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Tuesday, February 24, 2009
This means that Medicare Advantage won't cover as much of the medical costs as it did last year. Medicaid doesn't cover a lot so that leaves commercial insurance or the private sector. In order to cover the short fall of Medicare Advantage, providers, heart scanner makers and bed pan suppliers are going to ask commercial insurance plans for more money which means higher prices.
The systematic approach applies to the uninsured as the more people there are who are not likely to pay as much, the more other insurance plans have to pay. It's called the cost shift and given how the types of insurance coverage interrelate so precisely, that's the most systematic system that we have in health care today.
While this sounds depressing and I also sound like an insurance lobbying group by pointing how a seemingly unrelated event will raise premiums, I think that it's an important part of the health care system to understand. Changes in costs in one part of the system impact the others just like when you squeeze a balloon. The solvency of the Medicare trust fund which I described in this post is often viewed as a separate problem but it's more of a canary in coal mine that is indicative of the larger systematic forces in health care. Maggie Mahar, my new favorite health care blogger has an excellent post on the systematic issues of the Medicare trust fund. It could be summarized that when public programs like Medicare or Medicaid cover less, health care delivery has to raise prices that commercial insurance pays to cover the short fall.
Overall, I can't say that I am surprised that the Obama administration reduced the payments to Medicare Advantage plans given the rhetoric that it's an example of a program that doesn't work. Overall the reduction was less than had been mentioned and gives health plans time to plan for the future. Or wait for health care reform to come and completely change our current system. I have trouble planning in more than 3 year horizons since I think that the health care system will be dramatically different in 3 years.
Sunday, February 22, 2009
The article above is also as misleading or misdirected as my post title. It's title of "Business Schools Want You Now More than Ever" doesn't really show the love that it (which sounds like an 80's love ballad that would be sung by Chicago or a power ballad sung by Poison) suggests. Accepting the GRE instead of the GMAT is exchanging one tedious standardized test for another tedious standardized test. I had taken both the GMAT and GRE and I really couldn't tell the difference between them. Both have a Math section similar to the SAT's that I took in high school and a language section that includes some of the most arcane questions about punctuation and very dense paragraphs of equally arcane material. One of them also has a logic section, but I forgot which one.
Given they are both similar and equally painful to prepare for, it doesn't really feel like an outrageous display of affection. If business schools really wanted me to know what love is and they wanted to show me (show off your 80's music trivia and name the band who sings that song! I thought that it was Chicago but I was wrong), they would accept my SAT, ACT, or standardized undergraduate admissions test. The SAT, GRE, and GMAT provide context for grades and undergraduate institutions. Either of the three are a similar standardized test that show how well you take standardized tests which is the most effective measurement for scholastic performance that we currently have. Whether you take the standardized test in high school or post-college, it's really the same measurement. While I don't have the research, I am sure that people who do well on the SAT will do well on the GRE, GMAT, or LSAT for law school.
While I have been beating on standardized tests like a rented mule, I think they are a valid part of the admissions process. They provide a single measurement for evaluating applicants' scholarly performance. For example, take the following:
- Standardized test score of 90th percentile or above (700+ on the GMAT) and a 3.8 GPA mean someone who is very smart or smart and hard-working
- Standardized test score of 90th percentile or above (700+ on the GMAT) and a 3.0 GPA (excluding engineering since grades are usually lower), mean someone who is smart but lazier with school work
- Standardized test score around the 50th-60th percentile (low 600's on the GMAT) and a 3.8 GPA mean someone who is not as smart but very hard working, or went to a school with lower academic standards or someone who doesn't test well. Schools can investigate these applicants to evaluate the real story behind their academic performance.
Getting back to beating on rented mules, this is my favorite quote from the article:
Mark McNutt, a spokesman for ETS, says one reason business schools are embracing the GRE is because it brings in a more diverse applicant pool. "The typical model of an MBA student isn't working," he admits. "Schools are seeing value in recruiting creative people."
How is taking the GRE a measure of creativity? When I think of creativity, I think of the art students who made their front door furry. I think of the Clown House in Northeast Portland where they made crazy bicycles and tried to show that clowns could be your average neighbor. I don't think that any of these individuals would view a 6 hour standardized test as outlets of creativity unless you got extra credit for creating interesting patterns with your multiple choice answers.
Rather than the typical model of an MBA student not working, I would say that business schools are realizing that the GRE and GMAT are interchangable and having to take an additional standardize test is a barrier to entry. If anything, it's an idictment on the products of ETS company who administers the GMAT and GRE. This switch shows that schools believe that the GMAT is no more an effective gauge for MBA admissions than the GRE.
However, I think that we should continue down this path and graduate schools just accept the SAT or undergraduate admissions test. It provides the same data (which is useful) and removes a barrier to entry. Now for more fun tests, who knew who sang the 80's song quote that I mentioned above?
Thursday, February 19, 2009
Health care blogs that I follow have began to recently chronicle the next step in reform and have their own terms for the infighting. The Health Care Blog called it "Fear and Loathing" while Maggie Mahar noted that schisms are appearing in Coalitions like "Divided we Fail". However, the New York Times is more optimistic with an article about stakeholder meetings with Senator Kennedy. Maybe it's because hanging out with Senator Kennedy is still a lot of fun. I really like his accent and he's got to have some great stories.
Overall, here are some positions that have emerged from key stakeholders and my thoughts:
- Insurance companies want mandates for everyone to have insurance and will remove words like pre existing conditions from their vocabulary. This has all upside for the insurance companies as it will expand their customer base, reduce their administrative costs by removing underwriting and claims review, and maintain their role. Overall, this really won't change the health care system nor improve outcomes, delivery, or efficiency by itself. Having coverage is good, but we have seen from the Massachusetts health coverage plan is that it needs to come with health care. The insurance company is trying to keep their role as health care intermediaries and they are good at keeping enrollment systems, paying claims, and distributing the dollars.
- Businesses want to reduce their health care costs. They seem to prefer that health care be run more like, well as business, allowing competition to reduce costs and produce a better product. I think that business believes a government take over of health insurance will result in higher taxes, fees, or some sort of pay or play for them. Therefore, they prefer that the industry itself lower the costs of delivering health care since they will be forced to pay for it in some way or another. However, I think that the government is good at setting costs and improving efficiency by setting limits on unit prices. Those who can't make money under the new prices, will exit, just like hospitals did when Medicare changed its payment in the early 80's to DRG's or paying a set amount for hospital treatments.
- Unions want health care for all and seem to be willing to give up their role as protectors of health care for the working class. They are the only stakeholder that appers willing to give up their traditional role and power for the greater good. However, the greater good of health care for all nicely aligns with their goals so their membership will be happy.
- American Medical Association or physicians have a seat at the table but I haven't seen a clear position. Given the diversity of their membership with primary care physicians, specialist, subspecialists, and the cat herding, it's probably difficult for them to find a common ground or common planet. I am sure that physicians don't like the financial barriers that their patients face and all of the complicated coding and billing. Reform would make their lives easier. Primary care physicians probably have the best reputation as efficient stewards of health care but specialists could see their income drop if the government imposed price limits or businesses refused to pay specialists' fee. I don't know how the AMA would handle that turf war.
- Hospitals don't really seem to have a clear position. They will still be around regardless of health care so I don't know if they really have a stake in what happens with reform. I have pointed out in previous posts that their inability to defend the costs of their services could make them vulnerable. However, hospitals don't have to worry about disappearing like the insurance industry does. Therefore, they can probably sit the reform battle out until the specialists demand that they defend them. Specialists are hospitals main revenue vehicles so their future's will be intertwined.
- Insurance agents who sell insurance aren't usually invited to the table but are very interested in this outcome. Some of the state reform proposals and Obama's include a provision on setting up a Health Care Exchange that helps select an insurance plan. This would eliminate the insurance agents' jobs. They have been very active proving how they can help clients pick an insurance plan much better than a government program and how they are worth the commissions that insurance companies pay them. I have to agree with the insurance agents and side with them as I have met enough of them who are good at keeping the insurance companies honest and really do help their clients navigate a complex system. At least I support those who work on the individual level or with the small groups. The agents that I have worked with on larger accounts tend to put some really byzantine RFP processes in place gathering irrelevant information that takes a lot of time to prepare. There is not a high value added to these RFP's.
- Pharmaceutical and Medical Device Industry have been given a seat at Kennedy's table but as Bob Laszewski has pointed out, they have been effective at lobbying for provisions that do not hurt their position. Their new technology and drugs have changed health care delivery but has driven a lot of costs. Reform has pointed the barrel of cost effectiveness at this industry which they have continued to dodge. Their fight will play a key role in determining if reform will reduce health care costs. However, I think that they are driving force behind the health care bubble and their costs are unsustainable. This industry will fight long and hard, pull hair, and gouge eyes but I don't think there is the money to sustain their products.
Monday, February 16, 2009
I italicized last year because the article benchmarks this recession-ridden year to a year where the some industries were still bloated from the easy credit binge. Comparing a year where 3 major MBA employers disappeared to a year where those three were hiring hundreds of MBA's is not a comparison of the same fruit. In general the article that points out that things were worse a year ago with some easy data and a few snappy quotes from current students. The analysis is like pointing out how winter is a lot colder than summer. Comparing this recruiting year to previous recession years like 2001-2002 would have been much more insightful. That is right before the time that I graduated so I unfortunately had a front row seat to the post dot.com/corporate scandal recruiting environment.
There was one really good point raised in the article which is:
"The system they (career management) have in place now seems to be one that works very well when the economy is good, but now that there are no employers coming -- no one knows what to do,"
This is a quote from a Wharton student in the article that consistently rings true. During the boom times, career management needs all of its resources to coordinate the armies of traditional companies that hire MBA's and make sure that everyone behaves themselves. There is not the time to court non-traditional or smaller companies for MBA hiring and students are not as interested in these same companies.
During recession times, career management has to change their strategy and ramp up. Likewise, students have to quickly switch from deciding which recruiting dinner to attend or comparing company trinkets to hustling and networking. It's a different recruiting mind set for all. There is no easy solution because during the boom times, the traditional MBA companies are out in force and really competing for talent. This requires a lot of time from career management. Trying to make sure that non-traditional and smaller companies still receive sufficient attention is like trying to get someone to make a beer run during a party. No one is going to want to leave the fun until the keg is dry.
However, with this recession, I don't know if the non-traditional or smaller companies are hiring either. Savvy companies may try to get a fancy MBA student that they otherwise couldn't attract. This is the time period where MBA applicants do question if an MBA is worth it at all. Like any investment, it's recouped over time. This article below looks at salary (which is one way to measure the MBA investment) over 5 and 20 year horizons. There are some surprise schools in the ranking but overall the fancier schools have a higher return. The salary information does allow someone to see a median salary farther out into the future.
One year does not truly measure the MBA investment. While recruiting is lower this year, it can be expected to recover and follow the business cycles. The 20 year salary horizon does show the median increases to be expected. Career management, students, and companies will adjust as they have in the past but unfortunately, there is not an easy way to adjust recruitment to the business cycles quickly. My class watched the experience of the class of 2002 with the recession and both career management and ourselves were better prepared for it the following year. It's never easy but it requires a longer time horizon.
Saturday, February 14, 2009
I recently downgraded my Chase credit card to a no annual fee card with less rewards because I fly less and the $50 annual fee was a money loser for me. When I called to activate the card, I was transferred to a real person who wanted to tell me about my card's benefits with the goal of making the Chase card the primary credit card in my wallet. I told him that I understood the benefits perfectly well in a tone of voice that was in between telling your dog to stop eating the furniture and telling a salesperson that I'm "just looking" and he politely ended the call.
This got me thinking about how credit card companies make money. I've been using that card since 2004, it was my primary card, but I recently switched to another. I always paid on time and my credit rating is good. I didn't think that I was profitable enough customer to warrant a sales call about my habits?
My co-worker explained that the customers who rack up huge late fees, carry a balance, and look at their credit card like a roulette wheel are indeed more profitable. However, they often do not pay their bills in quantities large enough that it doubles the annual net income of the entire company. Customers like me are a steady and safe source of profit.
If anyone has any questions for my colleague about the credit card business (not your credit card in particular) send them to me and I'll harass them. Ever since Peace Corps, where I would receive endless questions about the United States ("Is everything concrete or is there any grass or trees? Do you shake hands there like we shake hands? Do people in the US know how to eat an orange?"), I take great delight in peppering someone with questions about topics where I have just enough knowledge to be dangerous. I think that it's a Peace Corps thing as we did that to an Australian traveler who came to a party with a group of us. He got 30 minutes of, "Name a famous Australian. Beside Mel Gibson. And not Elle McPhearson. And not Midnight Oil or AC/DC. Do you have dingos as pets? What about kangaroos?"
Last topic about Chase credit cards as I would be remiss not to mention how much I hate them for one thing that they did in the late 90's. It's made me hate them enough to fill any postage paid envelope they send me with junk and send it back to them or "mailing a brick". At the time, I had an REI credit card like any good backpacker. REI switched banks and sent us new cards. At the very same time, Chase sent me an Outdoors card that looked suspiciously like my REI visa card. I used it for a few months before REI sent me a letter to clarify. I called Chase to complain about their tactic and was told in the same exact tone of voice that you use when the dog is eating furniture that they did "Nothing unethical".
I grudingly kept the Chase card but whenever I talk with them on the phone, I tell them that I am still pissed about the REI card scam.
Tuesday, February 10, 2009
Initially, we were using more of a consumer product approach and following the "long tail" philosophy of trying to develop a niche for each type of a consumer. There would be the Struggling Musician Plan that included additional benefits for Ear Nose and Throat doctors or the Home Gardener Plan with additional benefits for allergy medication. The main progress that we've made towards those efforts involves me using the term "long tail" in a blog. I've seen many other bloggers drop the term and my next step is to use it at a work meeting with a straight face. Nothing against the term "long tail" but just my natural backlack towards business jargon that uses oblique, imaginary words when a concise description is sufficient.
Actually, the biggest progress that I've made is realizing that the individual health insurance market is still in the basic segmentation platform that coffee was in the pre-Starbucks days. We have small, medium, and large as you can buy a little bit of health insurance for a lower price to occasionally taste or you can get a Big Gulp size and dive into the buffet. My company really only has a Big Gulp plan and my next step is to move into small, medium, and large.
Other companies, mainly the Blue Cross plans are getting into the flavored coffee part of the individual market and whip up some sugary goodness for $6 or a $1 herbal tea for those who like the natural stuff. This includes individual insurance plans that offer predictable costs such as having everything in the form of a copay such as you pay $50 rather than a co-insurance such asyou pay 20% (of what?). There's also the young adult plans which are marketed like Ipods with seizure-inducing graphics and offer a low cost with just the basics for that 25 year old guy who still needs his pediatrician to sign waiver forms since he hasn't seen any other kind of doctor.
One thing that I noticed is that the more affordable plans do not cover maternity care. My state of Oregon mandates maternity coverage and I can't decide if that is a good idea or not. I am typically a Big D-democrat with regulation. As a result of the mandatory maternity coverage, non-child bearing individuals subsidize those of us who bear children. The result of not subsidizing future mothers could be more affordable health insurance which could be answered by looking at the insurance rate in states that mandate maternity coverage. Oregon's uninsured rate is on the high side. Ultimately, I think that the ROI on pre-natal care and a healthy child birthing process (at least in terms of cost avoidance of a high risk pregnancy) is high enough to justify the subsidization.
Back to the topic on hand, my product work is now focused on making sure we have enough different size cups of coffee for our individual health plan and I can stay away from any flavored syrups. We'll make sufficient gains with a better developed small, medium, and large platform than we would by targeting niche segments (niche segments is just a clearer way of saying "long tail" in my opinion).
Speaking of size, coffee, and syrups, why do they only sell flavored syrups in liters? At home, we don't need enough syrup to feed the week's morning rush so why don't they sell smaller sizes of flavored syrup for those of who will get sick of it after a few cups? This segmentation by size may travel even farther than I thought.
Saturday, February 7, 2009
I learned about contingency planning the hard way when a fellowship ended and the full-time opportunity fell through. As a result, I got good at always having an income-earning side job or a Plan B that I could quickly start. Here are those stories.
Knitting Instructor: I had been knitting since senior year in college and this was always the "Turn my hobby into a job" dream option. At the beginning of the holiday shopping season, I approached my local yarn store to see if I could work there and eventually become a knitting instructor. They were intrigued enough by a male knitter to hire me just for weekend work. I started out in the store, helping customers, running the cash register, and constantly searching for that one particular ball of yarn that the computer said that we still had in the back room. Eventually, they needed an instructor and I taught classes and did private lessons.
The great parts of the job were that having a employee discount for your hobby is like catnip as I would walk around the store in a euphoric haze. I also made up business cards with the motto, "Man enough to knit, strong enough to purl". Unfortunately, I learned that working in your hobby is different than working on your hobby. Teaching is hard work no matter if you're teaching knitting, calf-raising, or 17th century Russian poetry. The other draw back was that it would be hard to support yourself as a knitting instructor if I really needed to.
Spanish Medical Interpreter: In the definition of serendipity, I went into an acquaintance's birthday party and found this side job. While small talking with a guy, I found out that he sells insurance and does Spanish medical interpreting for a small local agency. With his reference and a Spanish Medical dictionary, I went to the agency and the next day was interpreting at a dentist's office. Later, I joined a larger agency so I could do phone interpreting at home. I would give them the hours when I was available. The phone would ring and I would either be helping with a lactation consult in Georgia or selecting a Medicare prescription drug plan with a senior in Florida. However, more often than not, I was talking with CommEdison in New York and explaining to someone why the electricity was shut off.
This replaced knitting as my side job. The good parts were that I was actually involved with patient care or at least talking about it. It was a little intense for a side job but it maintained my fluency in Spanish and this would always be a full-time option. Additionally, it would keep me in my field of health care so there was great networking potential.
MBA Admissions Consultant: This is my current side job where I subcontract with a company and help applicants with their MBA programs essays. I stopped the Spanish interpreting for this side job since it paid well, taught me a new skills that always had a market, and I enjoyed working with the applicants and keeping involved with the whole MBA scene.
My childhood dream career was to be a writer and this job is the closest thing to writing that I have done. It's more editing but I work with clients to tell their story. My previous posts here and here and here have described my experience with admission consulting. Admission consulting combines my social work skills (I spent a year in a Masters in Social Work program but did not finish the program), writing skills, and most importantly is something that I could see doing full-time that pays the bills. I do enjoy the work and the clients.
I also think that I can combine all three of these side jobs and become a knitting instructor for Spanish speaking MBA applicants. Or I could help knitters learn Spanish while they apply to business school. Or help MBA's fund a knitting cooperative in a Spanish speaking country. The options are truly endless.
Tuesday, February 3, 2009
- Standardize the insurance benefit plans so they all cover similar benefits and price them according to a community rating or the average price that everyone would pay.
- Therefore, all employers would pay the same amount. With this plan, employers are still buying the insurance for their employees. However, under this plan, health of employees or utilization does not impact the price that an employer would pay. This is insurance in the classic definition where everyone is part of one big community pool.
- Provide more information about the cost and quality of health care. For example, if you want to make sure you get the best colonoscopy possible, who should you go to when money is no object?
Here's how all the players would benefit:Health Insurance Companies: By eliminating underwriting and offering everyone the same rate and benefit packages, this does remove a layer of administration. It should also keep the same model intact of selling insurance to employers who distribute to employees. It also ends the constant positioning for those elusive healthy groups that everyone wants to attract. On a side note, I wonder if fitness clubs are great clients for insurance companies. In theory, the staff should all be really healthy and never use any medical services.
Results: It does make administration simpler but administrative costs are only 10% of the health insurance dollar. I think that the hope is that by spreading health care costs over a community rather than one employer, prices won't increase as much and more employers will continue to offer insurance. This should work well for smaller groups who tend to have higher rate increases than larger groups. That's probably the main benefit. Otherwise, it's a small change that make administration easier for insurance companies. The health care system won't fundamentally change and costs will continue to go up for everyone.Unions: The unions like SEIU are a wild card in health care reform. They have political clout and their main role is ensuring that unions have incredible health insurance. Often their health insurance is so good, that going to the doctor is cheaper than going to a movie and can be more entertaining than some movies like "Forgetting Sara Marshall" (It had the same cast as Superbad but how it could it have been so lame?!). In theory, you would think that unions wanted to preserve their main strength of negotiating great health care. However, ultimately they are in favor of all workers having health care and have a lot of experiencing negotiating with employers.
Results: Union support will help any reform effort and unions appear to be engaged for the right reasons of ensuring workers have good health insurance. Its members will probably not have as incredible health insurance as a result but that should be outweighed by more workers having quality health insurance.
In general, the AMA will have difficulty pursuing a reform agenda because of the different ends of primary care and specialists, let alone all of the subspecialists. Most reform promotes primary care and looks to cut back on specialty care because the value has been demonstrated with primary care. The inability to easily satisfy all of their membership may keep the AMA on the sidelines whose only option is to endorse someone else's plan.
Results: Physicians will benefit if more of their patients have insurance and their lives will be even simpler if everyone has a similar comprehensive design. It will make billing and their office administration easier. This also does not force any tough decisions about the delivery of care.
Overall, the health insurance plan in this example are attempting to gain control of the reform process by putting together a plan that other players can endorse by offering them some gains and no large losses. I would like to see the unions and the AMA introduce proposals also in order to get the best ideas from a diverse range of stakeholders.
Sunday, February 1, 2009
I was a bit afraid that this tele ski lesson was going to be similar to my first snowboarding lessons which I spent most of it finding a variety of painful ways to fall on my butt. However today's telemark skis are really nice parabolic shapes that I could just downhill ski techniques. It was really easy to get down the hill and I just had to concentrate on learning the tele turn by bending my downhill ski ankle and keeping the uphill ball of the foot planted.
At the beginning, I was mostly a Fakermark skiier. That means that I would really just slide out my downhill ski and do a token heel lift with my uphill ski. It looked like I was telemarking but I wasn't getting any benefit from the telemark turn. I worked on it and got a little better. My two friends did much better as one of them got the technique down while using 12 year old skis. I was surprised how logical the telemark style was which was described as "simultaneous knee" skiing. It was easy to pick up the technique of the telemark but I need more practice time on the mountain. Thanks to my dad falling in love with skiing in Colorado, I had been downhill skiing for 20 years which helped with today's learning curve. I had plateaued with downhill a while ago so I will be working on the telemark technique in the future.
Summit Ski Area has a nice long easy hill that's one notch up from a bunny hill. I had previously known the ski area for having the nastiest bathrooms in the Mt Hood area. However, it has a proud history as the first ski resort in Oregon and the slopes were great for learning a new technique since they are long with a consistent gradient. There were a lot of beginner snow boarders which caused me to remember my first years learning it and also some parents teaching their young children how to ski. I could see bringing my little one up there in a few years and see what piece of equipment and technique he wants to use to come down the hill.