Employer Coverage Slipping

Health reform shifts the burden of health insurance from employers to individuals and a tapped out Uncle Sam.  The Congressional Budget Office predicts in 2019 employers will insure 14 million fewer Americans than they did in 2008.  The drop is significant as America's population will have grown by 38 million people.

SEIU President Andy Stern said in 2006 that employer health insurance was "dead and not coming back."  Stern served on President Obama's health reform workgroup, supposedly representing the interest of workers..

Texas has the dishonor of having the highest number and percentage of uninsureds in the U.S.  Things are getting worse on the employer coverage front.  San Antonio Express reported:

As employers and workers struggle to absorb the skyrocketing cost of health insurance, fewer Texans below age 65 are opting for coverage through their jobs.

In 2008-2009, 51.5 percent of the state's nonelderly population enrolled in a plan through an employer, down from 62 percent in 1999-2000, according to a June study from the Robert Wood Johnson Foundation and the State Health Access Data Assistance Center.

Nationally, the share decreased by 8 percentage points to 61.4 percent in 2008-2009.

The rest of the country dropped to Texas 2000 levels, while the Lone Star state continued growing legions of uninsureds.  This study speaks to the first leg down, the drop from the blue bar to the brick colored bar in the chart above.  That represents 15 million losing employer health insurance.

The second leg down, the move from the brick bar to the green bar, kicked off with the financial crisis and will choke millions of Americans before health reform "rides to the rescue" in 2014.  That's a drop of 35 million people from employer coverage.  Illustrating this point, the City of San Angelo sent nearly 200 people off their health insurance rolls with draconian premium increases for dependents in January 2011. 

Peter Orszag's "political economy of delayed implementation" is a four year window of suffering for over 50 to 80 million Americans.  One could interpret the bill as setting the stage for for-profit health care companies and private equity underwriters (PEU's) to make grand returns in a bifurcated health care system, where safety net hospitals are called "private tax exempt facilities."  

It's hard to see how health care costs will go down as companies are bought for five times their original investment, in the case of Nancy-Ann DeParle's CareMore, or nearly four times total assets, in the case of TPG Capital's purchase of Immucor.  PPACA clearly set the stage for employers to slowly shed that pesky health insurance benefit.   Who will pick up their slack, suffering individuals, an empty pocketed Uncle Sam or the few remaining "private tax exempt facilities"?

(Click on the graph to view it larger.  This is updated from a March 2010 graph)

Blose's ASU Replacement: May

President Rallo formally announced two internal promotions. 

I am pleased to announce to the campus the appointments of Dr. Brian J. May as Interim Provost and Vice President for Academic Affairs and of Dr. Jason Penry as Vice President for Development. Drs. May and Penry have proven records of success at ASU and will be instrumental in helping us reach our university goals.

Dr. May joined the faculty in 1994 and has served since 2009 as dean of graduate studies, where he has overseen record enrollments. He will serve up to two years as interim provost and is eligible to apply when a full national search is conducted.

A full national search for Provost and Vice President of Academic Affairs culminated in April 2010 with the selection of Anthony Blose.  The perfectly suited match crumbled in less than a year. 

As for the appointment of May, one longtime ASU staffer with over ten years tenure offered:

Dr. May was never a department head. He was promoted to Dean of Graduate Studies (without department head experience) because the College of Graduate Studies has no actual faculty. The faculty who teach graduate classes report to the deans of their respective colleges. For example, a Mathematics professor who teaches a graduate Mathematics class reports to the Dean of the College of Arts & Sciences (formerly the College of Sciences). So, Rallo, in all his wisdom, has put a person who has NEVER managed faculty in charge of ALL faculty for two years. 

How long before Roscoe gets a VP job?  At least Roscoe can lift spirits when things look down.

Update 7-10-11:  The source for the comment on Brian May started a web site to chronicle ASU's sad stories.   It's called West Texas Matters.

ASU's Fifth VP Makes Rain

Angelo State University announced the promotion of Jason Penry from Executive Director to Vice President of Development.  The move comes while ASU eliminates and downgrades other positions. 

ASU President Joseph C. Rallo said the promotion acknowledges the development team’s unprecedented fundraising success at Angelo State.

Rallo stated the university created a new Vice President position in the midst of draconian budget cuts.  The press release went on to say:

This was a huge undertaking, but he knew it could be done because of his faith in the donors, alumni and friends of ASU.

Who knew a miserly state legislature would light a fire under alumni donors?  I expected alumni to write their state legislators.  Instead, they wrote a check.

How many wrote checks to save the ASU Honors Program, the elimination of which was bungled by other leaders, President and Vice Presidents? 

How much will Penry's salary go up from its current $95,000?  Other VP's make $148,000, $172,000, $172,000 and $160,000.

Interestingly, the VP with the lowest pay has been with ASU the longest (four years), not a surprise given the university's willy nilly wage and salary program.

Rainmakers get the rain.  Can ASU get Penry working on the big guy.?  Things are looking blighted.

U.S. Population Growth Dependent on Immigrants

The United States is expected to grow from 311 million to 423 million in 2050, keeping the U.S. the third most populous country behind India and China.  Not mentioned in these projections is the role immigrants are projected to play in growing America.

The basic international migration assumptions for the original projections included assumptions about levels of in-migration (both legal immigration and unauthorized in-migration) of the foreign born to the United States and about rates of emigration from the United States. Net immigration in the previous projections was 912,000 in 2025 and 984,000 in 2050. In the new interim series, net immigration is 996,000 in 2025 and 1,097,000 in 2050.

It's roughly 1 million immigrants (legal and illegal) per year.  Over 40 years, that's 40 million immigrants or 36% of the growth.  Where will they enter, Ellis Island or El Paso?  I can't predict, but America's leaders clearly count on more poor, tired and huddled masses coming to our shores.

Update 10-12-14:  Immigrant growth can be seen clearly in one simple picture.

Medicare's Coming Fraud-a-Palooza

Giant health insurer UnitedHealth settled with the federal government for a decade long period of stock option cheating by executives.  Consultants once touted stock option compensation as the "most pure" form of incentive compensation.  UnitedHealth CEO William McGuire personally profited until caught with his hand on the backdating pen.  AMED News reported:

William McGuire, MD, the former chair and CEO of UnitedHealth Group, resigned in 2006 after an investigation into stock option backdating. Though he never admitted wrongdoing, Dr. McGuire returned stock in the company and settled with the Securities and Exchange Commission and shareholders who sued him over the backdating scandal.

Bloomberg cited in 2006:

McGuire is the most visible CEO to leave his job in the continuing probe into options-granting practices at U.S. companies.

At least 144 companies are conducting internal investigations or are subject to government probes on the matter.  From 1994 through 2005, McGuire realized $333 million in option gains.

Nearly 30% of stock options were backdated, i.e. had executives cheating shareholders, the very owners of the company.  No program, no cheating.

Medicare is implementing at least three incentive programs, Value Based Purchasing, Accountable Care Organizations and Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS).  All reward providers who "perform."  Most performance is in relation to peers, which means not every provider can get the prize.

These programs have the same foundation as stock option compensation, people need to be extrinsically motivated to do a good job.  Extrinsic motivators are powerful drivers of behavior in the short run, slightly improving results in simple tasks able to be performed by an individual.  Add complexity and interdependence to the work and extrinsic motivators can make things worse than having no incentive scheme.  It's disturbing that board room compensation philosophy is infecting America's health care system.  If almost a third of executives can cheat, what will doctors and nurses do?

Combine management's obsession with results and heavy-handed consequences for failure, and cheating is bound to explode.  Both practices are epidemic in today's world, seemingly unnoticed by leaders.  The William McGuire's and executives at 144 other companies are seen as aberrant, instead of instructive.

Rick Scott's Columbia/HCA settled for $1.7 billion for upcoding case severity and paying physicians for referrals.  No investigation cited Scott's heavy handed, results obsessed management.  Leaders were told to achieve the targets or the company would "find someone who could."  Fear drives bad figures.  Threats of punishment produce unethical behavior from ethical people.

Fraud investigations rarely evaluate management philosophy and practices at the executive level.  They avoid the Board altogether, although this is the primary source of distorting incentive compensation practices.

Medicare expects more cheating, as they implement fraud producing systems.  Otherwise, why would they target executives?

US federal enforcement officials are now targeting corporate executives over alleged healthcare fraud as opposed to merely targeting companies and negotiating with corporate lawyers.

The government is bearing down on companies which actively engage in the healthcare industry with a specific focus on Medicare and Medicaid. 

Under the shift in enforcement corporate executive can be held on criminal charges for corporate actions, even if they were not directly involved. Further, they can be banned from working in the healthcare industry.

I conclude Medicare expects millions to billions in future fines, as the opportunity for cheating expands exponentially under pay for performance.  It's a new revenue source, not yet accounted for by the Congressional Budget Office.

Extrinsic motivators kill intrinsic motivation, the internal desire to do a good job   Medicare's plans will turn health care into a chore for providers.  Many will focus on incentive pay instead of the good work to be done.  When the short term adrenaline rush of the first few rewards pass, many will say "you can't pay me enough to do this job."

Complex pay schemes based on competition and scarcity is not the answer to health care's myriad of problems.  How long will it take the system to shed this growing cancer?  First, this deadly disease must be diagnosed.

Update 5-30-23:  HuffPo's "The Golden Age of White Collar Crime" stated:

32 percent of American managers said they were comfortable behaving unethically to meet financial targets.

COSA ERRP Update

The City of San Angelo was approved for Early Retiree Reimbursement Program on August 31, 2010.  As of mid March 2011 many Texas cities received ERRP reimbursement.  San Angelo is yet to receive a penny due to the inability to properly prepare and submit claims.  City Council approved an agreement that has Blue Cross/Blue Shield doing the work.  Lisa Marley, Director of Human Resources and Risk Management reported:

The agreement was executed with BC/BS.

No claims have been filed to this date. Presently with BC/BS, members and dependents have the same ID number. ERRP requires individual ID numbers. BC/BS is developing a solution for the numbering system for dependents of members. 

There's a limited pot of ERRP money.  It's not clear how many quarterly filings COSA will get before the fund runs out.  How much ERRP funding will the City have by the time it makes health insurance decisions for 2012?  It remains to be seen.

ASU Tuition Raid

Angelo State University joined the Texas Tech University System in May 2007.  Since that date, tuition and fees increased 60%.  Here's the data pictured above:

Tuition and Fees (15 credit hours in a semester)
2006 -- $2,298
2007 -- $2,555
2008 -- $2,705
2009 -- $3,068
2010 -- $3,344
2011 -- $3,675 

That's a $1,377 or 60% increase over five years.   A number of ASU professors found past tuition increases disturbing. 

Dr. Rallo took a consistent stand on increases:

2007 -- "Tuition increases are very difficult decisions,” said Dr. Rallo. “Historically, ASU has maintained affordable tuition and will continue to do so. However, without additional increases in state funding, it will be necessary to provide the required funds through tuition increases to offer the level of education students expect and we will provide.”

2008 -- ASU President Joseph C. Rallo said, “Even with the increase Angelo State remains one of the best educational values in the nation and the state, particularly when you consider the quality of the education and the amount of scholarships and financial support we provide our students.”

2009 --ASU President Joseph C. Rallo said the new tuition charges will help enhance the quality of the Angelo State educational experience through broadened student services, including student retention, and will increase the value of an ASU degree in the work place through additional accreditations being sought from the National Council for Accreditation of Teacher Education and the Association to Advance Collegiate Schools of Business.

Rallo said ASU is committed to both keeping a college education within reach of the average Texas family and to enhancing the educational experience of its students. He indicated that the full impact of the increase in tuition and fees will only be felt by a minority of ASU students due to the university’s strong program of gift aid – financial assistance which does not require repayment.

2010 -- “We are mindful both of costs and of our need to grow,” said ASU President Joseph C. Rallo.  “Even with the increase, Angelo State remains one of the best educational values in the state and our extensive gift aid program means that two-thirds of ASU students on average pay only 25 percent of the actual cost of attendance because of the university’s financial support.”

Over the last decade, Rallo said tuition increases had been used to address immediate needs without providing strategic funding to build the academic programs necessary to grow enrollment.  Rallo said the new tuition rate will provide the resources for growth of academic programs and to strengthen summer school offerings.  Additionally, he said the increase will help address a state-mandated 5 percent reduction in appropriations without detrimentally affecting existing programs.

“We are committed to expanding our programs and our enrollment because in the long run that will help keep our costs down,” Rallo said.  “For every 500 additional students we enroll, we get back from the state an additional $3.7 million in funding.  This increase will help us build the programs necessary to attract more students.”

2011 -- “Angelo State University,” said Rallo, “remains committed to keeping a college education within the economic reach of all families. Since 2007 we have increased our scholarships and federal assistance from $18.5 million to $34.5 million. Despite the increases in tuition since then, the average out-of-pocket cost per student over the last four years has actually decreased, and we remain one of the best educational values in the nation.”

From here, it's expensive...

(Click on the graph above to view it larger.)