What follows is “My View” on health care reform. It is an attempt to match the data and underlying problem with health care - all of which points to excessive costs — and a relevant solution. My view is not necessarily to block reform of the delivery system which comprises most of the Congressional bills; that can come later. Our first priority, however, is to make health care fundamentally more affordable and that will enable us to extend access. In fact, the latter will most probably evolve from the cost savings approaches we suggest. As one health care professional told me recently: “Our health care in the U.S. is like a broken bridge - it’s much too expensive. Why would we put more cars on this bridge?” I welcome your comments.

Health Care Reform—Let’s Do it Right the First Time

By Thomas E. Murphy* (Cincinnati, Ohio – October 2009)

There is one instrument in the U.S. health care system that is the driving force behind our high costs - the doctor’s ordering pen! The utilization of health care resources and their respective prices escalate with every stroke of the pen. The insurance companies can wave their swords, but until the pen is controlled, our costs will not be curtailed. Costs are our real problem and we should focus on this first before we dismantle our system. A provider market driven by quality and value will substantially impact our costs, make health care more affordable, and significantly enhance access. Insurance companies, big business, pharmaceutical companies, and “greed” are neither the enemies nor the root causes of our health care problem. We should stop relying on false and misleading anecdotes and have an honest debate based upon information and data that can lead us to the type of reform we really need. » Read the rest of the entry..

These Posts, Benefits and Beyond Updates are dedicated to updating the chapters of Benefits and Beyond - A Comprehensive and Strategic Approach to Retirement, Health Care, and More. The author, Thomas E. Murphy will write about new developments in benefits that are included in his book. The purpose is to use the blog as a means to keep the book up-to-date.

We have identified websites where, in most cases, the referenced article originally appeared. Often, however, the URL for the article has changed. In this case, you can use the topic or the title of the piece to search the publisher’s site for the specific article. In other cases, you might be required to copy and paste the URL on your browser window to locate the referenced article.

Chapter 3 (Life Events)

• The end of retirement?

Chapters 4 and 5 (Retirement)

• Capital Markets Dive, Retirement Income goes under.
• Are there safe choices?
• Should we totally change retirement?
• What about requiring annuities?
• What about Target-Date Funds?
• What’s a Hybrid 401(k)
• What’s a DBk?
• What’s the government doing?
• Some New Exercises!

As we point out in Chapters 4 and 5, capital markets play a key role in financing retirement benefits. The employer sponsoring a defined benefit plan relies on these markets to help finance retirement income for its employees. The employer-sponsor assumes the investment risk. In defined contribution plans, it is the employee who assumes this risk. In an economic recession coupled with huge losses in the capital markets, the employers’ and employees’ risks are significantly increased. Some estimate that $900 billion in pension assets were lost by employers sponsoring defined benefit plans. Here are some issues that will no doubt arise in the workplace as a result of this development.

» Read the rest of the entry..

On site clinic

Video: The blood pressure cuff appearing above is a safe and inexpensive diagnostic tool. The MRI, on the other hand is quite expensive but sees things in our body that provide a whole new level of data upon which to make a diagnosis.

MRI Machine

See the MRI VIDEO: How an MRI Works

Chapters 6 and 7 (Health Care, and Evolution of Design)

• Some new health care plan designs - “back to the future?”
• New LImits on HDHCPs and HSAs
• HIPAA and Wellness - resolving potential conflicts.
• New approaches to Wellness
• What is happening with Consumer Driven H.C. and HSAs?
• New Exercises at end of Chapter 7.
• What is the new “boutique” approach?
• Direct contracting revisited

Chapter 8 (Lower costs and increased access for health care)

• Some more good stuff on Health Care Reform
• What about taxing health care premiums?
• What will reform cost?
• What about cultural factors and life expectancy?
• What is the Republican h.c. reform approach?
• New exercises.
• The value of integrated health practices
• Electronic Medical Records
• Analyzing administrative costs
• Malpractice reform
• Cost sharing
• Update on Massachusetts Program

We have identified websites where, in most cases, the referenced article originally appeared. Often, however, the URL for the article has changed. In this case, you can use the topic or the title of the piece to search the publisher’s site for the specific article. In other cases, you might be required to copy and paste the URL on your browser window to locate the referenced article.

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Correction in Chapter 6, at page 160: change the footnote 1 in the Vignette concerning Max to read: “The assumption here is that Max would be reasonably satisfied . . .” Delete the name “Tom.”

Clarification in Chapter 6, at page 175: change the 2d last sentence of the 2d full paragraph to read, “For example, the employer may decide that employees will pay about 40% of the total health are costs.” The sentence mistakenly refers to “60%.”

» Read the rest of the entry..

U.S. District Court

Chapter 9, Benefit Legal Compliance, ERISA, IRC, and More.

• Investment advice and the rules of DCPs
• Updates and new Stimulus Package Rules; retiree health care and bankruptcy
• Whoops! I goofed!
• Important case reversed in the Courts
• Fiduciary duty and administrative costs (add at page 260)
• Investment choices in a DCP and fiduciary duty of sponsor
• Section 415 Limits
• “Vested” retiree health care?
• Potpourri of new rules under ERISA and IRC
• New exercises

Chapter 10 - Benefit Metrics

• Actuarial value of a benefit plan

Chapter 11 - Equity Benefits

• Restricted stock lives under TARP

Chapter 9 (Legal Compliance)

Add at page 263

There has been a lot of discussion about the duty of a pension plan fiduciary to monitor and control administrative costs. See, for example, Hecker v. Deere & Co., (28 DLR AA-1, 2/13/09; 45 EBC 2761 (7th Cir. 2009). The Department of Labor has proposed some detailed guidance on this issue and it appears employer sponsors or plan fiduciaries will be required to scrutinize administrative costs of its providers so as to minimize the impact of excessive costs on plan participants. See U.S. Department of Labor rules on fee disclosure, effective January 1, 2009.

A related fiduciary issue involves the sponsor’s obligation to reveal more about the investment characteristics as well as the administrative costs of the investment choices provided in the Defined Contribution Plan. To give you a glimpse of legislative approaches to this issue can be found in a recent Congressional proposal to amend the IRC. New 401(k) fee transparency rules from Congress. See the American Benefits Council. What do you think? Are the disclosure provisions sufficient, understandable? Will they address the problem of informing the DCP participant?

» Read the rest of the entry..

Social Security

Chapter 12 (Government Sponsored Plans and Mandated Benefits)

• Lots of Updates
• Social Security - Long Term Projections (see text, page 360)
• Long Term Care in Developed Countries (p. 390-391)
• COBRA reprieve
• Changes in RMDs
• Lots of new Exercises under Mandated Benefits

An interesting historical note about Medicare: “How Should Medicare Pay Doctors?” This is a revealing podcast from NPR, February 26, 2010, by David Kestenbaum and Chana Jaffe-Walt. Listen to the podcast here.  NPR: How Should We Pay Doctors?

Add to Footnote 22 at page 361:

The Congressional Budget Office (CBO) has weighed in on the financial viability of our Social Security Administration System (SSA). The CBO predicts that SSA will not have the legal authority to pay benefits by 2043. They point to the emerging crush of baby boomers as the principal reason funds will be exhausted. See: The CBO’s Long Term Projections for Social Security - 2009 Update (August 2009). (http://www.cbo.gov/).

Previously, The American Academy of Actuaries  predicted that although current payroll tax revenues do cover benefit outlays, this will change in 2017. At this juncture, SSA must use interest earned on its trust funds (largely bonds) to pay benefits. By 2027, SSA must begin to sell and redeem its Trust Fund assets in order to pay benefits. Then, according to the Academy, by 2040, there will be insufficient funds to pay benefits.  See the discussion below about Social Security reform. The Trustees of SSA also have projected the financial viability of their program which appears below.

» Read the rest of the entry..

Chapter 13  (Global Benefits)

Doing Business Globally

Doing business globally means business must consider employment and benefit practices in the host country and also the relevance of compensation and benefit costs among competing employers in various international venues.

• Comparisons of efficacy - U.S. v. OECD - universal health care countries

At pages 422 and 423, there should be sentence after the reference to the “Source” of data contained in Table 13.2.  There are significant differences in the way in which countries report infant mortality. For example, some do not include still born babies in their statistics, some do. Others do not include infants born at certain pre-mature intervals and weights, some do. For a review of the different reporting of infant mortality statistics, see: MacDonald,E., Health Care Myths, Fox Business News, June 23, 2009.

Also at pages 422 and 423 add: It is claimed that the U.S. has lower life expectancy and infant mortality than most OECD countries and this is the result of not having a universal health care system. An August 2009 study reported in the National Bureau of Economic Research (NBER), however, indicates that the differences in life expectancy are not a result of the U.S. health care system, but rather behavioral and social factors. They point to the high rates of obesity in the U.S. that are lowering life spans. They compare screening and survival rates for cancer, heart attack, stroke, and medications for hypertension and high cholesterol in the U.S to OECD countries, and the U.S. has better or equal ratings. They point out that breast cancer and prostate cancer mortality in the U.S. has shown a faster decline than in OECD countries. This study is consistent with a similar one comparing life expectancy and infant mortality in the U.S. to Canada which has a single payer, universal system. The almost identical conclusion was that the U.S. has lower life expectancy and higher infant mortality but these are not the result of the differences in the respective health care systems, but rather behavioral differences. They point to higher rates of obesity in the U.S., lower birth weights which are most often the cause of infant deaths and attributable to poor health and drug addiction of the mother. Finally, and sadly, they show how the higher homicide and fatal accident rates in the U.S. significantly affect life expectancy results compared to Canada’s. See: Preston, S., and Hu, Jessica Y., “Low Life Expectancy in the U.S. - is the Health System at Fault?” NBER Working Paper No. 15213, August 2009. Also see: O’Neil, J., O’Neil D., NBER Working Paper 13429 (Fall 2007), “Health Status, Health Care, and Inequality: Canada v. U.S.” (http://www.nber.org/digest)

Last Update: October 16, 2009

Collective Bargaining at the Table

Chapter 14 - Collective Bargaining and Benefits - new case on retiree health care

Chapter 15 -  Corporate owned life insurance to fund bonuses? What are the rules?

Chapter 16 - Benefit communications and the multi-generational workforce - no more passing out the envelopes? Some new ideas and approaches.

Union Contract and Retiree Health Care: do they both “expire?”

The U.S. Sixth Circuit Court of Appeals recently refused to vest retiree health care benefits before active union workers actually retired. See: Winnett v. Caterpillar Inc., 2009 WL 170598 (6th Cir. 2009). The labor contract had long expired and active workers argued that they had a vested right to retiree health care benefits when they either retired or were eligible to retire. But since the plaintiff employees did not retire before the contract with the retiree health care benefits had expired, the Court ruled they had no vested right to claim these benefits. Subsequent contracts changed the retiree health care benefit for Caterpillar employees and the Court held that since such benefits do not vest until an employee retires, the plaintiffs were covered under subsequent labor agreements that included modified retiree health care benefits. See the Seyfarth analysis of the case.

» Read the rest of the entry..

Tram in Vienna

Global Management Competencies - Vienna, Austria

I was invited again to teach in Vienna, Austria ( Wirtschafts Universitat, Vien, Osterrich, International Summer University, 2009 www.wu.ac.at). My course was titled “Global Leadership” and we discussed the basic skills and behaviors I believe are critical for successful global managers: encouraging innovation, ethical leadership and legal compliance, the ability to effectively resolve conflicts, selecting and developing talent, managing with cultural and multi-generational sensitivity, and using data and metrics in to design and evaluate business practices. There are, of course, many more essential competencies, but we settled on these to accommodate the allotted time. The course, was presented to university exchange students from Europe, Asia, and North America. It included student opportunities to apply the principles learned in a number of specially designed simulations. I will teach the same course in the fall in Miami University’s MBA program.

HRM’s New Skill Set

I recently met with an exceptional HR executive, Lisa Knutson, Senior VP of HRM at Scripps Publications. (www.scripps.com)  She was a guest speaker in my HRM course in March 2009. Ms. Knutson wanted to discuss her ideas about the new skill set for HR professionals. Knutson, who is a CPA and worked as the CFO of 5th/3rd Bank’s corporate HR department believes current HR professionals should be project managers, good marketers, understand basic labor law, have a sound grasp of financial and business issues, and know the potential of Information Technology. I agree.

Last updated: October 16, 2009

With the current economic recession, many employers are faced with the need to drastically reduce their operating costs. Often, they settle on employee layoffs, called “Reductions in Force.” I have posted below some material that I presented together with David Montgomery, partner at the law firm of Keating Muething & Klekamp in Cincinnati, during a recent “Webinar” for HR professionals. I hope you will find it useful. Originally done in Power Point, it is a detailed review of the issues, alternatives, relevant metrics, and a detailed checklist for employers who are considering a RIF.

» Read the rest of the entry..