Laid-off workers dread end of COBRA subsidy : Margaret Collins

April 19th, 2010 admin Posted in healthcare reform Comments Off

A government subsidy that pays 65 percent of health insurance premiums for unemployed people who remain on their former employer’s plan is only temporary, and those who need coverage most may not qualify for other insurance after it ends.

Diane Nelson, 48, of Riverview, Fla., has terminal lung cancer and worries she’ll have to stop medical treatments once the subsidy her husband gets under the COBRA program ends in November. The couple have been paying $377 a month in premiums, but without the discount, their costs will rise to $1,100, she said.

“I’ve looked into other insurance, but I’ve been denied a couple of them because it’s a pre-existing condition,” said Nelson. Her husband, who was fired as a heavy-equipment mechanic in February, has found work as an auto mechanic but doesn’t receive health benefits, she said.

While health care reform may make COBRA less relevant down the road, people like Nelson are focused on the near-term. The economic stimulus plan passed in February included the subsidy, valued at $24.7 billion, to reduce health-care costs for the growing number of fired workers, but it lasts for a maximum of nine months and is only available to employees who lose their job from Sept. 1, 2008, through the end of this year.

“I have no idea what I’m going to do come December,” said Nelson. They’ve depleted their 401(k)s and are “trying to keep our heads above water, but we’re slowly sinking,” she said.

The Joint Committee on Taxation estimates about 7 million people will use the subsidy for some part of 2009. Without the subsidy, people keeping their employer-sponsored plan typically pay the entire cost of the monthly premium, plus a 2 percent administrative fee.

Under COBRA, a 1986 law, workers can remain on their employer’s health plan for as long as 18 months. The average time out of work is 25 weeks and the number of Americans out of work longer than 27 weeks rose by 584,000 to 5 million in July, according to the Bureau of Labor Statistics.

Enrollments have doubled since the subsidy began, according to an analysis released Aug. 18 by Lincolnshire, Ill.-based Hewitt Associates Inc.

“The subsidy has truly been a life saver, a major reduction of monthly bills,” said James Fisher, 59, of New York City, who pays about $150 a month for coverage. He was fired in February from Hetrick-Martin Institute, a non-profit counseling center for teens.

With the subsidy, the average family pays $377 a month, according to the Henry J. Kaiser Family Foundation of Menlo Park, Calif. The cost rises to $1,078 a month without it.

People with pre-existing conditions, like Nelson, may be rejected when applying for individual policies, or may pay more than they would under even unsubsidized COBRA, said Karyn Schwartz, a senior policy analyst for the Kaiser Family Foundation.

Still, for people without pre-existing conditions, individual plans are typically cheaper than unsubsidized COBRA, said Schwartz. The average monthly premium for an individually purchased policy was $217.75 for one person and $483.25 for a family in 2007, according to America’s Health Insurance Plans in Washington, which represents the health-care industry.

Individual plans, as opposed to an employer-sponsored group plan, are the “fastest growing sector of the business,” said Humana Inc. spokesman Mitch Lubitz. The number of customers has grown 17 percent in the past year to 345,000 in June 2009 from 295,000 in June 2008, he said.

Humana, based in Louisville, Ky., began offering short- term insurance in April for unemployed or part-time workers. Applicants can choose from many features found in group health plans, Lubitz said, and may opt for a policy length from 30 days up to six months or one year. Humana added individual dental and vision options in May as many COBRA users were continuing to pay for dental coverage, Humana’s Large Group Actuarial Director Beth Grice said.

Golden Rule Insurance Co., a subsidiary of Minnetonka-based UnitedHealth Group Inc., started offering dental and vision plans in the past 12 months, said Ellen Laden of the Indianapolis-based company. The company also added two temporary plans in June, “for consumers whose lives are in a time of transition,” Laden said.

A family of four, with parents in their mid-30s and two children under 10, would pay $133 to $163 in monthly premiums for six-month coverage with a $1,000 deductible, she said.


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Mattress Money – the Wave of the Future ?

April 17th, 2010 admin Posted in healthcare reform Comments Off

We are all relieved the unlamented year 2008 is past. It was a brutally rough year, seismic even.

The US stock market went through its worst year since the Great Depression. The Dow fell 33.8 percent, the worst annual decline second only to the 52.7 percent drop in 1931. The S&P500 lost 38.5 percent, just a shade better than its 38.6 percent decline back in 1937. The scope and extent of wealth destruction is just incomprehensible.

The government finally acknowledged in December 2008 that the economy had been in recession since December 2007. The question is: How long will this recession last? Some say 10 months; others say longer.

The Great Depression began August 1929 and did not end until 43 months later. How will things be in 2009? Perhaps, there is some comfort to be taken in the fact that the 11 recessions after the Second World War lasted only about 10 months on the average.

Only one thing is certain: each new day will mean one day closer to recovery. Prosperity will always come again, once said John D. Rockefeller.

For those who have some money left to invest, a conservative approach and a diversified portfolio may help reduce the anxiety of uncertainty. Some possibilities:

1. Corporate bonds
There is expert consensus that investment-grade corporate bonds may be a good bet for the year. Corporate debt is currently priced at a huge discount. Once institutional investors open up to more risk, the prices for bonds issued by the top-rated companies are likely to rise. These days, corporate bond yields are several notches higher than Treasury bonds.

2. US stocks
When you`re brave enough to venture again into stocks, consider that US stocks may be in a better position to rebound than international stocks. The federal government has been bolder in its response to the crisis. Industries primarily targeted by the bailouts and the incoming administration`s promise of massive spending will be the best bets. This means companies in construction, alternative energy, and technology for productivity.  Larger cap companies or small cap banks that derive their revenues mostly from within the US are recommended.

3. TIPS (Treasury Inflation-Protected Security)
TIPS may be in if (or when) inflation comes. During these days of recession, deflation is the main worry. But with government set to spend a lot of money on its proposed $800 billion stimulus package, inflation may strike sooner than you think. When it does, the perfect inflation fighter is TIPS.

4. Companies with necessities
In a period where people buy only what they need, the companies that serve these needs are likely to perform better. Companies like Wal-Mart, the master of low-price goods, Procter & Gamble, or pharmaceuticals like Johnson & Johnson, Pfizer and Merck are good defensive stocks. Consumer staples like food and beverages will continue to be bought, benefiting companies like General Mills.

5. Municipal bonds
Like corporate bonds, muni-bonds have seen heavily discounted prices — making their yields more attractive. The added incentive is that these bonds are tax exempt. Pick very carefully and look for the more reliable bond issuers.

6. Cash-rich market leaders
Financially sound companies who are market leaders in their industries may be poised to take advantage as economic recovery gets underway. Companies with ample cash flow are most attractive, as this will help them hold out better during this downturn.

7. Dependable dividends
In hard times, it is best to invest in something that provides predictable dividend income. The more dependable sources of dividends are stocks from telecoms companies and utilities.

8. Healthcare firms
Over the years, healthcare stocks have delivered the best values and robust earnings growth. Healthcare reform is not about to impair the industry, even as it seeks to lower healthcare costs and widen access. Old reliables are the giants Johnson & Johnson, Abbott Laboratories, Pfizer, Merck, Bristol-Myers Squibb.

9. Oil recovers
Oil prices have soared high to a peak of $147 and plunged low to around $40 on fears that demand will drop as the world economy shrinks. But emerging economies like India and China will continue to fuel demand, especially as they recover. Prices may go back up and stabilize around $80 or so — benefiting stock prices of oil companies like Exxon and Chevron.

10.  Gold shines
Like oil, gold prices surged to $1000 per ounce and fell back to $720. But gold and precious metals have always been considered safe havens and 2009 is likely to see price trends going up.


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Anti Poverty

April 13th, 2010 admin Posted in healthcare reform 12 Comments »


Anti Poverty in USA


                          Even the wealthiest nation in the world like the United States does not escape the problem of poverty. This paper takes a critical look at poverty and anti-poverty policies in the United States. In this paper, I have argued that poverty is caused by several factors. This paper also discusses the liberal and conservative perspectives for reducing poverty in America. The conservatives have focused on individual factors such as wide wage gaps, breakdown of family, racial factors and other reasons while the liberals have focused on the structural transformation of the American economy to explain the persistence of poverty.  Since 1960, both the federal and state governments have been responding with policies that address the problem with mixed results. In this paper, I have analyzed the policies and have also recommended the possible ways to deal with this intractable nature of poverty.

                   According to Sen (1981), ‘the poor are those people whose consumption standards fall short of the norms, or whose income lie below that line’. The word "poverty" suggests destitution, an inability to provide a family with nutritious food, clothing, and reasonable shelter. Over thirty-six million Americans live below the official U.S. poverty line (Blank, 2007). This means a family of three earns less than less than $ 16,000 or a single individual earns $10,300 per annum (Blank, 2007, p. 17). Millions more struggle each month to pay for basic necessities, or run out of savings when they lose jobs or face health emergencies. Job cuts, high rates of unemployment, foreclosures and high food and gas prices continue to stimulate policy formulation designed to improve the condition of the poor.

                     Poverty is integrally associated with misery and suffering. The lost potential of children in poor households and the lower productivity and earnings of poor adults are all intertwined with poor health, increased crime and broken neighborhoods. Childhood poverty typically leads to poor health care and high crime neighborhoods. Persistent childhood poverty is estimated to cost the United States $500 billion each year, or about 4% of the nation’s gross domestic product (Blank, 2007, p.1).

                    One in eight Americans lives in poverty and poverty in the United States is far higher than in many developed nations (Rebecca Blank, 2007, p1). Inequality has reached record high. The richest 1 percent of Americans in 2005 held the largest share of the nation’s income (19%) since 1929 (Rebecca Blank, 2007, p. 2). At the same time the poorest 20% of Americans held only 3.4% of the nation’s income (Rebecca Blank, 2007, p.2).

                    Colorado in spite of being surrounded by the beautiful Rocky Mountains and experiencing a cool, mountain climate has many homeless people. Scholars have identified that, a growing number of single parent households, a shortage of jobs for lower wage workers and a low rate of high school graduation have contributed to the growth of poverty in Colorado. The Colorado poverty rate has increased from 9.2% in 2000-2001 to 10.6% in 2005-2006 while the poverty rate of United States has increased from 11.5% in 2000-2001 to 12.5 % in 2005-2006 (Center on Law and Policy, 2006, p.1).  Most of these ill-fated poor people suffer from mental and health problems. 

Causes of Poverty

                        Policy analysts are trying to explore numerous perceived direct and indirect causes of poverty in the United States to formulate effective policies to alleviate poverty. The work of scholars such as Corley (2003), Sowell ( 2004), Iceland (2006), Jencks (1992), James Tobin (1993) and others have shown that the intractable nature of poverty is a result of not any one factor but of the interaction of a variety of causes. The breakdown of family and other social causes as well as the structural changes in the economy, have all contributed to society’s failure to eradicate poverty inspite of ardent efforts by policy analysts.

                   Individual Explanation of poverty mainly stresses the attitudinal or motivational factors and human capital factors. Thus lack of motivation among indigents causes poverty. Generous welfare programs sometimes affect the mind-set of recipients and they prefer to stay at home and enjoy the benefits rather than work outside. Murray (1984) argues that individuals prefer to remain on welfare because of insufficient motivation to come out from public welfare programs.

                  Formulation and proliferation of policies to alleviate poverty has been a major concern of the United States Government since 1960. Educational attainment is necessary to get a high paying job. Elementary school education, as well as lack of adequate skills and motivation among indigents to come out of the situation is the major causes of poverty. People well equipped with technical skills get high salaried jobs while people who are school drop outs get low pay on an hourly basis. During the 1960s when the then- President of United States Lyndon Johnson began to implement the United States ‘war on poverty’, he placed great emphasis on education (Jencks, 1992). The Lyndon Johnson administration even invested in programs like Head Start and occupational training to upgrade the skills of the poor and also to prevent future generations from working in low-paying jobs. Scholars like Sowell (2004) and Corley (2003) have emphasized individual level factors as the central causes of poverty. They argue that a person’s compensation is based on his or her educational qualification and marketable skills. Sowell (2004) argues that the lack of appropriate skills has affected the ability of many indigents to climb out of poverty. He also argues that there has been an increase in the poverty rate of unskilled Americans, who have lost jobs to Asian immigrants. Corley (2003) also supports the above argument and regards ‘lack of educational attainment’ as one of the entrenched sources of poverty. Low quality education from poorly funded inner-city schools results in few marketable skills which leads to low-wage jobs and other miseries associated with it such as less ability to pay for housing, food, clothing, medical care, bad neighborhoods, funding problems for schools, and increased risk of serious illness (Corley, 2003). 

                          Many scholars have argued that structural changes are the primary reason for the persistence of poverty in the United States. Structuralists emphasize issues such as joblessness, discrimination in education, institutional racism and economic transformations in explaining the causes of poverty. Scholars argue that the inability to provide decent paying jobs for some American families and the ineffectiveness of American public policy to reduce poverty are basically the result of structural failures and processes. Poverty is rooted in the structure of American society. Rank, 2004 supports the above view and argues that lack of human capital tends to place individuals in a vulnerable state when events and crises occur. The incidence of these events like loss of a job, family break-up and ill-health often result in poverty. These ill-fated people unable to handle these situations often end up in paying more. Scholars also argue that the acquisition of human capital is strongly influenced by the impact of social class on this process (Rank, 2004). Apart from poor family, race and gender also play a role in the acquisition of human capital (Mark Robert Rank, 2004).

                          Globalization, the expansion of credit markets leading to greater indebtness and foreclosures leading to recession in 2008 all point to the growth of poverty.  Iceland (2006) primarily focused on economic factors and has argued that poverty is also the product of deindustrialization. As the U.S. shifts from a manufacturing, industrial society to a service-oriented, high-tech society, many of the blue-collar jobs that required little education but paid well are disappearing or are being outsourced. Rural areas, such as Appalachia, suffer losses of mining jobs, and cities such as Detroit lose many manufacturing jobs to automation or overseas factories. Some people are unable to follow the jobs or commute to work are left in neighborhoods without employment or tax-basis to support needed social functions, such as schools, public transportation, police departments, and so forth. Others simply cannot find jobs because of the shift towards a service-based economy; in economic terms these people are structurally unemployed due to the changing skills needed. Tobin (1993) supports the above viewpoint and emphasizes on the disappearance of jobs in the 1900s as the main reason for the country’s failure to eradicate poverty. Recent employment data shows that the US housing slump and the crisis in America’s credit markets are threatening to increase poverty levels. Isidore (2008) mentions that the job losses  are widespread, with the battered construction sector losing 51,000 jobs and manufacturing employment falling by 48,000 in the year 2008 . Retail employment dropped by 12,000 jobs, and business and professional service employers cut staff by 35,000. The unemployment rate jumped to 6.1% in September from 4.9 % in January (Bureau of Labor Statistics, 2008).

                         Kelso (1994), argues that over the last forty years, there has been a major shift of American firms first to the west and then to the south. Part of this shift was due to the rise of the Cold War and the decision of the government to enlarge U.S. military power (kelso, 1994). He argues that as America elected to invest more in defense and in the aerospace industry, cities like Seattle and Los Angeles on the West Coast began to boom while the growth of a high technology and information based technology led to the growing affluence of California and the San Francisco Bay area. Later with the expansion of inter-state highway system and growth of jobs, markets were created in the south.

                         Iceland (2006) also argues that although the service sector of the economy has generated millions of jobs, but again polarized earning distribution based on educational attainment separates better paying jobs from poorer paying jobs. He supports a Marxian analysis of class conflict and exploitation and emphasizes on business owners favor hiring inexpensive labor to maximize profit. This also accounts for the inflow of cheap labor to the United States from Mexico and other countries. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side. Roubini notes that, "Having access to credit should be helping low-income individuals, but instead of becoming an opportunity for upward social and economic mobility, it becomes a debt trap for many trying to move up (Grow and Epstein, 2007).

                          Inspite of public assistance and wide initiatives taken by both Federal and State governments, poverty still exists. Meticulous analysis of the situation and effective formulation of policies is needed to solve the problem of poverty in the United States. Scholars like Rank (2004), Blank (2007) and others have shown that the United States Government spends fewer funds addressed towards poverty than any other industrialized country. Thus a major structural failure is found at the political level (Rank, 2004). Most European countries provide a wide range of insurance programs, unemployment assistance, and wide universal health coverage along with considerable support for child care (Rank, 2004). Such social programs are far more generous than those in the United States (Rank, 2004). While, low-income families in the United States work more than those in other countries, they are still not able to make up for lower governmental income support relative to their European counterparts (Blank, 2007, 141-142).

                          The gross disparities among impoverished people in the United States along racial lines have led many scholars to speculate that institutional racism is responsible for much of the poverty in the United States. Racial discrimination in employment and   education contribute to the growth of poverty. Some scholars like Massey and Denton (1993) interpret the statistics in terms of institutional racism while others like Kelso (1994) interpret the statistics as evidence of deficiencies and suffering of blacks.   In spite of efforts to remove racism, slavery and Jim Crow segregation, Massey and Denton (1993) argue that racial segregation still exists and that the fundamental cause of poverty among African Americans is segregation. They argue that segregation has created and perpetuated a black underclass by limiting educational and employment opportunities. Massey and Denton (1993) have shown that Blacks were shown homes in racially mixed areas or areas adjacent to predominantly black areas.

                           Also, changing patterns of family formation are more pronounced among racial and ethnic groups. Family patterns are also one of the causes of poverty in the United States. There is a wide gender gap in wages. In 2004 the median income of FTYR male workers was $40,798, compared to $31,223 for FTYR female workers (DeNavas-Walt et al, 2005) Pearce (1978) argues that ‘poverty is rapidly becoming a female problem’. Iceland (2006) supports this statement and showed that in 2000, the female poverty rate (12.5%) was 26% higher than the male poverty rate (9.9%) (Iceland, 2006). According to Iceland, women have fewer economic resources than men, and they are more likely to be the head of single- parent families. It also leads to the greater likehood that single, divorced or widowed women will be poorer than their male counterparts because of less social security income or other retirement income in addition to higher female life expectancies. Women’s lower wages, lower retirement benefits and the increasing number of single mothers have led some scholars to talk about the “Feminization of Poverty.”

Federal policies

                       After the Second World War, by 1963, creation of jobs by President John F. Kennedy’s tax policies could not remove the problem of poverty. Poverty was still recognized as a major national problem. President Lyndon B. Johnson’s War on Poverty led to a host of programs that included Medicare, Medicaid, Food Stamps, Aid to Families with Dependent Children, and others. These entitlements eventually consumed half the federal budget and could not alleviate poverty. The U.S. economy had been devastated by the recession of 1979-83 when the United Statess manufacturing infrastructure was shattered by the Federal Reserve’s skyrocketing interest rates causing unemployment to shoot up by sixty-five percent in four years (Cook, 2007). By the end of the 1980s the economy was in another recession, leading to the election of Bill Clinton who in 1992 replaced the incumbent George H.W. Bush. The investment boom of the 1990s was fueled by foreign capital lured in by the Treasury’s strong dollar policies. Jobs were created as the bubble expanded, trade barriers fell, and utility trading giants like Enron took off. NAFTA was enacted to promote free trade, welfare-to-work brought low-income women into the job market, and the Earned Income Tax Credit was extended. The party ended when the stock market crashed in December 2000 and millions of people lost their retirement savings and other investments. Recession was returning even as George W. Bush was being declared president by the U.S. Supreme Court in December 2000. The economic crisis deepened after the September 11, 2001 attacks when $1.4 trillion in wealth vanished during the worst five days of the stock market since the Great Depression (Cook, 2007). Cook (2007) argues that today, poverty is becoming a national catastrophe. Cook (2007) argues that from 2002 through 2006 the economy was floated by the housing bubble, with many lower income people getting into homes of their own through the proliferation of sub prime mortgages. With the financial woes in late 2008, many American citizens are left with inflated home prices and no way to pay for them.

                      The 1960’s policy initiatives and declaration of ‘unconditional war on poverty’ by the then president Lyndon Johnson marked a discrete change in the federal government’s willingness to intervene for the purpose of improving the economic situation of poor Americans. Despite the billions of dollars spent on programs like CETA (Comprehensive Employment Training Act), The Manpower Development and Training Act, Head Start, and the Elementary and Secondary Education Act, the government efforts to deal with the origins of poverty have met with minimal success. During this period, implementation of the Social Security old-age program insured virtually all retired workers against the risk of outliving their savings. The Social Security Act of 1935 sought to protect the incomes of those who did not work because of age or a poor economy by establishing a federal framework for unemployment insurance, old-age benefits, and assistance to women. In early 1964, the two most pressing priorities of President Johnson’s antipoverty agenda involved passing a massive tax cut designed to stimulate the economy and organizing a task force to shape the ‘War on Poverty’. The Economic opportunity Act (EOA) signed by Johnson created a long list of programs designed to help individuals develop marketable skills, political power, and civic aptitude. But this anti-poverty legislation oversaw other programs like Community Action Program, Job Corps, VISTA, Head Start (1965), Legal Services (1965) which were not included in its framework. While extensive programs like the Food Stamp Program, Medicare for elderly, Medicaid applied to qualified poor residents, the Elementary and Secondary Education Act for poor students overshadowed the EOA. The Higher Education Act eased the financial burdens of millions of college students. The Civil Rights Act opened up new spaces in the American marketplace, while the Voting Rights Act did the same for the political marketplace. The Fair Housing Act established an important base of law to combat housing discrimination. As a result the EOA slowly lost importance. Again, Murray (1984) argues that welfare benefits had soared so high so as to make living in poverty a meaningful option for the poor. Even Burton (1992) has supported the above viewpoint and argues that the programs have done more to cause poverty than to alleviate it.

                          When Nixon assumed power, he tried to deal with poverty in a more direct way than emphasizing social programs. . Although President Nixon expressed dislike for much of the War on Poverty, his administration responded to public pressure by maintaining most programs and by expanding the welfare state through the liberalization of the Food Stamp program, the indexing of Social Security to inflation, and the passage of the Supplemental Security Income (SSI) program for disabled Americans (Rank, 2004). The Nixon administration also endorsed a “New Federalism” in which the federal government shifted more authority over social welfare enterprises to state and local governments. His plan to implement the ‘Family Assistance Plan’ (FAP) consisted of various income provisions, work provisions, and training provisions for those below the poverty line (Rank, 2004). It failed to pass the Senate much like the ‘Programs for Better Jobs and Income’ initiated by President Carter in later years.                                       Welfare reform continued as a focus of federal policy debates even after the legislative defeat of FAP. Even though a cash ‘Negative income Tax’ (NIT) for all poor persons never passed, the Food Stamp program provided a national benefit in food coupons that varied by family size, regardless of state of residence or living arrangements or marital status. The number of AFDC recipients increased from about 6 million to 11 million and the number of food stamp recipients, from about 1 million to 19 million during the Nixon administration (Danziger, 1999, p. 8). Danziger (1999) also argues that as higher cash and in-kind benefits became available to a larger percentage of poor people, the work disincentives and high budgetary costs of welfare programs were increasingly challenged. The public and policy makers came to view increased welfare recipients as evidence that the programs were subsidizing dependency and encouraging idleness.

                        Despite the failure to enact a guaranteed income program, both the number of recipients and the amount of money spent on welfare programs increased substantially during the 1970’s (Rank, 2004). Rank (2004) has given an overview of Reagan’s policies and noted that Reagan emphasized individual action unhampered by government interference, rejected the social engineering of the 1960’s and also supported federalism, that is, returning power to the states rather than centralizing them within the federal government. Reagan tried to address the problem and set the tone for welfare reform that occurred in 1990 during his successor’s administration. The Reagan administration thought eligibility for welfare benefits had increased so much, that many persons who were not “truly needy” were receiving benefits. The Reagan Administration opposed simultaneous receipt of wages and welfare benefits. Rather, it proposed that welfare become a safety net, providing cash assistance only for those unable to secure jobs.

                    The Earned Income Tax Credit (EITC), enacted in 1975, provides families of the working poor with a refundable income tax credit (i.e., the family receives a payment from the Internal Revenue Service if the credit due exceeds the income tax owed). Thus the EITC raises the effective wage of low-income families, is available to both one- and two-parent families, and does not require them to apply for welfare. The maximum EITC for a poor family was $400 in 1975 and rose to $550 by 1986 (Danziger, 1999, p. 14). The 1986 Tax Reform Act increased the EITC so that by 1990 a low-income working parent received a maximum credit of $953 (Danziger, 1999, p. 14). The number of families receiving credits increased from between 5 and 7.5 million families a year between 1975 and 1986 to more than 11 million by 1988 (Danziger, 1999, p. 14). Danziger, 1999 argues that as the expanded EITC supplements low earnings, it became easier for policy makers to emphasize welfare reform policies that could place recipients into any job, rather than training them for “good jobs.” Thus he argues that if a nonworking recipient took a low-wage job, a substantial EITC could make work pay as much as a higher-wage job would have paid in the absence of an EITC.

                         The Family Support Act (FSA) of 1988 expanded the scope of the AFDC program for two-parent families, instituted transitional child care and Medicaid for recipients leaving welfare for work, and added funds and required states to establish programs to move greater numbers of welfare recipients into employment. When the welfare rolls jumped in the late-1980s and early-1990s, from about 11 to about 14 million recipients, dissatisfaction with welfare again increased ( Danziger, 1999).    

                        President Nixon identified the two main economic problems, inflation and unemployment, that justify the need for economic recovery to the American worker. Reagan has emphasized despair caused by unemployment combined with high inflation. Reagan’s rhetorical construction of welfare recipients and the welfare system was aimed at reducing anxiety among Americans caused by increasing taxes, inflation and the continuous fear of losing jobs. To end this victimization, Reagan proposed a plan for economic recovery (Rank, 2004). Apart from cutting government spending, specifically spending on social programs, Reagan also proposed to have State governments assume control of Aid to Families with Dependent Children (AFDC) and the food stamps program in exchange for the Federal Government control of Medicaid. Although this proposal failed to reach the Congressional floor, his presentation of the proposal to exchange AFDC and food stamp program with Medicaid made poverty a local concern (Mark Robert Rank, 2004).  

                       Liberals and conservatives still disagreed on other goals of welfare-to-work programs. Liberals thought welfare reform should expand opportunities for welfare mothers to receive training and work experiences that would help them raise their families’ living standards by working more and at higher wages. Conservatives emphasized work requirements, obligations welfare mothers owed in return for government support whether or not their families’ incomes increased (Mead, 1992). 

                       In later years President Clinton’s approach also emphasized empowerment as a way of helping welfare recipients and to accumulate more savings without being penalized and expanding the earned income tax credit (Blank, 2007). By the mid-1990s, the focus of policy concern shifted from fighting poverty to reducing welfare dependence. President Clinton’s signing of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (the PRWORA) ended the entitlement to cash assistance and dramatically changed the nature of the social safety net. The Act created the Temporary Assistance to Needy Families Program (TANF). TANF began on July 1, 1997, provides cash assistance to indigent American families with dependent children through the United States Department of Health and Human Services (The Center for American Progress Task Force on Poverty, 2007).  Danziger, 1999 argues that each state can now decide which families to assist, subject only to a requirement that they receive “fair and equitable treatment.”  In instituting a block grant program, the PRWORA granted states the ability to design their own systems, as long as states met a set of basic federal requirements. The bill’s emphasis on ending welfare as an entitlement program, places a lifetime limit of five years on benefits paid by federal funds, and also aims to encourage two-parent families and discourages out-of-wedlock births. In granting states wider latitude for designing their own programs, some states have decided to place additional requirements on recipients. Although the law placed a time limit for benefits supported by federal funds of no more than 2 consecutive years and no more than 5 years over a lifetime, some states have enacted more stringent limits. All states, however, have allowed exceptions with the intent of not punishing children because their parents have gone over the time limit. Federal requirements have ensured some measure of uniformity across states, but the block grant approach has led individual states to distribute federal money in different ways. Certain states more actively encourage education, others use the money to help fund private enterprises helping job seekers. The PRWORA offers no opportunity to work in exchange for welfare benefits when a recipient reaches her lifetime limit of 60 months of federally-supported cash assistance. But the reform has certain limits. States may not use federal block grant funds to provide more than a cumulative lifetime total of 60 months of cash assistance to any welfare recipient, no matter how willing she might be to work for her benefits, and they have the option to set shorter time limits. States can grant exceptions to the lifetime limit and continue to use federal funds for up to 20 percent of the caseload. The extent of work expectations has also been increased. Single-parent recipients with no children under age one will be expected to work at least 30 hours per week by FY 2002 in order to maintain eligibility for cash assistance (Danziger, 1999, p 20). States can require participation in work or work-related activities regardless of the age of the youngest child. Thus PRWORA emerged from research that sought both to reduce poverty and welfare dependency (Danziger, 1999).  In the 1990s, following Clinton’s call to “end welfare as we know it,” policy makers escalated their demands for recipients to work and reduced government obligations toward and funds to serve them (Danziger, 1999).

                     When Bush took office in 2001, the U.S. was experiencing a national surplus, unemployment and poverty had been on the decline for years, and the economy was booming. Now, almost six years later, poverty is on the rise, healthcare coverage is on the decline, and the country is faced with the largest national deficit in history. Lower middle class families are slowly slipping below the poverty line and the poorest are becoming even more destitute. Most of these families are headed by women.

                      President Bush has extended the TANF. There has been a general economic stimulus policy initiative during the Bush administration but nothing targeting low income Americans has been enacted. President Bush signed the economic stimulus package (H.R. 5140) into law with the hope that it will provide a much-needed boost to the lagging economy. The package includes tax rebates for individuals, tax breaks for businesses, and a temporary increase of the Federal Housing Administration loans from $417,000 to $729,750 (White House report, 2008). More than 130 million people are expected to get tax rebates ranging from $300 to $1,200 per household for individuals earning $75,000 or less and couples earning up to $150,000 (White House report, 2008). While the stimulus package will provide much needed financial help to millions of people, it fails to target those most in need as it will not include an extension of unemployment benefits, energy assistance, food stamp benefits, or fiscal relief to states for Medicaid.                       

                  From the above analysis, the question arises whether poor are responsible for their own condition. The above analysis implies that recipients become dependent and lethargic due to vast welfare measures. Scholars such as Murray (1984) and Kilty and Segal (2006) have emphasized on individual factors. They argue that welfare measures and lack of spirit and motivation among indigents contribute poverty. Danziger, 1999 argues that during the Nixon era increased welfare measures encouraged idleness. Kilty and Segal, 2006 also argues that poor people can come out into a state of self-sufficiency from dependency by learning proper work attitude and skills. Kilty and Segal, 2006 argue the importance of welfare reform and a ‘tough love’ approach would ultimately help the poor by making them conscious of their condition and forcing them to take their own responsibility. Bill Clinton’s emphasis on ‘personal responsibility’ and measures to ‘end welfare as we know it’ in 1992 all supports the above argument.

                     Due to the implementation of TANF, the numbers of people on welfare have decreased. As a result more funds are accumulated. In 1996 the number of ADFC recipients was 12,644,076 while in 2001, the number of TANF recipients was 5,91, 811 and the poverty rate also reduced from 13.7 to 11.3 ( Kilty and Segal, 2006) and while in 2008 it is 1,628,422  ( US Dept of Health and Human Services). The share of single mothers on welfare (based on administrative caseload counts divided by population numbers) rose from 38 percent in 1969 to 48 percent in 1980, but had fallen to 30 percent by 1998 ( Kilty and Segal, 2006). These caseload changes are widespread, with every state in the country experiencing substantial caseload decline. This decline has been widely hailed by politicians as an indication that policies designed to reduce dependence on public assistance and move less-skilled adults into the labor market have been extremely effective ( Blank, 2007). But however Blank argues that declines in welfare do not affect the poverty rate. The poverty rate in 2007 was 12.5 percent, increasing slightly from its level of 12.3 percent in 2006. The poverty rate increased for four straight years from 2000 to 2004. In 2007, the poverty rate was 1.2 percentage points higher than it was in 2000 (Blank, 2007).     

States welfare initiatives

                      Most states took a significant decision about reform, and this decision was sensible in light of state goals and experience. A few states did not seriously make reform policy. New York was so deeply divided that it took no serious decisions about AFDC (Mead, 2002). Alabama and Missouri were pushed into reform by federal action and appeared to have little welfare policy of their own (Mead, 2002). In several other Southern states (Florida, North Carolina), policymaking appeared to be casual and personalized, with the governor or legislators offering reform plans with, apparently, little inquiry or evidence behind them( Mead, 2002) . Texas policymaking was incoherent as the state claimed to pursue work first but based its policy on an experimental program and focused far more on education and training (Mead, 2002). States have always emphasized on reform. But sometimes lower contribution towards these plans result in total failure of the program. Mead (2002) argues that in Florida and Georgia, however, officialdom was dragged into reform but showed little commitment to it. In Arizona and California, the agency or major localities had been heavily committed to a skills-oriented approach to welfare and resisted the shift toward work first. In Texas, welfare reform was a lower priority to administrators than rebuilding non-welfare employment programs and other initiatives. In Colorado and New Jersey, local agencies had a history of defiance toward the state government, and this prevented them from fully endorsing reforms decided in the capital. Mead (2002) argues that inspite of establishment of Employment Service (ES), a federally-funded job placement agency, and training programs under the federal Job Training Partnership Act (JTPA), poverty rate did not improve. After national welfare work programs were first enacted in 1967, the ES engaged in welfare practices. But because the ES’s routine stressed serving job seekers who came to it voluntarily, it generally performed poorly with welfare clients (Mead, 2002). These jobseekers came to it on a mandatory basis, as a condition of receiving aid. To succeed with them, the agency had to enforce work but also support employment with special services. The ES often found both these roles uncongenial (Mead, 2002). The ES was denoted to the role of contractor to welfare and later in 1988 the Workforce Investment Act (WIA) merged the ES, JTPA, and other non-welfare work programs. But this merging also created confusion. The problems included lack of clear procedures to refer clients to WIA, to serve them there, or to report results back to welfare. The states that lacked coordination and inadequate management information systems (MIS) were Massachusetts, Rhode Island, Tennessee, Washington, West Virginia, Florida, Georgia, and Tennessee.      

                         Colorado’s public reform has been associated with decline in poverty rate. By the close of 2000, Colorado’s unemployment rate dropped to 2.6 percent, personal income showed steady gains, state welfare cases declined dramatically, and State legislators wrestled with an estimated $833 million revenue surplus (Colorado Fiscal Policy Institute, 2001). But inspite of all the above facts poverty still persists as expenses like child care, out-of-pocket medical expenses and geo-graphic differences in housing costs increased. The increases occurred even after adjusting for income support such as tax relief, food stamps and school lunch programs, housing subsidies and energy assistance. A report published in 2001 by the Colorado Fiscal Policy Institute determined that a single parent with two small children living in Denver County would need to earn an annual salary of approximately $39,924 in order to meet their basic needs such as housing, food, health care, childcare and transportation without public or private assistance. Even child poverty rate is high in Colorado. About 180,000 children, 15.7 percent of the state total was living in poverty in Colorado in 2006, a 73 percent increase since 2000 (Frosch, 2008). The state of Colorado purchases childcare for income eligible families through the Colorado Child Care Assistance Program (CCCAP). The state allows individual counties to set the purchase price of childcare and make payments to providers from a combination of parental fees and federal, state and county funds. However, the Colorado Office of Resource and Referral Agencies (CORRA) found in a 2001 study that the average county payment fell below 75 percent of market value (Colorado Fiscal Policy Institute, 2001, pp 9). As a result counties forced providers to subsidize the cost of service to low-income families, which many were simply unwilling to do when limited slots could be filled with families that could afford to pay full rates. Other providers that chose not to simply refuse service to CCCAP families saved money by limiting the number of children on CCCAP that they would accept, cutting programs, or reducing workers’ wages. All of these actions limited availability and sacrificed quality of care to low-income children. Poverty still exists in Colorado despite initiatives to alleviate poverty as too many working families lives with incomes below the poverty line and more families earn wages simply too low to afford their basic needs. The Colorado government started the Common Good Caucus in 2007 to develop a 2009 agenda, emphasizing on K-12 education and determined to bring technologies out of the laboratory and into the marketplace by investing $4.5 million dollars in bioscience industry, supporting the Clean Energy fund to reduce high family utility costs , creating the Colorado Solar Incentive Program with $2 million to provide rebates for photovoltaic and solar thermal systems to help Coloradans join the new energy economy and cut their utility bills ( State Rep. Kerr Andy, 2008). Poor people cannot pay the full cost of heating and lighting their homes. Governments and social service agencies have long assisted low-income ratepayers in paying their bills through such programs as the Low Income Home Energy Assistance Program (LIHEAP), charitable fuel funds, levelized billing, discounts, home weatherization, energy efficiency, energy usage education and debt management. If all Americans live in weatherized and energy efficient homes and have the income to pay their full share of utility bills, all other ratepayers would save nearly $6 billion in poverty costs, including fuel assistance, lifeline and other rate assistance, weatherization and efficiency costs, the costs of late payments and service disconnections (Oppenheim and MacGregor, 2007).      



              From the above analysis it is clear that poverty remains pervasive due to the economic system, social stratification and welfare measures. According to Iceland (2003) on one hand, economic growth and technological changes contribute to increase in wages and overall standard of living. Economic growth accompanied by rising education levels improves the condition of people. On the other hand, the market economy often exerts a contrary effect on poverty levels (Iceland, 2003). To maximize profits, businesses usually seek to pay low wage to workers which increase inequality and poverty. Again policy may increase or decrease the harmful effects of inequality. Combining the factors emphasized by both liberals and conservatives, poverty is multifaceted. I believe that a strong national effort would alleviate poverty. Employment opportunities for all so that that worker and their families can avoid poverty, meet basic needs and save for the future. Increasing hourly wages would definitely improve the condition of these people. A smaller share of unemployed low-wage workers, receive unemployment insurance benefits. I believe that states (with federal help) should reform “monetary eligibility” rules that screen out low-wage workers, broaden eligibility for part-time workers and workers who have lost employment as a result of compelling family circumstances. Workers should use this period of unemployment and the money received from the Unemployment Insurance System and upgrade their skills and qualifications. Thus adults should have opportunities throughout their lives to connect to work, get more education, and live in a good neighborhood and move up in the workforce.

                         Child care assistance to low-income families and emphasis on K 12 education would definitely reduce the rate of poverty in the United States.                          Low-income youth hardly attend college than their higher income peers. Pell Grants play a crucial role for lower-income students. Simplification of the Pell grant application process, and encouragement of institutions to do more to raise student completion rates would definitely improve the condition. Expansion of Pell Grants would make higher education accessible to residents of each state. The states at the same time should also develop strategies to make postsecondary education affordable for all residents. Expansion of the Saver’s Credit would encourage saving for education, homeownership, and retirement. As a result all Americans would have assets that would allow them to weather periods of volatility and to have the resources that may be essential for upward economic mobility. Apart from Saver’s credit, expansion of Earned Income Tax Credit would raise incomes and helps families build assets. Thus there should be opportunity for all so that children grow up in conditions that maximize their opportunities for success.











Blank Rebecca (2007); Poverty to Prosperity; Center for American task force on Poverty; – Similar pages

Colorado Statewide Homeless Count (2007), School of Public Affairs, University of Colorado, – Similar pages

Cook Richard (2007), Poverty in America – 61k – Cached – Similar pages

Corley Mary Ann (2003); Poverty, Racism and Literacy; ERIC Clearinghouse on Adult Career and Vocational Education

Danziger Sheldon (1999), Welfare Reform Policy from Nixon to Clinton, Institute for  for Social Research, University of Michigan.

De Navas-Walt, et al., “Income, Poverty and Health Insurance in the United States: 2005.

Diana Pearce Diana Pearce (1978) "The Feminization of Poverty: Women, Work, and Welfare," Urban and Social Change Review.

Iceland John (2006); Poverty in America; University of California Press

Isidore Chris (2008); the Trillion-Dollar Mortgage Bomb, – 66k –

James Tobin (1993); Poverty in Relation to macroeconomic Trends, Cycles and Policies; Cowles foundation discussion paper.


Garima Dasgupta

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Changing Employment Laws in 2009: What You Need to Know

April 11th, 2010 admin Posted in healthcare reform 3 Comments »

For many, the dawn of 2009 holds a great deal of uncertainty, while for others it represents a chance at a fresh start and the potential for improvement – whether personal, professional, financial, or some combination of the three. For the human resources industry, 2009 will undoubtedly be a year in which changes in our government and our economy will be noticeably reflected in changes to employment law. The election in 2008 played host to a huge number of ballot issues regarding hiring processes and worker benefits. Such issues are again at the top of the incumbent legislature’s agenda in 2009, and will have a direct impact on not only the American worker, but on the employers and HR professionals responsible for their pay and benefits.

After examining a number of the bills proposed and voted into action for 2009, leading research indicates some overall legislative trends emerging in three major areas of human resources:

Healthcare Reform

As the number of Americans without insurance continues to rise, finding a way to provide individuals with better access to affordable healthcare was at the forefront of heated issues in the 2008 election. While already a major issue in 2008, the incoming Congress has recently announced that healthcare reform will be among its top priorities this year. Just prior to the start of 2009, for example, Congress passed the Mental Health Parity Act, a measure requiring many employers to broaden their mental health and substance abuse coverage for employees.

Meanwhile, a number of states and municipalities introduced new legislation addressing employers’ responsibilities concerning the health of their employees. Washington, DC and Milwaukee, for instance, passed initiatives mandating that employers provide paid sick leave for workers. New Jersey joined the movement by signing into law a bill requiring employers to give six weeks paid leave to staff members caring for a sick relative or new child.

However, in light of the economic crisis, further healthcare legislation may not increase quite as dramatically as once expected – on the state level, at least. The Society for Human Resource Management (SHRM) predicts that in light of “widespread budget shortfalls predicted in nearly half of the nation, health care reform is likely to be less of a front-burner issue in the states.” Instead, SRHM predicts that cash-strapped state legislatures will be looking to the new administration to handle this issue on a federal level.

Immigration Reform

A hot-button issue with immediate implications for employers and HR professionals, immigration was the topic of a significant number of bills introduced in 2008. A total of 26 states passed new legislation addressing immigration concerns, many of which imposed new penalties on companies employing undocumented aliens.

Playing a large role in much of the new immigration legislation was E-Verify, the government’s Employment Eligibility Verification System. In 2009, all federal contractors and subcontractors will be required to use the system. Likewise on the state level, many immigration bills passed in 2008 require employers to use E-Verify or similar systems to ensure they are not hiring illegal workers.

Unlike the issue of healthcare reform, immigration legislation is predicted to continue occurring mainly at the state level while, according to SHRM, any sort of comprehensive reform at the congressional level is considered “unlikely.” Again, however, due to the budget shortfalls and the economic crisis it is difficult to predict whether states across the country will see a continued push for immigration reform. However, in some more conservative U.S. regions like the South and Midwest, employer penalties for hiring illegal workers may be more severe.

Workplace Safety

Concerns about workplace safety and efforts to increase employee health and wellness were evident in a number of new state laws put into effect in 2009. Safety concerns ranged from matters such as office air quality to more grave issues like gun control in the workplace.

On a federal level, increased attention to workplace safety was made clear in a large increase in government money directed toward the Occupational Safety and Health Administration (OSHA) for its 2009 fiscal year. OSHA received a budget increase of $15.7 million, part of which is being used to conduct increased workplace inspections in 2009. Likewise, the incoming presidential administration has touted workplace safety as a priority, and is predicted to take a second look at several previously failed workplace safety bills, including the regulation of combustible dusts in the workplace and mandating stricter ergonomics requirements for employees working in the healthcare industry.

On a state level, Oregon passed a law requiring all workplaces to be “smoke free,” prohibiting smoking within ten feet of the entrance to a building or worksite. In the meantime, eight other states, concerned with a growing number of gun-related incidents in the workplace, have enacted various laws concerning an employer’s right to limit the possession of weapons on company property.

While only time will tell how these potential changes to federal and state policies will play out over the course of the next year, staying aware and informed of proposed legislation can help employers and HR professionals prepare in advance for new regulations, develop appropriate contingency plans, and ensure a smooth and compliant transition if and when the changes occur.

Elizabeth Rice, SPHR

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Healthcare Managing Change

April 9th, 2010 admin Posted in healthcare reform 2 Comments »

Healthcare Managing Change
I consider the question of the managing change with the healthcare issues in a way of curtain problems and they’re solutions. First of all, let’s see some current issues in the USA health care system today. New diagnostic and treatment procedures flourish in the United States. Our medical schools are of the best, our physicians of the first rank. And why not, since we spend some 15 percent of our GDP on health care? Few would argue that there’s a better place to get sick than in the United States if you can penetrate the system. Our system is the problem, and it’s only going to get worse. At dinner party, if you listen to people on the subway, if you talk with physicians, and if you talk with leaders of small business and big business, they’re all very unhappy and confused. Private insurance companies are happy about current trends, if not happy about where we are. In the present, they’re making money. Drug companies were happier six months ago. They think they’ve been taken aback by the bad press that they’ve been getting, and they’re searching for how they can do better. But by and large, until relatively recently, I think they were feeling again comfortable. The more-affluent people that are also fully insured. While they grouse about the paperwork, they have reasonable ways of accessing the tremendous advances that have taken place in the biomedical sciences, which are increasingly translated into better diagnostic care, therapy, drugs. I use the word “access” advisedly, because it isn’t always easy for them either to get to the right places because of the bureaucratic constraints, because of the third-party payers who say you’ve got to have your primary-care physician refer you before you can see a specialist. But when they do gain access to the system, this group feels reasonably satisfied.
National medical errors database hits one million records milestone. Medmarkx, nongovernmental database of medication errors, has received over one million medication error records to date, the U.S. Pharmacopoeia (USP) announced recently. Medmarx is an anonymous, Internet-based program used by hospitals and other healthcare organizations to report track and analyze medication errors. Since the program began in 1998, more than 900 HCOs have contributed data to use an historical review of Medmarx data reveals that approximately 46 percent of the medication errors reported reached the patient; 98 percent of the reported errors did not result in harm. JCAHO Creates IT Panel. The Joint Commission on Accreditation of Healthcare Organizations has created an advisory panel to recommend ways the Oakbrook Terrace, Ill.-based organization can use its accreditation process to increase the role of IT in healthcare. The panel will conduct a benchmark survey on the existing state of IT adoption in healthcare, and track progress annually. The 39-member panel, chaired by William Jessee, M.D., president and CEO of MGMA, includes provider representatives and reps from health insurers, academia, think tanks, IT vendors and government agencies.
The Council of Smaller Enterprises is putting its considerable weight behind a push by the National Small Business Association for health care reform on a national level. The National Small Business Association, of which COSE is a member, has developed three ideas it plans to take to the federal government as ways to reform the ailing health care system, said William Lindsay III, immediate past chairman of the association, during a recent visit to Cleveland. Those ideas are fair sharing of costs, empowering and focusing on the individual, and reducing costs while improving quality. “The fundamental problem in America is the cost of health care and the cost of insurance,” he said. “We’ve got to get everybody insured.” The Washington, D.C.-based association already has begun to lobby lawmakers to adopt the three basic principles, and they’ve been receptive so far, Mr. Lindsay said. For its part, COSE soon will lobby Ohio lawmakers on the same issues, said COSE president Jeanne Coughlin. Under the association’s proposal, all Americans would be required to obtain basic health care coverage, a package that would be designed and mandated by the federal government, Mr. Lindsay said. The basic package would cost the same for anyone in a given market, regardless of their health condition, he said. For that proposal to work, insurance companies would need to accept everyone into one insurance pool, which would spread costs broadly and reduce uncompensated care, Mr. Lindsay said. If companies provide health care coverage above the basic federal level, they would need to pay taxes on the money spent on those benefits, he said. Those additional tax dollars then would be set aside for health insurance subsidies for people who don’t qualify for Medicaid but can’t afford their own insurance.
It is ironic that Mrs. Jeannie Lacombe received so much attention after her death; she didn’t receive much of it immediately beforehand. On the morning of February 1, the Montrealer suffered chest pains and went to the nearest hospital emergency room. Four hours later, a physician finally looked at the 66-year-old woman, who lay on a stretcher in the hallway. She was dead. On that early February morning, Maisonneuve-Rosemont Hospital was crowded with 63 patients in a ward designed for 34. Only three of Montreal’s 24 emergency rooms were not overflowing with double or triple their capacity. The problem isn’t confined to Montreal. Two weeks later, in Toronto, a five-year-old boy died in an ER five hours after arriving, without having seen a physician. At times this February, Toronto nurses have fought with ambulance attendants over the stretchers patients were brought in on. A Toronto Ambulance official commented last week that the hospitals have been refusing ambulance patients more often, and for longer periods, than at any time in the last 27 years. In Winnipeg, hospitals have been routinely on “redirect,” meaning that they accept only critical patients, and “critical care bypass,” meaning they are too crowded even for those. In Calgary, a physician arrived for work at Rocky View Hospital one day to find emergency patients lined up in the parking lot. The ER and the foyer were already filled. “I have never seen anything like that in all the years I have been practising,” he says. Calgary’s regional health authority openly contemplated cancelling all elective surgeries, and near month’s end, health officials in Edmonton did so. Somehow, in the “best healthcare system in the world,” patients are waiting hours to be examined. The sickest lie on stretchers for days, awaiting admission. Some argue that a combination of winter storms and flu have placed an unusually great strain on the system. These two factors surely contributed, but how did Medicare erode to the point where minor stresses can wreak such havoc? And is ER overcrowding such an isolated phenomenon? Last year at this time, with neither flu nor ice storm, Montreal’s emergency wards were filled to 155% capacity. And the problems with Canada’s emergency rooms are only the tip of the iceberg. In truth, Medicare has been languishing for years. Consider the plight of Jim Cullen of Winnipeg. Mr. Cullen has a potentially life-threatening abdominal aneurysm. He could bleed to death without warning unless the aneurysm is surgically repaired. Mr. Cullen has waited five long months for that surgery. Despite his optimism, he wonders every day: “How long will that (artery) wall hold out?” But because of the ER crisis, Mr. Cullen’s surgery is on hold indefinitely. Once Canada’s pride and joy, Medicare is marked by long waiting lists for life-saving surgeries, inaccessible diagnostic equipment, dwindling standards of hospital care, and an exodus of good physicians. Meanwhile, Canada’s population is aging. Over the next 40 years, the percentage of senior citizens will double. More seniors require more services; if we can’t meet today’s demand, how will we meet tomorrow’s? To improve Medicare, Canadians must first answer one question: what ails the system? Some-opposition politicians, professional associations, and public-sector unions-argue that the system is simply under funded. Others-cabinet ministers, economists, and policy experts-maintain that the system has enough money: we just have to spend it better through greater government control. If Medicare is under funded, people should pay more into the system. But according to a study by the Fraser Institute, working Canadians already spend 21 cents of every dollar they earn paying for Medicare. How much more do we need to spend? How much higher must taxes rise? The aging of the baby boomers will almost certainly bankrupt us: the Canadian Actuarial Society estimates that taxes will need to rise to an average of 94% of income in the next 40 years to sustain the system.
If greater control is needed, governments must take a larger role in the healthcare system. This has been the trend over the past two decades, but has any government ever managed to browbeat part of the economy into efficiency? Governments are increasingly involved in hospital decision-making, but if Moscow central planning didn’t work in Moscow, what makes us think it will work in Victoria, Edmonton or Toronto? When healthcare is “free,” people do not hesitate to use the system. They request too many tests. They stay in hospitals too long. They consult too many physicians. The costs add up. Millions of Canadians suffer from problems such as insomnia, back pain, chronic fatigue, severe headaches, and arthritis: there is a great potential for them to spend vast resources to little proven benefit. In 1977, a joint Ontario government-medical association committee reviewed patients’ use of the system and concluded that “demand for medical care appears infinite.” Canadians assume that in a “free” system there are no tough decisions to be made. If the doctor suggests that you need an X-ray, you get one. But while you don’t need to think about the cost of the X-ray, the folks at the Ministry of Health do. You don’t worry about the cost of visiting walk-in clinics, or lengthy hospital stays, but these costs still add up. According to the Ontario Task Force on the Use and Provision of Medical Services, Ontario physicians billed $200 million in 1990 alone for “treating” the common cold.
In Canada, the provinces have achieved cost control by restricting access to health services. They have downsized medical schools, restricted access to specialists, and reduced the availability of diagnostic equipment. In many ways, Canada has opted for the old Soviet method of rationing-everything is free, and nothing is readily available. And so Canadians must line up for tests. For surgery. For the basic healthcare they need. Provinces have been busily “reforming” health care, but what are the long-term results? Patients are discharged earlier from hospitals, often too early. Patients wait for treatment; some develop complications. Hospital beds are closed, reducing doctors’ ability to admit patients. All these factors played a role in the ER crisis this February. To make matters worse, bureaucrats have developed elaborate spending controls, reducing the system’s ability to react. Canadians have assumed that if we make health care “free” (and pay the consequent high taxes), no one will ever need to worry about getting quality care when they need it. It seems that this assumption is false. Making health care “free” means everyone must worry about getting quality care. And yet the so-called experts continue to try to make Medicare work-against the odds, against human nature. This dooms us to longer waiting lists and more horror stories.
Isn’t it time we had a meaningful public discussion about health care? Lives are at stake.
Most Americans are insured through their jobs. Employers used to buy the insurance from a third party, typically the local Blue Cross/Blue Shield not-for-profit plan. Recently the Blues have lost ground to more aggressive for-profit insurers. But their strongest competitor is now employers themselves, stung by rising health-care costs and the state authorities’ burdensome regulation of the insurance industry. Federal law allows employers who “self-insure” (usually through an arm’s-length intermediary) to escape state regulation. Over half of America’s biggest employers have now made the switch, in effect paying their workers’ medical bills themselves. The other main insurer in America is the government. The old and the disabled are covered by a federal programme, Medicare. Medicare, which will spend about $110 billion this year roughly twice the cost of Britain’s NHS , is divided into two parts: the first pays for most hospital care out of payroll taxes; the second pays for doctors’ fees out of general taxation and a premium paid by the patient. Medicaid, a state-federal programme that will cost nearly $90 billion this year, pays all the medical bills of the poor, including those for long-term care. Retired and serving soldiers are covered by the Veterans’ Administration, which has a network of inefficient hospitals, and by a special programme with the colourful acronym champus. This patchwork quilt (see chart 4 on next page) has two gaping holes. One is that it leaves a large and growing number of people currently around 35m without any insurance at all. The plight of the uninsured is bad, but not as bad as it sounds: most get care from hospitals that are, in theory, not allowed to turn anyone away. Figures from the census bureau and the American Hospital Association suggest that overall spending on the uninsured is comparable to spending on the insured, though it is unevenly distributed. Uninsured people can be bankrupted by big medical bills. And the bills they cannot or will not pay are a time-bomb passed among others involved in the system. The hospitals try to pass it to the insured in higher premiums; insurers try to pass it back in lower hospital profits, or to offload it on to state and local governments. The other flaw in the American way is caused by costs that are spinning out of control. At over $600 billion, the cost of health care in America now absorbs 12% of GDP. And whereas in other countries it has roughly stabilised, in America the share has been rising throughout the 1980s. Employers have reacted by trimming the health benefits they offer, especially undertakings to cover staff who have retired. Those undertakings will knock a $200 billion hole in profits when they have to be shown in company accounts from next year. One result is that in four-fifths of labour disputes in the past two years, the main fight has been over health benefits.
Foreigners like to blame the tribulations of American health care on excessive reliance on the free market. In fact, government policy has played a big part. Instead of improving equity, well-intentioned state regulation of the insurance market has made insurance all but impossible for small employers to buy. Two-thirds of the uninsured work, many for employers who would like to offer insurance if they could find it. The other third ought to have Medicaid cover, but budget cuts and a diversion of cash into long-term care for poor, old people mean that the programme now covers only 40% of those below the federal poverty line. As for costs of treatment, the biggest source of inflation has been reliance on expensive fee for-service medicine that gives doctors and hospitals an incentive to treat people in the most expensive possible ways. This might look like a market fault. But another prime contributor is the government’s decision to exempt employer-paid insurance premiums from federal and state income taxes amounting to an annual subsidy of nearly $60 billion. It is bad enough that this subsidy is biased to the better-off; worse, it destroys any incentive for employees to choose cheaper insurance. The government is also partly to blame for a legal system that has produced astronomical awards to patients in malpractice suits. These feed straight into the costs of health care through malpractice insurance taken out by doctors. High premiums and the fear of being sued have also made some types of care hard to get (try finding an obstetrician in Florida to deliver a baby). Even more expensively, they encourage doctors to practise defensive medicine such as ordering unnecessary tests.
Not everything about American health care is bad. Its quality is widely thought to be high which is why one opinion poll had 90% of respondents favouring “major changes” in the system, but over half satisfied with their own care. There is plenty of choice of doctors and hospitals: European indifference to patients is rare in America. America has made the biggest progress in developing quality assessment and output measures for health. It remains the world leader in innovation, experiment and new technology, both in medical care and in different ways of delivering and paying for it.
In 1915 a labour pressure group looked forward to national health insurance as the “next great step in social legislation”. Truman tried and failed to introduce it in 1948. In the mid-1960s Johnson managed to push through Medicare and Medicaid. Richard Nixon encouraged the spread of HMOS (in which patients pay a fixed fee to cover all their health care) and managed care. But when he suggested a national health programme based on a mandate for employers to provide health insurance for their workers, it died partly because Democrats like Edward Kennedy wanted government insurance instead. Ironically Senator Kennedy now supports something like the Nixon plan, but it is opposed by George Bush. There is a host of other ideas on offer: Insurance reform. Some want to ban “experience rating” (skimming the cream of insurance risks) and insist on community rating. Others want to encourage the small-employer insurance market, perhaps by pooling risks. A third idea is an “all-payer” system such as Maryland’s, under which all insurers agree to pay the same price to hospitals an attempt to create the monophony power among purchasers that is common in most other countries. But the insurance market already suffers from too much regulation. And an all-payer system could stop the move towards cheaper selective contracts with providers. Medicaid expansion to cover more of the uninsured. This might include letting people above the poverty line, but who cannot otherwise find insurance, buy into the public programme. An alternative is to expand Medicare to cover the whole population. But in deficit-ridden, taxophobic America, neither the federal nor any state government is in a position to take on a new spending commitment that could add up to $250 billion a year (even if it saves more in private spending). State governors have repeatedly asked Congress to stop expanding the coverage of Medicaid. Price and volume controls. The most successful of these has been Medicare’s prospective budgeting for hospitals, where payments are based not on the costs incurred but on fixed prices per case (known in the jargon as diagnosis-related groups, or DRGS). This has been copied by many private insurers. The average patient now stays in hospital for a shorter period in America than in any other country, and a recent Rand Corporation study confirmed that the quality of patient care has not been affected. A new set of Medicare price and volume controls on doctors comes into force next year. But though such controls might hold down spending in one place, bills have a nasty habit of popping up somewhere else as providers fight to maintain incomes. Alain Enthoven of Stanford University has put forward the most sophisticated single reform plan. TO encourage managed care (of which more below) he would cap the tax exemption for health insurance at the cheapest insurance policy available. He would create state insurance pools under healthcare “sponsors” for those who cannot get coverage. Employers who did not give their workers insurance would have to contribute to a state pool an idea known as “play-or-pay”. Congress’s Pepper commission, which reported in 1990, also wanted a play-or-pay plan. But such employer mandates would increase business costs, and without firm cost controls they might lead to more overall spend on health care. Individual mandates. The Heritage Foundation, a right-wing think-tank based in Washington, DC, is touting a plan that would replace the employee-tax exemption by a tax credit to help people buy their own health insurance. The government would require everyone to take out “catastrophic” health insurance a long-stop protection against the biggest medical bills. Potting the burden on individuals sounds attractive, but it would make it harder to avoid adverse selection by both insurer and insured. As a variant, a government commission headed by Deborah Steelman has been considering replacing both Medicare and Medicaid with catastrophic coverage for all. More patient charges or what are known in the jargon as “co-payments”. But these are already high, in both the private and the public sectors (on some estimates, old people now pay as much out of their own pockets for health care as they did before Medicare). And if they are pushed too far, people simply take out extra private insurance. Managed care in HMOS or PPOS (preferred-provider organisations that offer more choice of doctor and hospital than most HMOS). This still looks the most promising option. About 70m Americans now belong to a managed-care plan. Some plans do little more than insist on second opinions before surgery. But the best of them offer patients all the care they need for an annual prepayment, reversing fee-for-service medicine’s incentive to excessive treatment. HMOS have been touted as the answer for American health care since Paul Ellwood, a health economist, coined the phrase in 1972. But after a one-off cut in costs, their spending growth has since matched the inflation of the fee for-service sector. Many HMOS have lost money; some have gone bust. No wonder Bob Evans of the University of British Columbia says that “HMOS are the future; always have been and always will be.”
Is America ready to make any changes to its chaotic system at all? One day, it must: the uninsured are a growing embarrassment; spending cannot rise for ever; growing paperwork will become intolerable; increasing interference in doctors’ clinical judgments will provoke revolt. But the short-term prospects for reform are poor. The White House appears to think that any change would be politically riskier than letting the system bumble along as it is. As for the Democrat-controlled Congress, it was badly burnt when it expanded Medicare to cover catastrophic health-care costs in 1988, only to be forced to retract it in 1989 when the better-off elderly objected to paying extra taxes. In recent months the Democrats, especially in the Senate, have gingerly begun to discuss changes in health care. Some hope to make a version of national health insurance a big issue in the 1992 election campaign. The biggest problem for Republicans and Democrats alike is the mulish conservatism of America’s powerful interest groups. John Ring, president of the American Medical Association, says his organisation is firmly against national health insurance, or any plan that involves a single payer. (It might horrors reduce doctors’ incomes from their present average of $150,000 a year.) Insurers and private hospitals similarly guard against invasion by “socialised medicine” especially of the iniquitous British variety.
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Andrew Sandon

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Obama Heath Care Reform Update on H.R.3590

March 29th, 2010 admin Posted in health insurance reform, health reform, healthcare reform, obama health reform, obama healthcare reform, obama healthcare reforms 1 Comment »

While the dust has not settled on the Obama health care reform bill  which was signed into law, I am attaching several good summaries of the bill as it impacts insurers and coverages. There will likely be a series of amendments coming as the House and Senate finalize their deliberations on the bill.

There are several provisions that will go into effect shortly after the bill is finalized.

  • Prohibition on lifetime limits
  • Yet to be determined restrictions  on imposing annual limits on “essential health benefits”
  • Rescission restricted to fraud or intentional misrepresentation (effective 6 months after enactment) For us this is a non event since these are the only conditions today that we would rescind coverage for.
  • Requires plans to cover preventive health services with no cost sharing (6 months after enactment)
  • Extends dependent coverage to 26 (again 6 months after enactment)
  • Several new requirements on consumer information plans must provide
  • Emergency room coverage can’t impose out of network cost sharing  (6 months after enactment)
  • Requires plans to establish an appeals process for coverage or claims disputes (we already have that)
  • No pre-ex for children under the age of 19 (6 months after enactment)
  • A temporary national high-risk pool will go into effect within 90 days of enactment
  • Imposes medical loss ratio requirements on individual and small group plans commencing in 2011 (Definitions and supporting rules will be developed by the HHS Secretary and the NAIC) As a note, currently state insurance departments who  govern rates and rate increases in the individual and small group market require actuarial documentation justifying the rates being charged. The measurement generally focuses on “lifetime loss ratios” meaning the average loss ratio expected over the life of the policy. There has been a considerable amount of discussion between the house and the senate and the NAIC regards this measurement issue. At present this is supposed to be worked out and be finalized by the end of November, 2010.

Most of the other provisions that will affect our business are slated for a 2014 effective date. That’s a long way off. But one thing is for certain, premiums will increase in the individual market. Between the imposition of no medical underwriting/guaranteed issue, a 3 to 1 age band (which incidentally will drive up rates for  25 year olds by 60%, for 30 year olds by 48%, and for 35 year olds by 28% given our current age banded rates), unisex (which again will increase rates for males under age 55 by anywhere from 10% to 20%) females will get a corresponding reduction so it won’t materially impact families, coverage parity for mental nervous ( this could be a huge inflator given guaranteed issue), an ineffective mandate which may depending on the penalties for “late enrollees” allow for people to wait until they come down with a serious medical condition to buy coverage, to name a few drivers of premium increases.

The bill does allow policyholders who have coverage in force prior to 2014 to retain their coverage presumably for as long as they want.

The CCH Tax briefing does a good job of explaining how the premium tax credits for people between 100-400% of federal poverty would work. So the presumption is that  while rates will go up in the  individual market the poor folks get a break. Notice however that there is no adjustment for age. At present the tax credits are only available if coverage is obtained through a state insurance exchange (which coincidentally many states are already fighting)

I also am including a letter from NAHU talking about the role a Certified Health Care Access Advisor should play for exchange customers. Please note that one of my roles at AHIP has been to work with NAHU on developing a certification program for health insurance agents. That work is nearing completion.

While Obama Health Care Reform it is a long way off, I believe the best service an agent can offer their customers is to ensure they have a plan in force before 2014 and advise them it is not in your best interest to wait unless you are likely to be eligible for a huge tax credit,  are old enough that the 3 to 1 age rule won’t have a big impact,  or  are either an older male or a younger female.

I will continue to provide updates as appropriate.

Ben Cutler

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