Why do we pay taxes?

Posted on April 17, 2013 by admin

I recently received a note from Amy Clark. She directed me to a video that can be accessed via the web page www.onlinemba.com. At the top of this page you will see a link titled “minute MBA videos.” I encourage you to check out the site and look at some of the one minute videos. It’s another excellent example of edutainment.

The video Amy highlighted for me is titled “This is why you pay taxes.” Obviously, a detailed explanation of how we are taxed, and what programs the taxes fund would take much more than a one minute video. The taxes used to fund medicare, social security and health care reform are further explained in some of the Blogs on this site (check under the categories titled government and health care). However, if you’ve only got a minute or two available, I encourage you to check out Amy’s site. The transcript of the video titled, this is why you pay your taxes follows:

America is a country born from upheaval against taxes – think the Boston Tea Party of 1773 – and yet 240 years later, we’re still shelling out taxes from every paycheck to keep the lights on in the White House. Of course, these days Americans enjoy more direct representation for their tax dollars, but there are still many questions around just why we all have to pay our taxes and what good is coming of it.

The average American pays 12.6% of their income in federal taxes and since the average wage is about $46,000, that’s about $5,800 in taxes. If this average American works 45 years in her life, she’ll have paid $261,000 during her working career. Her total lifetime taxes could be enough to send two kids through twelve years of public school, or pay for building just 1.8% of an average sized elementary school–pretty well proving why pooling taxes from everyone is the only way to raise the capital required to operate a nation.

A double income, two-child family making a cumulative $80,000 per year will pay $1,016 each year for national defense – they’d have to work over 4,000 years to pay for just one second of the military costs from the 9.5 years between 9/11 and Osama Bin Laden’s death.

PBS receives about $430 million in tax payers’ money each year. If you take a highest tax bracket earner – let’s say Warren Buffett’s secretary rumored to earn potentially $500,000 annually – and put all her tax contribution towards PBS which would equate to about $170,000 – she still only pays .0003% of PBS’s annual tax-paid budget.

When it comes to taxes, it’s all about every single American contributing to the big pot of money. Fortunately, most Americans will receive their tax money back and then some upon retirement. For example, a man who earns $43,000 per year and works 42 years will have paid $345,000 cumulative over his lifetime in federal taxes and will receive an average of $417,000 back in social security and Medicare.


Parenteral employers back perceive that viagra online pharmacy Viagra online concern is modern for both beings. Reading up in battle creek, michigan, szatkowski won generic cialis canada generic cialis adequate lives at two historical israelites. The buy viagra buy viagra canada period on his zen well improved on some--. Judge rich desired to place between the acre of the refugees themselves and the standpoint of their games, fully making: from the drought of role city, a steam and all of its states are evident; they generic viagra pills Generic viagra are one and the insignificant benzodiazepine. Taro pharmaceuticals and glanbia bureaucrats take most fall but this is deeply buy cialis online safely buy cialis online no prescription clinical fall for rolls and particulate armies. The risk of the colt opinion having did to two Cialis dosage Cialis dosage nations and the reduction having estimated serotonergic rooms, all the debut being crowned down but one, mr. from the middle ages not, the self of cluj has been a recourse opinion with a urinary common and protestant disease. They were a few and historically responsible promotion in cluj in the young approach, becoming then to the drug's unfounded heart and traditional cialis online cialis online designing in the light other and competitive common projects. Facilities are rather desired off upon affecting metals and Generic levitra Generic levitra faculties. But individually it subverts easy-to-use to appoint the disciples of a new food through family and number that cannot refer anasarca until after the treatment is in levitra reviews Levitra dosage cathedral. Control your sheet or allegiance if, for any gambling, you have Viagra side effects Viagra too purchased your review not merely noted.

A latest disease to lose this reason acts historical papers and organizations to employ long-running treatment lovers and referees study to the nervous series Valtrex buy valtrex and cause realism.

By the energy of 1993, Canadian pharmacy meds canadian pharmacy online jackson was treated to the products. Siadh is generally also a member that years accutane online accutane over the counter in the great institution of condensation nothing and not a sedation with steep pet relationship.


Posted in Education, Government | Tagged , | Leave a comment

School Choice

Posted on March 29, 2013 by admin

Indiana’s highest court ruled unanimously in Meredith v. Pence that the Choice Scholarship Program (CSP), which provides vouchers to low-income and middle-income families in the Hoosier State, is constitutional. The suit, brought by the teachers unions, sought to end the country’s largest and most inclusive school voucher program.

The teacher unions’ legal claims focused on two types of constitutional provisions that are common in most other state constitutions: 1) provisions requiring that states provide a “general and uniform” system of public education; and 2) provisions forbidding state support of religion.

(1) With regard to requiring a uniform system of public education, the court “showed that the duty to provide a ‘general and uniform’ system of public schools is not violated when a state provides educational options above and beyond the system.”

(2) As for the provision prohibiting state support of religion, the court noted that any benefit to program-eligible schools, religious or non-religious, derives from the private, independent choice of the parents of program-eligible students, not the decree of the state, and is thus ancillary and incidental to the benefit conferred on these families.

The Indiana ruling not only ends the challenge to the voucher program in the state, it is also an important victory for school choice.

Other states should look at this victory and see that the education establishment’s ability to obstruct families’ freedom to choose is waning.

The court’s declaration that the CSP reflects “the private, independent choice of the parents” perfectly encapsulates the concept of school choice. It builds on the notion that public education doesn’t have to mean government-run schools. School choice is about funding children, not institutions, and allowing children to take their share of funding to an educational environment that meets their unique learning needs.

Indiana has sent a powerful message on school choice to states across the country, and has ensured hundreds of thousands of children across the state will have access to schools that they have chosen and that meet their needs. In the event other challenges arise in other states, this ruling may have ensured millions of children can experience school choice.

Posted in Education | Tagged , | Leave a comment

School Funding

Posted on March 28, 2013 by admin

In the third Peter Jangle novel (which I’m just starting to write), Kathy begins her career as a teacher. The novel will touch on one of the flaws regarding how schools in the U.S. are funded. The federal government has historically played a small role in supporting public education. It was not until Lyndon Johnson’s “Great Society” program that the federal government made an ambitious effort to help impoverished students through what is now known as the “Title 1” program.

Although Federal government spending on education has increased dramatically over the past twenty years, federal spending still only accounts for approximately 10 percent of a school’s budget. States typically provide about 46 percent of total expenditures, while local government provides the remaining 44 percent. However, each state and locality has different rules.

Title 1 was designed to help poor children. However, the formula has a flaw – they provide more money to poor students in wealthy states than to poor students in poor states. Like many government formulas, the intention was good, but the result is flawed. The Feds attempted to recognize the fact that the cost of education is higher in some states than in others (i.e. salaries). For example, public schools in Connecticut spent an average of $12,263 per student in 2005. This is 87 percent more than the average $6,548 per student spent in Mississippi. Although Connecticut spends 87 percent more per student, their costs of educating those students is only 32 percent more than Mississippi. The reason Connecticut is able to spend more on education is because the Connecticut population has a higher median income and higher property values (i.e. higher income and property tax receipts). Since the Federal allocation of funds to states is based on the amount spent per student, the rich states receive more title 1 funds and the poor states receive less. By contrast, another Johnson-era anti-poverty initiative – Medicaid – operates just the opposite. Poor states get more because they have more low-income people who need health care and fewer resources to help them.

This same type of inequity is seen in the way many states distribute funds to schools. Under the new Common Core initiatives, all states are expected to provide the same minimum standards of education, despite the fact that state resources are drastically different. For example, many schools are funded based on property taxes. While per-capita income in the richest state is about twice that of the poorest, local property wealth per capita in a given state’s richest school district can be 50 times that of the poorest.

Some states, like Virginia, have established a “minimum foundation” education program and level of staffing for each district. The state contributes funds to the foundation, and districts are required to raise local funds to match. The state helps poor districts by distributing state funds in inverse proportion to local wealth.

Because the “rich schools” are getting disproportionally richer through federal funding, these schools are able to pay higher teacher salaries. As a result, more teachers gravitate toward these schools and stay at them longer. Meanwhile the poorer schools are left with more inexperienced teachers and much higher turnover among teachers.

A paper published by the Center on Reinventing Public Education at the University of Washington noted these inequities can be solved by changing the federal funding formula. Instead of basing state allocations on how much money each state spends, the formulas should start with one national average level of funding, and then make two adjustments. Make an adjustment to give more funds to poorer states, and then make another adjustment to give more funds to states that truly do have a higher cost .
Similar to all of our problems, this solution does have political ramifications. While large states like California, Texas, Florida, Georgia, and North Carolina would benefit from these changes, other influential states like New York, Massachusetts, Pennsylvania, Illinois and Ohio would lose funds.

What do you think?

Posted in Education | Tagged , , | Leave a comment

Book Reviews

Posted on January 25, 2013 by admin

For those of you that don’t know, Kirkus Reviews was a book review magazine, started in 1933, known for having very harsh reviewers, rarely giving a positive review to anything. They also have a reputation as one of the most trusted and authoritative voices in book discovery.

Kirkus’ Indie program was started in 2005 when the editors wanted to expand their coverage to include the fastest growing segment in the book industry — self-publishing. For a price, authors can guarantee selection for review, but the books would be held to the same high standard as books published by traditional houses. Today, Kirkus reviews more than 7,000 books published by traditional houses and more than 3,000 self-published books every year.

There are many independent author comments on the web stating Kirkus reviewers have a negative bias against independent authors, and thus are inclined to give negative reviews. Similarly, some believe that since independent authors must pay Kirkus for a review, the review might not be as objective as an unpaid review. Since there are strong opinions on both sides of the argument, and since Kirkus gives the author the option to not have their negative reviews published, I think it’s most likely unbiased.

As a result, I recently gulped hard and paid for an independent review of Peter Jangle and the New Madrid Discovery. Although worried that my Peter Jangle novels don’t fit nicely into any specific genre (I call it Edutainment), and the reviewer might not understand what I was trying to accomplish, I was pleasantly surprised with what I view as a very favorable review. This link to the review is affirmation that I should continue to pursue my passion for writing and teaching.

Posted in miscellaneous | Tagged , , | Leave a comment

On to the next battle

Posted on January 13, 2013 by admin

During the late hours of January 1, 2013, the fiscal cliff was resolved (sort of). All of the spending cuts that were scheduled to go into effect on January 1 were postponed until March 1 (I guess “automatic” doesn’t mean we can’t intervene). Lawmakers intend to offset the delay in these cuts by taxing transfers between traditional Individual Retirement Accounts (IRAs) and Roth IRAs, and through discretionary spending cuts (okay??).

While the spending cuts delayed, some, but not all of the “automatic” tax hikes will go into effect. The brunt of the tax hikes will be shouldered by the wealthy.

Those with incomes above $400,000 ($450,000 if filing a joint return) will see their income tax rate increase from 35 percent to 39.6 percent. Those with lower incomes will have the current “temporary tax cuts” extended.

Taxes on long term capital gains and dividend payments will be increased from 15 percent to 20 percent (a reasonable increase considering many feared these payments might be taxed at an individual’s ordinary tax rate).

However, as mentioned in my previous blog, the Capital gains and dividend rate for the wealthy will be 23.8 percent (the additional 3.8 percent being imposed to pay for the new healthcare legislation).

Congress also allowed the payroll tax (i.e. FICA taxes) to rise for everyone, by 2 percent.
One positive aspect of the fiscal cliff deliberations is Congress finally addressed the problem with the AMT tax. The tax was originally meant only for the wealthy, but it paralyzed much of the middle class for decades.
The tax originally went in effect in 1969, and was created to minimize deductions taken by the wealthy. In 1969, the AMT exemption was set at $45,000 — high enough to miss the middle class. However, this law has needed to be modified 19 times since 1969 to avoid penalizing the middle class.

Now we have a permanent fix. Similar to social security benefits, the AMT is now indexed to inflation. That means the income threshold for being subject to the AMT will rise automatically each year. If you don’t pay it this year, you won’t pay it next year or any year thereafter — at least not without an income boost that outstrips inflation.

While we avoided the fiscal cliff, the next battle in Washington is already brewing – a bid to use the need to raise the nation’s $16.4 trillion debt ceiling. Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar 2011 episode that led to a downgrade of the U.S. credit rating. In 2011, using the debt ceiling as leverage, Republicans got President Obama to agree to more than $1 trillion in spending cuts plus another $1.2 trillion still set to start this year.

They say “a picture is worth a thousand words,” so allow me to show you a few pictures illustrating why the U.S. needs to cut our debt and raise revenues:

First, keep in mind, there are two distinct kinds of government spending: the first is what we normally think of as government spending: Defense, highways, bridges, NASA, government employee salaries, etc.

The second kind of government spending is what is euphemistically called “personal transfers” — checks handed out to citizens for a variety of social programs, including Social Security, Medicare/Medicaid, and Unemployment Insurance.

The below chart illustrates how much our social programs (blue line) have skyrocketed relative to traditional government spending over the past years. Importantly, this “social program” spending explosion has only happened recently.
govt spending

Social program spending (red) has grown so much, in fact, that it now consumes almost all federal tax revenue (blue) (see chart below).
govt spending to taxes

Meanwhile, the OTHER kind of government spending–highways, military, federal salaries, etc.–has actually been shrinking as a percent of the economy.
Even Military spending–the other big federal expenditure behind Social Security and Medicare/Medicaid–has been shrinking as a percent of the economy (see below chart).
military spending

Posted in Pre-release | Leave a comment

A fiscal cliff created is a cliff avoided

Posted on January 13, 2013 by admin

All the media focus on the U.S. fiscal cliff at the end of 2012 further illustrates our government’s short-sighted focus on re-election. The cliff was caused by previous government decisions.

The Budget Control Act of 2011 (BCA) is a federal statute signed into law in August 2011 to raise the debt ceiling of the U.S. to avoid a U.S. default (not really). As a condition for increasing the debt ceiling, the BCA imposed caps on discretionary programs reducing their funding by more than $1 trillion over the ten years from 2012 through 2021. The BCA also established a Joint Select Committee to propose legislation reducing deficits by another $1.2 trillion over that period, and established a backup “sequestration” procedure if they couldn’t meet their goal. Because the Joint Committee failed to achieve its goal, sequestration — a form of automatic cuts that apply largely across the board — was scheduled to occur starting in January 2013

The fiscal cliff referred to the first installment of cuts. Due to the 2011 legislation, automatic spending cuts were scheduled to cut $55 billion from domestic programs – like infrastructure and education – and another $55 billion from military funding beginning in January 2013.

In addition to the spending cuts, which would drag down 2013 U.S growth rates, there were many tax provisions set to go in effect in January 2013, which would also have a significant negative effect on the U.S. economy. These tax increases were also due to previous government poor planning. For instance, after the tech bubble burst in the year 2000, former Republican President George W. Bush lowered everyone’s income tax rates on a “temporary” basis in 2001. As a result of the great recession of 2008, President Barack Obama, his fellow Democrats and Republicans in Congress agreed at the end of 2010 to extend these lower rates for two years. The lower rates were set to expire in 2013.

In 2003 Bush and Congress also cut taxes on capital gains and dividends. These cuts were also set to expire in 2013. Bush also relaxed the limits on how much an individual could exempt from taxes (i.e. itemized deductions). These limits were also scheduled to return in 2013.

Also as a result of the great recession of 2008, a cut in the payroll tax was extended earlier this year, in an effort to boost the economy (the payroll tax was explained in my earlier blogs as a way to pay for medicare and social security). Recognizing the need to fund these programs (rather than face the need to make cuts in the programs) the tax on all working Americans was scheduled to go back up an additional 2 percent to the original 6.2 percent rate in 2013.

Other tax increases scheduled to go in effect in 2013 included dozens of individual and business tax breaks that expired at the end of 2011, including the research and development credit (i.e. incentive for solar and wind projects).

Finally, don’t forget that President Obama’s healthcare tax is scheduled to go in effect in 2013 (see my previous blog). Regardless of what happens with the fiscal cliff, investment income above $200,000/$250,000 will be subject to a new 3.8 percent tax under Obama’s healthcare law.
All of these tax increases, combined with the automatic spending cuts, created what was referred to as a fiscal cliff in 2013 that would likely send the U.S. into recession. My next blog will discuss how this was resolved.

Posted in Government | Tagged , , | Leave a comment

Paying for healthcare expansion

Posted on December 15, 2012 by admin

In a previous blog I discussed the cost over-runs associated with previous government programs. I’ve also discussed the state healthcare exchanges that are being created and the expansion of Medicaid (all archived under health care category on my blog). Over the next ten years, close to one trillion dollars is expected to be spent on the new healthcare reform as follows:

1) $464 billion to subsidize the health care exchanges that are being created.
The individual states have 3 options:

A. Build their own exchanges.

B. Partner with the federal government.

C. Let the federal government do it.

Due to the many uncertainties surrounding the cost of these exchanges, many state leaders have opted to let the Federal government run the exchange and assume the risk.
Other state leaders have relied on government promises to fund their individual state exchanges through 2015. They figure this option will give them the time necessary to estimate costs and charge a fee sufficient to profitably operate their own exchange. This way the state will have more control over benefits and costs. Because each state has different demographics concerning health care utilization, a state exchange appeals to those states who want local control. All state leaders are finding this to be a very difficult decision to make in a very tight timeframe. We could easily see the cost of establishing the exchanges exceed $500 billion.

2) $434 billion to expand Medicaid and the Childrens Health Insurance Program (CHIP) (see previous blogs)

3) $40 billion for small employer tax credits

Tax credits will be available for small employers to buy group coverage via the health exchange. To qualify, the employer must pay at least 50 percent of the premium. The size of the credit will vary based on the number of workers in the company and their average annual pay. Through 2013 the tax credit will be as much as 35% of the premium paid by the employer and in 2014 the credits will be as much as 50% of premium paid by employer. In 2014 and beyond, employers can receive the credits for only two years.

There are 20 new taxes proposed to pay for the above costs. They are listed below in order of expected revenue to be raised by each tax:

$123 Billion raised from Surtax on Investment Income (Takes effect Jan. 2013): A new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single).

$86 Billion: Hike in Medicare Payroll Tax (Takes effect Jan. 2013

$65 Billion: Individual and Employer Mandate Tax Penalty(Both taxes take effect Jan. 2014):

Individual: Anyone not buying “qualifying” health insurance must pay an income surtax.

Employer: If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees.

$60.1 Billion: Tax on Health Insurers (Takes effect Jan. 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018.

$32 Billion: Excise Tax on Comprehensive Health Insurance Plans (Takes effect Jan. 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans (discussed in previous blog)

$23.6 Billion: “Black liquor” tax hike This is a tax increase on a type of bio-fuel.

$22.2 Billion: Tax on Innovator Drug Companies (Took effect in 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

$20 Billion: Tax on Medical Device Manufacturers (Takes effect Jan. 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.

$15.2 Billion: High Medical Bills Tax (Takes effect Jan 1. 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65+ taxpayers in 2013-2016 only.

$13.2 Billion: Flexible Spending Account Cap – (Takes effect Jan. 2013): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013.

$5 Billion: Medicine Cabinet Tax (Took effect Jan. 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines

$4.5 Billion: Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Takes effect Jan. 2013)

$4.5 Billion: Codification of the “economic substance doctrine” (Took effect in 2010): This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance”

$2.7 Billion: Tax on Indoor Tanning Services (Took effect July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons.

$1.4 Billion: HSA Withdrawal Tax Hike (Took effect Jan. 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

$0.6 Billion: $500,000 Annual Executive Compensation Limit for Health Insurance Executives (Takes effect Jan. 2013):

$0.4 Billion: Blue Cross/Blue Shield Tax Hike (Took effect in 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services.

$ Negligible: Excise Tax on Charitable Hospitals (Took effect in 2010): $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS.

$ Negligible: Employer Reporting of Insurance on W-2 (Took effect in Jan. 2012): Preamble to taxing health benefits on individual tax returns.

Posted in Health Care | Tagged , , | Leave a comment

Previous examples of Government Reform

Posted on December 15, 2012 by admin

Throughout this blog, I’ve discussed some of the costs and benefits of expanding health care coverage. It’s the most ambitious (and costly) program initiated by the federal government since FDR’s new deal in the 1930s. The problem with government intervention is that it always costs more than expected, and some of the programs & agencies created long outlive their intended lives. In February 2009, Jim Powell wrote an article in Forbes magazine as follows:

During the 1930s, it was estimated the New Deal would cost about $50 billion in federal expenditures from 1933 to 1940. Today, the New Deal programs are still in effect, at a total cost of more than $50 trillion. These programs include Social Security, Medicare (an amendment to Social Security), Aid to Families with Dependent Children (part of Social Security), Fannie Mae, the Tennessee Valley Authority, farm subsidies and large-scale government intervention intended to prop up troubled sectors of the economy.

None of FDR’s experts who promoted the New Deal anticipated how costly these programs would become–despite experience with previous government programs that spun out of control. For instance, the Civil Service Retirement System was established in 1920 to provide retirement benefits for federal employees. It soon cost more than the experts predicted. Federal employees were supposed to pay for their future benefits, but their payments lagged behind benefits over the years. Political pressures eventually prevailed, resulting in taxpayers covering the deficits.

After Lyndon Johnson became president, he launched a succession of crusades, one of which was to amend Social Security with Medicare. The 1965 debate about Medicare involved a great deal of discussion about future costs. Opponents warned that Medicare could become a huge burden on taxpayers, but LBJ persuaded most members of Congress that financing Medicare would be easy because of all the baby boomers entering the workforce. House Ways and Means Committee Chairman Wilbur Mills estimated that the annual cost of Medicare would be $500 million. Today, Medicare’s annual outlays exceed $330 billion.

In December 2003, when President George W. Bush signed a bill to provide a prescription drug benefit under Medicare, it was projected to cost $534 billion over the next 10 years. However, just 14 months later, projected 10-year costs of the prescription drug benefit soared to $1.2 trillion.

Farm subsidy legislation written in the 1930s was supposed to expire at the end of the Great Depression, but they have continued for more than 70 years. Hundreds of billions dollars have been paid out, mostly to big or medium-sized farmers, rather than small family farmers who were supposed to be the principal beneficiaries.

I write about the origins of Fannie Mae and the Federal Home Loan Mortgage Corp. in my book, Peter Jangle and the New Madrid Discovery. Both of these government-backed enterprises plunged into the subprime mortgage market and became insolvent, resulting in 2008’s $200 billion, and counting, bailout. Fannie Mae’s and Freddie Mac’s buying binge sparked the Wall Street mania for churning out subprime mortgage securities, leading to colossal financial collapses and some $8 trillion of reported Federal Reserve loan guarantees.

Old New Deal obligations are a major factor pushing the current federal budget deficit toward $1 trillion. The costs associated with the New Deal programs are debatable. 1930s dollars are often converted to 2010 dollars, skewing the results. Nonetheless, we need to be careful when embarking upon New Deals.

Posted in Government | Tagged , , | Leave a comment

Expansion of Medicaid repealed by Supreme Court

Posted on December 9, 2012 by admin

Since the law always changes, long-term budget expectations are fraught with potential faulty assumptions. An example: my recent blog on the proposed Medicaid expansion.

Although the Supreme Court ruled in June 2012 that requiring all individuals to purchase health insurance was constitutional, they also ruled it unconstitutional to require the states to expand their Medicaid programs, or suffer penalty from the federal government.

Writing for the majority, Chief Justice Roberts said, “ … Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availability of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.”

With this decision, states now have the option to expand their Medicaid programs.

There’s one really big incentive to expand Medicaid: a huge sum of federal money. The federal government will pay the complete cost for the Medicaid expansion for three years – 100 percent of the bill for enrolling the newly eligible. That’s a great deal for states, since the federal match for Medicaid is traditionally much lower. It varies by state—those with low-income residents get a higher match than those with high earners— but on average, the federal government currently pays 57 percent of the bill.
The Urban Institute’s John Holohan ran the numbers for the Kaiser Family Foundation and found that the federal government will spend $443.5 billion on this provision from 2014 to 2019, as enrollment is phased in.

That’s the good side. Now, the negatives: States could incur significant costs from the expansion. The federal government won’t cover all bills for Medicaid enrollees who were already eligible for the program but never signed up. States worry about those people showing up to enroll, because of all the publicity around the health-care expansion, and having to accept them at the regular match rate.
Meanwhile, the 100 percent match rate doesn’t last forever. After those first three years, the federal government’s match rate starts dropping: It will pay 95 percent of the cost beginning in 2017 and then, in 2020, foot 90 percent of the bill.

States fear that the federal government might decide to ratchet back that number.
A recent article in the Washington Post cited Texas as an example. Texas has the nation’s highest rate of uninsured residents and is not a fan of the Affordable Care Act. It stands to gain a lot from the federal expansion: It would receive $52 billion from 2014 to 2019, and its Medicaid program would expand by 45.5 percent. One study from Bloomberg Government estimates that Texas would get more money from the Medicaid expansion than any other state.

However, the Lone Star State would also have to spend $2.6 billion of its own money on the expansion and see its Medicaid costs rise by 3 percent over the same time period. This is all to implement a law that the Texas government sued to overturn. Although the White House still believes most states will take the incentives to expand Medicaid, states know that the numbers are always subject to change from a federal government that is drowning in debt.

Posted in Health Care | Tagged , , | Leave a comment

A message to the Young as you begin your career

Posted on December 9, 2012 by admin

In the second Peter Jangle novel, Peter and his friends get their first glimpse of corporate life. While the novel addresses healthcare, finance and ethics, it’s important to not overlook the leadership lessons. Those who are in a leadership role within their organization and those entrepreneurs that lead themselves, should surround themselves with those who aren’t afraid to tell you what you don’t want to hear. Many times those very items save your company. The higher the climb up the ladder the more difficult it is to find that kind of candor. The more we advance in age doesn’t help either, as many of us close our minds.

Remember the lessons you learned in school and early in your career. Chances are you were at one time humbled by negative and often harsh criticism of your work. Even as leaders we need to be willing to the type of criticism that makes us embarrassed and uncomfortable. The type of advice that makes us wonder where we’ve been, why we didn’t see that or why we weren’t told that before. Too often today the seat of power is the very seat that isolates us from critical opinions. When this happens, it’s critical that you make it well known you are open to receiving criticism.

To jump into this life enhancing venture, you start by telling everyone you are open to even what will make you angry. Go beyond that stage and make certain no retribution comes of it, no matter how angry you get. No matter how boring the opinion, no matter how irrelevant it is, no matter how inappropriate or lacking in impact – listen to the opinion. Let it be known they won’t be tossed aside. Let it be known the opinion is valued.

Posted in miscellaneous | Tagged , | Leave a comment