For you: No co-pays, or fewer/lower co-pays. This means that policy holders will have less encouragement to limit trips to the Doctor’s office. It will also mean that high volume visitors (like hypochondriacs) will get a fee ride at your expense.
This also means that you will have fewer options, and those options left to you will be the lowest cost options. For example: Instead of allowing you to have brand name medications if you pay the difference from generics, brand names won’t be an option.
For your insurance company: This means that premiums will have to go up, or services will have to be cut. Responsible policyholders will have to pay more to cover their less responsible counterparts.
3. Ends Cost-Sharing for Preventive Care: Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.
This is not a medical insurance issue, it is more of an HMO or budgetary issue. This is akin to requiring car insurance companies to pay for all vehicle maintenance, rather than just repairs after accidents.
Regular checkups somehow don’t sound like the thing we keep hearing about from those who claim we need health care reform – the unexpected medical emergency that bankrupts a family.
Again, costs will go up, and it will force all medical insurance companies to also become HMOs.
4. Ends Dropping of Coverage for Seriously Ill: Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.
Does this mean that if you are ill, and can no longer pay your premiums, your coverage must be continued? Sounds like a bad business model.
5. Ends Gender Discrimination: Insurance companies will be prohibited from charging you more because of your gender.
This contradicts the whole point of things like actuarial tables. I guess that we can also require that car insurance companies can’t use gender in their rate calculations either.
Fact: Men get in more car accidents. Women go to the Doctor more often.
Corresponding fact: Men pay more for car insurance. Women pay more for HMOs and medical insurance.
Is this gender discrimination, or simply having the business model match the facts?
Men’s insurance costs will increase. Women’s may come down (but don't count on it).
6. Ends Annual or Lifetime Caps on Coverage: Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.
Caps on coverage allow companies to balance risk and offer lower cost policies. This will increase policy costs – just as having a smaller deductible on your car insurance, or insuring a more expensive car will increase your car insurance premiums.
7. Extends Coverage for Young Adults: Children would continue to be eligible for family coverage through the age of 26.
This makes no sense at all, since any adult will supposedly be eligible for care under their own plan, their employer’s plan, or the “public option”. This actually seems like it is a subsidy for upper middle class and wealthy families who tend to send their children to college and grad school straight after high school.
This means that an adult child will have to be covered for nine years after their 18th birthday, since coverage won't end until their 27th birthday, adding 50% to the time that children are covered by their parent's policies, and forcing an increase in costs to the policyholder.
8. Guarantees Insurance Renewal: Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick.
This will increase costs as the insurance companies will not be able to cut their losses with policyholders who end up using up more money than they pay in. This has also sometimes been described as not allowing insurance companies to raise insurance rates.
What these eight things do is to guarantee that private insurance companies will either have to dramatically raise their rates, or they will lose money and eventually be bankrupted and driven out of the health insurance business.
Even if they raise rates, that means that fewer people will be able to afford the insurance, reducing profitability, and making this a bad business model.
* The eight policy statements (in bold) are courtesy of Mr. David Axelrod, writing in an Official White House email on August 13th, on behalf of President Obama. The responses are my own.
1. Ends Discrimination for Pre-Existing Conditions: Insurance companies will be prohibited from refusing you coverage because of your medical history.
For you: This means that there will be no economic benefits to those who make healthy life choices. Non-smoker? You’ll pay just as much for insurance as that three pack a day chimney.
For your insurance company: This means that insurance companies will be required to take on bad risks.
2. Ends Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays: Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.
For you: No co-pays, or fewer/lower co-pays. This means that policy holders will have less encouragement to limit trips to the Doctor’s office. It will also mean that high volume visitors (like hypochondriacs) will get a fee ride at your expense.
This also means that you will have fewer options, and those options left to you will be the lowest cost options. For example: Instead of allowing you to have brand name medications if you pay the difference from generics, brand names won’t be an option.
For your insurance company: This means that premiums will have to go up, or services will have to be cut. Responsible policyholders will have to pay more to cover their less responsible counterparts.
3. Ends Cost-Sharing for Preventive Care: Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.
This is not a medical insurance issue, it is more of an HMO or budgetary issue. This is akin to requiring car insurance companies to pay for all vehicle maintenance, rather than just repairs after accidents.
Regular checkups somehow don’t sound like the thing we keep hearing about from those who claim we need health care reform – the unexpected medical emergency that bankrupts a family.
Again, costs will go up, and it will force all medical insurance companies to also become HMOs.
4. Ends Dropping of Coverage for Seriously Ill: Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.
Does this mean that if you are ill, and can no longer pay your premiums, your coverage must be continued? Sounds like a bad business model.
5. Ends Gender Discrimination: Insurance companies will be prohibited from charging you more because of your gender.
This contradicts the whole point of things like actuarial tables. I guess that we can also require that car insurance companies can’t use gender in their rate calculations either.
Fact: Men get in more car accidents. Women go to the Doctor more often.
Corresponding fact: Men pay more for car insurance. Women pay more for HMOs and medical insurance.
Is this gender discrimination, or simply having the business model match the facts?
Men’s insurance costs will increase. Women’s may come down (but don't count on it).
6. Ends Annual or Lifetime Caps on Coverage: Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.
Caps on coverage allow companies to balance risk and offer lower cost policies. This will increase policy costs – just as having a smaller deductible on your car insurance, or insuring a more expensive car will increase your car insurance premiums.
7. Extends Coverage for Young Adults: Children would continue to be eligible for family coverage through the age of 26.
This makes no sense at all, since any adult will supposedly be eligible for care under their own plan, their employer’s plan, or the “public option”. This actually seems like it is a subsidy for upper middle class and wealthy families who tend to send their children to college and grad school straight after high school.
This means that an adult child will have to be covered for nine years after their 18th birthday, since coverage won't end until their 27th birthday, adding 50% to the time that children are covered by their parent's policies, and forcing an increase in costs to the policyholder.
8. Guarantees Insurance Renewal: Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick.
This will increase costs as the insurance companies will not be able to cut their losses with policyholders who end up using up more money than they pay in. This has also sometimes been described as not allowing insurance companies to raise insurance rates.
What these eight things do is to guarantee that private insurance companies will either have to dramatically raise their rates, or they will lose money and eventually be bankrupted and driven out of the health insurance business.
Even if they raise rates, that means that fewer people will be able to afford the insurance, reducing profitability, and making this a bad business model.
* The eight policy statements (in bold) are courtesy of Mr. David Axelrod, writing in an Official White House email on August 13th, on behalf of President Obama. The responses are my own.
Monday, July 20, 2009
Health insurance is not the same as health care
The President is warning that if we don't pass his health care plan this year, it will be a disaster for Americans. He acts like there won't be time to make any changes next year, and that we must rush a bill through - probably without having a chance to read it and study the impact on the economic environment and the repercussions for health care for Americans.
Why can't we take this slow and make sure we do it right? Why do we have to rush it through before the American people know what they are actually buying for the trillions of dollars that it will cost us?
Obamacare has some odd proponents - including the insurance industry, who are supporting the idea of universal health insurance, as long as there isn't a government insurance program that will use taxpayer subsidies to drive them out of business. They have no problem with taxpayer subsidies - as long as they are getting what they consider to be "their fair share".
My question is this: if we are attempting to fix the problems of our health care system, why pursue an insurance based health care policy?
One problem with insurance is that it ends as soon as you can't pay the premiums any more, or as soon as your employer stops paying the premiums.
This means that while you are healthy and working, you have coverage, but when you are unhealthy and not able to work, you are not able to pay premiums, so have no coverage. This is what makes it profitable for insurance companies - when you most need the service, you aren't eligible.
This is true of private insurance, employer provided insurance, and even government provided insurance - when there is no longer enough money coming in, the insurer will cut benefits.
Another problem is that if you are paying the insurance company, you are not paying for health care, but for a promise of health care.
It reminds me of the Seinfeld episode where Jerry tries to pick up a rental car and is told that, while the company has his reservation, they have no car for him. Just as Jerry argues "It doesn't matter if you can TAKE my reservation. What matters is that you can KEEP my reservation.", I say "It doesn't matter if you have health insurance. What matters is if you can get health care." - the insurance is a promise to provide care when it is needed, if the insurer finds it possible. Health care is exactly what it says it is.
A further problem with insurance is that it disconnects the health care provider and patient from the decision making process. Health care providers often feel pressured to plan treatment based on what insurance companies are willing to reimburse them for. Patients don't have as much of a reason to weigh the costs and benefits of various options against each other.
In many cases, there are various choices within the broad categories of surgery, medication, therapy, lifestyle adjustment, palliatives, and non-traditional treatments that are ignored because the health care provider can't be reimbursed by the insurance company for them, and the patient only asks about options that are covered by their insurance plan.
This disconnect creates a system where patients and health care providers are not discussing options, and not making their own decisions. Often, this leads to higher costs as we find that one size doesn't fit all.
If the government wants to involve itself in health care, and use taxpayer subsidies to provide a more "socially just" access to care, I see tax exempt health savings plans as a far better option, along with tax credits for health care expenses.
Health savings plans are a great idea, but one that many people might decide not to invest in, because we don't like to think about bad things happening to us. If there were a health savings plan set up similar to a 401k plan, where employers could match contributions as a benefit to attract employees, that would probably work better, but it still wouldn't convince everyone to save up for a possible health emergency. Effective health savings plans need to be tax exempt (with penalties for withdrawing them for non-health expenses), lifelong, and transferable to your heirs. I have seen health savings plans where the money just evaporates at the end of the year - they are fine for saving up for a planned procedure or regular medical cost, but not very useful in the long run.
The larger end of the equation would be medical expense tax credits. These would go a long way to ensuring that an accident or unexpected illness wouldn't wipe out a family's ability to survive. Of course such tax credits would have to be regulated, as we could easily see people getting more money in tax returns via these tax credits than they would pay in taxes, or even earn in a year of working. There would seem to be a need to restrict the number of years a person could claim medical tax credits in excess of their withheld taxes. Perhaps once every seven years, as we restrict bankruptcy?
Whatever is done, the first two steps are to:
1) cut any free or subsidized care for those who are in our country illegally
and
2) restrict the limit of care provided free to felons in prison to the lowest level of care available free to law-abiding citizens.
Why can't we take this slow and make sure we do it right? Why do we have to rush it through before the American people know what they are actually buying for the trillions of dollars that it will cost us?
Obamacare has some odd proponents - including the insurance industry, who are supporting the idea of universal health insurance, as long as there isn't a government insurance program that will use taxpayer subsidies to drive them out of business. They have no problem with taxpayer subsidies - as long as they are getting what they consider to be "their fair share".
My question is this: if we are attempting to fix the problems of our health care system, why pursue an insurance based health care policy?
One problem with insurance is that it ends as soon as you can't pay the premiums any more, or as soon as your employer stops paying the premiums.
This means that while you are healthy and working, you have coverage, but when you are unhealthy and not able to work, you are not able to pay premiums, so have no coverage. This is what makes it profitable for insurance companies - when you most need the service, you aren't eligible.
This is true of private insurance, employer provided insurance, and even government provided insurance - when there is no longer enough money coming in, the insurer will cut benefits.
Another problem is that if you are paying the insurance company, you are not paying for health care, but for a promise of health care.
It reminds me of the Seinfeld episode where Jerry tries to pick up a rental car and is told that, while the company has his reservation, they have no car for him. Just as Jerry argues "It doesn't matter if you can TAKE my reservation. What matters is that you can KEEP my reservation.", I say "It doesn't matter if you have health insurance. What matters is if you can get health care." - the insurance is a promise to provide care when it is needed, if the insurer finds it possible. Health care is exactly what it says it is.
A further problem with insurance is that it disconnects the health care provider and patient from the decision making process. Health care providers often feel pressured to plan treatment based on what insurance companies are willing to reimburse them for. Patients don't have as much of a reason to weigh the costs and benefits of various options against each other.
In many cases, there are various choices within the broad categories of surgery, medication, therapy, lifestyle adjustment, palliatives, and non-traditional treatments that are ignored because the health care provider can't be reimbursed by the insurance company for them, and the patient only asks about options that are covered by their insurance plan.
This disconnect creates a system where patients and health care providers are not discussing options, and not making their own decisions. Often, this leads to higher costs as we find that one size doesn't fit all.
If the government wants to involve itself in health care, and use taxpayer subsidies to provide a more "socially just" access to care, I see tax exempt health savings plans as a far better option, along with tax credits for health care expenses.
Health savings plans are a great idea, but one that many people might decide not to invest in, because we don't like to think about bad things happening to us. If there were a health savings plan set up similar to a 401k plan, where employers could match contributions as a benefit to attract employees, that would probably work better, but it still wouldn't convince everyone to save up for a possible health emergency. Effective health savings plans need to be tax exempt (with penalties for withdrawing them for non-health expenses), lifelong, and transferable to your heirs. I have seen health savings plans where the money just evaporates at the end of the year - they are fine for saving up for a planned procedure or regular medical cost, but not very useful in the long run.
The larger end of the equation would be medical expense tax credits. These would go a long way to ensuring that an accident or unexpected illness wouldn't wipe out a family's ability to survive. Of course such tax credits would have to be regulated, as we could easily see people getting more money in tax returns via these tax credits than they would pay in taxes, or even earn in a year of working. There would seem to be a need to restrict the number of years a person could claim medical tax credits in excess of their withheld taxes. Perhaps once every seven years, as we restrict bankruptcy?
Whatever is done, the first two steps are to:
1) cut any free or subsidized care for those who are in our country illegally
and
2) restrict the limit of care provided free to felons in prison to the lowest level of care available free to law-abiding citizens.
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