With this post, I am going to take a brief respite from the political commentary and post a recollection of a personal note.
Back in the early 1980's, I worked at the Cummins Engine Company in Indiana in various IT positions eventually advancing to the position of a CIM (Computer Integrated Manufacturing) specialist. CIM was the organization of computers, machine tools, robots, automated inspection stations, etc. to produce a product in a way that promised huge leaps in productivity and quality. CIM was intended to eventually lead to the near fully automated factory which, at the time, was frequently referred to as the "lights our factory". Most of the technology used by CIM was available off the shelf and the challenge was to integrate the technology so as to enable automated manufacturing. At that time, CIM was new and CIM specialists needed to be proficient with all major IT technologies as well as know manufacturing methods. I might install and configure a database such as Oracle one day, install an operating system on VAX computer another day or write some custom software another day. Consequently, we CIM specialists were very rare. I used to say frequently that I loved my job and would not want any job where I couldn't make a ton of metal dance with the press of an ENTER key.
In around 1985, I was the CIM specialist working on a project to implement an automated machining cell (computers, machine tools, robots, etc.) to produce replacement water pumps for diesel engines. Diesel engines can be rebuilt and consequently last for maybe 20 years. Consequently, with the different engine series and engineering changes to each engine series over the years, there were hundreds of water pumps that might be ordered. Long story short, the project was a huge success and, at the time, was ranked as being in the top 100 factory automation installations in the world. I was invited to speak at major trade conferences and participated in a project with Purdue University to assist the university in designing courses for manufacturing technology.
In 2000 while driving to Florida, I stopped in Indiana to see a friend with whom I had worked on the water pump manufacturing automation project. He explained to me that Cummins had decided to outsource as much manufacturing as possible to reduce costs and the water pump cell had been sold to a former manufacturing engineer at Cummins who was producing the replacement water pumps required by Cummins on a contract basis. My friend asked if I would like to see the equipment that I had worked on so we went to see it. As it happens, the manufacturing engineer who purchased the equipment had a side line business as a pig farmer. In the middle of his pig farm, he had erected a large metal building in which he had installed the machine tools shorn of all the computers and robots. What had been one of the most advanced manufacturing installations in the world was now sitting in a building next to piles of pig manure.
I suppose that there are several lessons in this story. Be proud of what you do and not what you have comes to mind as being at the top of the list. With some changes to the software perhaps I could have made pigs dance.
Thursday, July 30, 2009
Sunday, July 19, 2009
Selection of a Supreme Court Justice and Sotomayor
Regarding nominee Sotomayor's comment that she would bring empathy to the Supreme Court, empathy is subjective and objectivity, not subjectivity, is what is required in a judge. A Supreme Court justice is human and will have personal subjective views like anyone else but this empathy or subjectivity should be left at the door. This is no more than is expected of each of us when we serve on a jury.
As far as the selection of a Supreme Court Judge, nominees are confirmed by the US Senate by a simple majority vote. Since Supreme Court Justices are confirmed for life, I think that there is an argument to be made that the confirmation should require a super majority vote rather than a simple majority vote. Judges confirmed by a super majority would tend to be more middle of the road and the confirmation proceedings would be less divisive.
It is unfortunate that the confirmation proceedings are more about Senators appealing to their constituents and grand standing rather than a real job interview. It would be helpful to know how a judge goes about interpreting the Constitution and the law. For instance, using part of the 2nd Amendment as an example which reads "the right of the People to keep and bear arms shall not be infringed" how would the nominee determine the definition of the word arms. Would it be appropriate to use available reference material written by the people who wrote the Bill of Rights such as the FEDERALIST PAPERS to reach a definition of the word arms? Assuming that the word arms was defined as any weapon that could be carried in a persons arms such as a rifle, would the word arms only include flint lock rifles such as existed at the time the 2nd Amendment was written or is it appropriate for a judge to 'update' the definition to include modern weapons that can be carried in the arms such as an assault rifle? How are limitations to rights justified and determined? For instance, using the above example, what is the constitutional justification for excluding the right to minors and convicted felons?
Also, how would a judge weigh competing constitutional rights? Take the rights of Freedom of Speech and Right to Privacy in the context of telephone marketing which are competing constitutional rights. How does a judge make a determination which by necessity limits the constitutional rights of one of the parties?
I'd rather know more about how a nominee goes about making a legal decision rather than hearing campaign speeches from the Senate.
As far as the selection of a Supreme Court Judge, nominees are confirmed by the US Senate by a simple majority vote. Since Supreme Court Justices are confirmed for life, I think that there is an argument to be made that the confirmation should require a super majority vote rather than a simple majority vote. Judges confirmed by a super majority would tend to be more middle of the road and the confirmation proceedings would be less divisive.
It is unfortunate that the confirmation proceedings are more about Senators appealing to their constituents and grand standing rather than a real job interview. It would be helpful to know how a judge goes about interpreting the Constitution and the law. For instance, using part of the 2nd Amendment as an example which reads "the right of the People to keep and bear arms shall not be infringed" how would the nominee determine the definition of the word arms. Would it be appropriate to use available reference material written by the people who wrote the Bill of Rights such as the FEDERALIST PAPERS to reach a definition of the word arms? Assuming that the word arms was defined as any weapon that could be carried in a persons arms such as a rifle, would the word arms only include flint lock rifles such as existed at the time the 2nd Amendment was written or is it appropriate for a judge to 'update' the definition to include modern weapons that can be carried in the arms such as an assault rifle? How are limitations to rights justified and determined? For instance, using the above example, what is the constitutional justification for excluding the right to minors and convicted felons?
Also, how would a judge weigh competing constitutional rights? Take the rights of Freedom of Speech and Right to Privacy in the context of telephone marketing which are competing constitutional rights. How does a judge make a determination which by necessity limits the constitutional rights of one of the parties?
I'd rather know more about how a nominee goes about making a legal decision rather than hearing campaign speeches from the Senate.
Thursday, July 16, 2009
Health Care Reform and Costs and Savings
There are several proposals in congress in the area of health care reform which would raise costs to the insurers including the Schumer plan which would add $10b in fees per year to insurers and requiring insurers not to charge more for policy holders with pre-existing conditions. Any reform which raises costs to insurers without capping premium prices or reducing costs will just result in the insurers passing on the increased costs to policy holders and increasing the cost of medical coverage. I see only two ways to make sure that premiums do not rise to offset the additional costs which are:
1 - A public plan similar to medicare. Competition with the public plan would prevent insurers from continuing the double digit annual premium price increases.
2 - Price controls. Capping the premium charges at there current level and only permitting annual premium increases in an amount equal to the annual increase cost of health care as measured by the Bureau of Labor Statistics (BLS). The BLS currently collects health care pricing by region and metro area for a range of health care services. Per the BLS, health care costs have been rising by about 8% per year by premium charges have been increasing at double digit rates.
As far as how to pay for health care reform, following are some options with the annual potential savings.
1 - A public plan similar to medicare. Competition with the public plan would prevent insurers from continuing the double digit annual premium price increases.
2 - Price controls. Capping the premium charges at there current level and only permitting annual premium increases in an amount equal to the annual increase cost of health care as measured by the Bureau of Labor Statistics (BLS). The BLS currently collects health care pricing by region and metro area for a range of health care services. Per the BLS, health care costs have been rising by about 8% per year by premium charges have been increasing at double digit rates.
As far as how to pay for health care reform, following are some options with the annual potential savings.
- $10.0 b - Negotiate Medicare Part D pricing. The US House Oversight committee estimates the 10 year savings at $156b.
- $0.5 b - VA pension decrease resulting from universal coverage. The VA provides pensions to certain groups of veterans or surviving spouses based on income and health care premiums are subtracted from income so a reduction in premium costs would reduce the pension amount paid.
- $7.1 b - Per the IRS, in 2006, federal tax revenues were reduced by $14.3 b due to deductions from income for medical expenses. Keep in mind that only those medical expenses that exceed 7.5% of adjusted gross income are deductible. If everyone had insurance then medical deductions would decline significantly. I also think that some thought should be given to removing the deductibility for elective procedures such as plastic surgery.
- $17.0 b - Per the American Hospital Association, uncompensated costs in 2007 for US hospitals was $34 b. These costs for services rendered but not paid for, typically for services provided to the uninsured, are shifted to paying patients. If everyone had insurance then uncompensated costs should decline dramatically. I expect that other health care providers such as labs and doctors also have significant uncompensated costs which are also passed on to paying patients.
- $30.0 b - Tax 20% of the value of employer provided health care benefits. Per the Heritage Foundation, $150b per year is lost in federal tax revenues by not taxing health insurance benefits. All other employer provided benefits such as day care credits or 401K contributions have an annual limit of the amount that is deductible. Also, in terms of fairness, it doesn't seem fair that 100% of health care premiums paid by an employer are tax deductible while, for someone who pays for their own health care premiums in an individual plan, only the costs which exceed 7.5% of adjusted gross income are deductible. Employees, especially unions, too frequently are against this because they think that they will lose benefits. What they don't understand is that higher health care costs incurred by their employers causes the employer to cut other benefits and reduce wages and to use more part-time and contract employees for whom the employer typically does not provide benefits.
- $2.2 b - Require a $2 co-pay for prescriptions covered by Medicare Part D. I found it amazing that each year there are 1.1 billion prescriptions filled by medicare recipients. I think it only fair that everyone share in cost of health care reform that will benefit everyone.
- $20 b - More actively fight medicare and medicaid fraud. US Attorney General Eric Holder estimates that the annual cost of Medicare and Medicaid fraud to the taxpayer is at least $60b.
- $10.9 b - More actively fight Social Security Disability fraud. Keep in mind that most people who are awarded Social Security Disability are also able to use Medicare. Social Security Disability payments are $109b per year and rising fast. At a minimum, the Feds should more frequently review medical conditions of recipients to ensure that disability awards are still warranted. To get an idea of how much waste and fraud there is in the system, see the NY Times article or an article on Medicare fraud in Miami.
- $ ? - When a chemically identical generic is available, require Medicare & Medicaid recipients to use the generic. Most private insurers such as Blue Cross will only pay for generics in this case so why not the government? As an example, a 30 day supply of the brand name drug Zocor for cholesterol is about $150 while a 30 day supply of the chemically identical simvastatin is about $6. Also, Medicare and Medicaid could reduce costs by not paying for prescriptions which are available over the counter such as high dose Tylenol.
- $ ? - In 18 states, personal injury protection (PIP) coverage on auto insurance policies is mandatory. PIP pays for up to $10K for medical expenses for people involved in auto accidents who do not have private medical insurance. If everyone had medical insurance, I don't see why PIP would continue to be included on auto insurance policies. In Florida, I pay about $250 per year in auto insurance for PIP even though I have medical insurance because I might be in an accident with someone who doesn't have medical insurance. In Florida, there are about $1b per year in claims on PIP coverage so I woud assume that the auto insurers are collecting in excess of $1b per year in PIP premium charges.
Monday, July 6, 2009
Health Care Reform - Round 2
It appears that the main features of a reformed health care system are firming up and will include the following:
1 - Mandatory health care insurance for everyone although there will be an opt-out for those who claim financial hardship.
2 - No exclusions or additional premium for pre-existing conditions from private insurers.
3 - Annual premium increases from private insurers will be 1.5% less than what the increase would otherwise be.
4 - No public insurance option other than possibly cooperative insurance at least for the 1st 5 years following reform.
5 - Government subsidies for low and middle income families for premiums paid.
The net-net of the above is that private insurance premiums for everyone will probably increase and the private insurance companies realize significantly higher revenues and profits.
In the case of no exclusions for pre-existing conditions and no additional premium for medical issues that exist at the time that the policy is taken out, the insurers will just raise the premiums for everyone else in the age group to cover the higher costs associated with this new group. When I took out private health insurance from Blue Cross several years ago, my premium was increased 25% due to high cholesterol. I doubt that health care reform will require these existing surcharges to be removed but the insurers will not be able to levy these surcharges on new policies and will spread the surcharge over all policy holders.
In the case of mandatory insurance, the health insurers will add a large number of young, healthy policyholders which can only translate to higher profits.
Government subsidies will increase the number of policy holders above what it would otherwise be which will also increase insurers' profits. With the annual cost of health insurance increasing at double digit rates, the insurance industry must have realized that they were in danger of pricing themselves out of business. The subsidy will enable the insurers to keep increasing premiums at double digit rates without pricing themselves out of the market - at least for a few more years.
As far as increasing annual premiums by 1.5% less than what the premium increase would otherwise be, it will be almost impossible to determine whether the insurance industry is keeping to this promise. The premiums on my personal policy from Blue Cross has been increasing by 14% per year so even the lower annual increase of 12.5% which, if this is typical, will still eventually bankrupt the consumer.
An effective and significant health care reform would need to include the following characteristics:
1 - Mandatory health care insurance for everyone although there will be an opt-out for those who claim financial hardship.
2 - No exclusions or additional premium for pre-existing conditions from private insurers.
3 - Annual premium increases from private insurers will be 1.5% less than what the increase would otherwise be.
4 - No public insurance option other than possibly cooperative insurance at least for the 1st 5 years following reform.
5 - Government subsidies for low and middle income families for premiums paid.
The net-net of the above is that private insurance premiums for everyone will probably increase and the private insurance companies realize significantly higher revenues and profits.
In the case of no exclusions for pre-existing conditions and no additional premium for medical issues that exist at the time that the policy is taken out, the insurers will just raise the premiums for everyone else in the age group to cover the higher costs associated with this new group. When I took out private health insurance from Blue Cross several years ago, my premium was increased 25% due to high cholesterol. I doubt that health care reform will require these existing surcharges to be removed but the insurers will not be able to levy these surcharges on new policies and will spread the surcharge over all policy holders.
In the case of mandatory insurance, the health insurers will add a large number of young, healthy policyholders which can only translate to higher profits.
Government subsidies will increase the number of policy holders above what it would otherwise be which will also increase insurers' profits. With the annual cost of health insurance increasing at double digit rates, the insurance industry must have realized that they were in danger of pricing themselves out of business. The subsidy will enable the insurers to keep increasing premiums at double digit rates without pricing themselves out of the market - at least for a few more years.
As far as increasing annual premiums by 1.5% less than what the premium increase would otherwise be, it will be almost impossible to determine whether the insurance industry is keeping to this promise. The premiums on my personal policy from Blue Cross has been increasing by 14% per year so even the lower annual increase of 12.5% which, if this is typical, will still eventually bankrupt the consumer.
An effective and significant health care reform would need to include the following characteristics:
- Single payer
- Mandatory coverage
- Negotiated prices with all providers
- Emphasis on preventing fraud
- Higher co-pays for everyone including Medicare recipients. A $120 per year calendar year deductible is too low.
- Generic drugs required if available
- Electronic, centralized health and treatment records
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