Is retirement the most important financial responsibility?

[FrantzM]

I'm sure their lawyers are working overtime trying to figure out how floors full of people working on denying coverage can be classified as spend on care. And I'm sure they'll have some successes. And I'm sure they'll lobby aggressively in the coming years for many little laws that will nibble away at the edges, getting more of the money back out of care and into their hands. Nature of the beast. The only way to avoid all of that was to kill the beast off and go to a single payer system, and that has it's own set of problems. The Affordable Care Act is a dog's breakfast of a law. It's the kind of messy sausage of policy that only a representative democracy which views corporations and lobbying organizations as among the most important citizens to be represented could create. But it managed to make it through with a handful of provisions that will make it, I believe, while tragically flawed, better than what we have. And while things like no pre-existing conditions and lifetime limits will be more popular, the insurance requirement and the limit on insurance company administrative costs will be the ones that will make it work.

The strenuous, on-going opposition is not because ACA will be ineffective. It is because of fear that it will be very effective, become very popular, and add another huge entitlement program that is politically impossible to significantly alter. But that opposition is ideological, not practical, and it is misguided. If they would work to strengthen the new system instead of trying to kill it, they could help bring the cost of healthcare in America down to the fiscal benefit of the nation's people and businesses. MHO. YMMV.

Tim

+1


back to Retirement ...

 

[ack]

Yes, back to retirement... what do people feel is the best way to save for retirement? 401K? 403b? IRAs? Stocks? Bonds? Rental property? MIT or other expensive audio cables?

 

[Johnny Vinyl]

I have a friend who came here from Albania 15 years ago with nothing. He and his wife worked and worked (he works with me at Costco, she at Home Depot) and they bought a house after 5 years. He now has that, plus 3 rental properties and he wants to buy more. He just turned 40, so I'd say his plan to invest in real estate has paid off so far. I don't know about his other investements, but I'm sure he's contributing to our pension plan and possible additional RRSP's as well.

Just as a point of interest, Canadians don't invest nearly as much in stocks as do our US cousins. I think we're more inclined to go with mutual funds and government bonds.

 

[jazdoc]

We're not talking about profit margins, we're talking about profit margins + administrative costs, and administrative costs alone have run as high as 40% in that industry. Administrative costs may be the reason why no private insurance company makes anywhere near a 20% profit margin, but 20 or 30 million new customers, many of whom are young and healthy, should help.

Here you go, doc:

http://www.google.com/search?client...ompany+administrative+costs&ie=UTF-8&oe=UTF-8

Unfortunately, Obamacare has so politicized the issue that objective information isn't all that easy to get, so you have to scan a pretty broad swath, picking up both sides of the issue and trying to avoid the blatant propaganda. Near the top of this Google search is a recent article from that scion of the liberal media, Business Week, that gets to the heart of the matter, IMO.

Tim

Tim,

Even Ezra Klein of that right-wing front group The Washington Post, and a proud Obamacare cheerleader, admits that administrative costs in private insurance are not the reason health care costs keep rising, http://voices.washingtonpost.com/ezra-klein/2009/07/administrative_costs_in_health.html:

It's also important to note that you don't necessarily want administrative costs as low as they could possibly be. Some activities that are considered "administrative" are useful. Disease management, for instance, which accounts for some of the difference between Medicare and Medicare Advantage. Mental health counselors who are available by phone. Good-faith investigations into waste, fraud and abuse. Care coordination. Nurses who use e-mail or telephones to remind patients to take their drugs. Administration is not always wasteful.

But no matter how good you got at slashing administrative costs, they will never be a panacea to the problems of the system. Rick Kronick, a political scientist at the University of California at San Diego, has done some of the best work on administrative costs, and he summed the situation up quite well. "The main question," he said, "is why are health care costs going up at 2.4 percent a year faster than GDP? And most of the answers to that question have nothing to do with administrative costs. The answers are that we do more stuff and have more technology. Even if we could wring administrative savings out of the system, which I'm all in favor of and would be a good thing, we'd still be facing the question of how to slow the rate of cost growth."

ACA and single-payer advocates like to point out that Medicare and Medicaid have lower administrative costs than private health insurance. However, that is illusionary for two key reasons:
1. Spending per patient, i.e. the denominator of administrative cost, is higher per Medicare/Medicaid patient, reflecting the patient population and lack of incentives to control costs.
2. Overhead at private health insurers includes money spent on fraud and abuse which is not calculated as an expense line item for Medicare/Medicaid. The OIG, the federal agency charged with fighting fraud and abuse, is extraordinarily ineffective in fighting it. As the NY Times noted on Sept. 11, 2012:

Medicare abuse and fraud like this costs taxpayers tens of billions of dollars every year. The Centers for Medicare and Medicaid Services, or C.M.S., estimated that in 2010, the two programs together made more than $65 billion in improper federal payments. An April 2012 study by a RAND Corporation analyst and former C.M.S. administrator estimated that fraud and abuse cost Medicare and Medicaid as much as $98 billion in 2011.

Using the lower estimate of $65 Billion, fraud and abuse, an overhead expense, accounts for 11.5% of Medicare's $562 Billion 2012 budget.

As someone who works in the healthcare industry, I see lots of waste. Some of this is inevitable in a large, complex industry dealing with ultimate questions of life, death and health. However, much is imposed from the outside by well-meaning, but ineffective rules and regulations.

Last month, my practice has received notification that our current, high deductible health plan will not be offered next year. One alternative we are exploring with our insurance broker is NOT purchasing health insurance. Since the tax penalty for not having health insurance is 1% of 2012 income (yes you read that right, the tax for not paying for health insurance in 2013 is 1% of last year's income) and pre-existing conditions are covered once you purchase insurance through an exchange, i.e. once you face a large healthcare expense, it may make financial sense for us.

 

[Phelonious Ponk]

Doc, we agree that insurance company administrative costs are not the whole answer to reeling in the high cost of American healthcare. But they are a pretty good start. I don't know how ACA defines patient care vs administrative costs, but it wouldn't surprise me a bit to hear that disease management and mental health counseling are defined as patient care. They certainly should be.

You're not really suggesting the the high spending per patient in Medicare is due to high administrative costs are you?

Tim

 

[zztop7]

Revolving Door

The person who wrote most of Obamacare left some time ago and rolled into an EXTREMELY CUSHY position in the insurance industry [revolving door - just like FDA / defense / etc.].
Correct me if I am wrong.
zz.

 

[Phelonious Ponk]

The person who wrote most of Obamacare left some time ago and rolled into an EXTREMELY CUSHY position in the insurance industry [revolving door - just like FDA / defense / etc.].
Correct me if I am wrong.
zz.

I imagine you must be. No one person wrote Obamacare. But it wouidn't surprise me at all to learn that people with extensive experience in the insurance industry were involved in the crafting of the bill. It would be rather shocking if they weren't.

Back to retirement...

Tim

 

[jazdoc]

You're not really suggesting the the high spending per patient in Medicare is due to high administrative costs are you?

No. Sorry if my prior post gave you that impression. Higher spending per patient in Medicare is, in part, inevitably driven by the (elderly) patient population.

 

[Phelonious Ponk]

No. Sorry if my prior post gave you that impression. Higher spending per patient in Medicare is, in part, inevitably driven by the (elderly) patient population.

I probably mis-read you, doc. I'm sure you get that one. I know, I do. I manage my 95-year-old dad's healthcare.

Tim

 

[andromedaaudio]

Exactly what happened in holland , the EU is also full of it, iirc its called horse trading

The person who wrote most of Obamacare left some time ago and rolled into an EXTREMELY CUSHY position in the insurance industry [revolving door - just like FDA / defense / etc.].
Correct me if I am wrong.
zz.

 

[astrotoy]

A simple formula for having it all. Be a Republican during a Democratic administration. Actually, a disciplined formula which does work is take your gross income - 1/3rd goes to taxes (income, property) 1/3 to savings (including both pre and post tax and voluntary and involuntary contributions to retirement) and you live on 1/3rd. This means you have both enough to retire on and put kids through college, but also you have learned how to live on less income than you earn, so retirement is much easier. Say you can't possibly live on 1/3rd of your gross income - look around to see how many people do it.

Larry

 

[edorr]

A simple formula for having it all. Be a Republican during a Democratic administration. Actually, a disciplined formula which does work is take your gross income - 1/3rd goes to taxes (income, property) 1/3 to savings (including both pre and post tax and voluntary and involuntary contributions to retirement) and you live on 1/3rd. This means you have both enough to retire on and put kids through college, but also you have learned how to live on less income than you earn, so retirement is much easier. Say you can't possibly live on 1/3rd of your gross income - look around to see how many people do it.

Larry

That is exactly the formula I apply.....