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Tuesday, September 29, 2009

The MBA Arms Race

During one of my first weeks at Wharton in 2001, I remember a second year telling us how one of their classmates really made an impression at recruiting events. That enterprising classmate got business cards from people that he met during information sessions, sent a follow-up email thanking them for their time, and was very succesful during the recruiting season.

You can imagine the impact of telling an entire class about sending thank you notes. I am sure that company representatives began to dread returning to the office to find their email system frozen due to the sheer volume of nearly identical, "Thank you for taking the time to describe your career path while I smiled and nodded with a deer in the headlights look on my face." I noticed that company representatives started to "forget" their business cards. Some probably changed their out of office message to, "Thank you for your thank you. I enjoyed standing in an awkward circle with you too!"

This is an example of the MBA arms race where MBA's steadily send more thank you's, ask for more recommendations, retake that GMAT, volunteer more, cap their teeth, color their hair, or do whatever the previous class did to get ahead and add to it. Some help MBA's get accepted or get the job while some perepetuate this path of mutually assured destruction where you do more and expect less.

Which of these really matter or which are noise in the machine?

Thank you notes: One of my humble classmates turned out to be an absolute all star with the consulting industry. After the interviews were over, she was the only who turned the hat trick and had offers from Bain, McKinsey, and BCG. While we were at the same lunch table, she was going through her bag and a pile of business card fell out. She looked up at us and said, "Oh I still have to send thank you notes to all these people who interviewed me. Do you think that I can just send the same thank you note to all of them?"

The concept of a thank you note hasn't changed whether it's delivered on monogramed stationary with raised gold lettering or through your picklesniffer@hotmail email address that you had since 8th grade. It can show that you are still sufficiently interested to want to keep lines of communication open but main are just about being polite and saying thank you. When organizations have test scores, resumes, recommendations, background checks, google searches, and behavioral interviews to assess everyone, do they really need another piece of information that is tangentially related to the job or graduate program?

Thank you notes are really about what your mother told you they were for. To be polite.

Volunteering and Extracurricular Activities: After getting good grades at a fancy institutions and finding success at a well-known company, MBA's eventually came to the same conclusions that admissions committees did. There are a lot of people with similar credentials. But some of those people used their free time to play a sport at a competitive level, folk dance, or breast feed orphaned goats. Others used their free time to watch every episode of Seinfeld. All are noteworthy achievements but admissions chose to value those who studied hard, worked hard, and found time to pursue outside interests and contribute in focused, chosen extracurriculars. Some applicants feel that this is outside the scope of an MBA program or that they can't make time due to their job. However, extracurriculars are a big part of the MBA experience and they are competing with others who have made the time.

Taking Quantitative Classes: In the last few years, applicants who majored in East Timor Poetry, minored in the bag pipes, and whose only demonstrated application of math was figuring out tips at restaurants have explored taking accounting or statistics classes to demonstrate their quantitative ability. Some will retake certain business classes where they got a B or C. Some take classes because they figure that it will show admissions that they're serious about the business school thing. In reality, the only good reason to take business or quant classes to help with your application is if you really never took a class with numbers in undergraduate and the quantitative section of your GMAT is below the school's average. MBA programs are just looking for a demonstration of mathematical aptitude, they don't need to see a cult-like dedication.

Retaking the GMAT: The GMAT is the most quantitative part of the application which is why applicants want that number to be as high as possible. Since I graduated, I have watched a 700 GMAT score go from being a great score to being a good score. It's the worst case of inflation that I've seen outside of Zimbabwe. The key is that 700 is a good score or whatever the 80th percentile is. Even 670 is within a standard deviation of 700 so it's close enough. If you are thinking of retaking the GMAT if your score is anywhere near these numbers, your time would really be better spent watching Seinfeld re-runs.

However, if your score is below the school's average after 2 tries, you do need to take the GMAT a 3rd time to show the school that you tried. Stopping after 2 tries with subpar scores is like not running out a ground ball in baseball.

I have read some accounts where companies that ask for your GMAT score claim that it should be a 700. Personally, I think that's used as a convienent excuse to reject someone instead of telling them that they failed the airport test or that they just weren't into them.

Pre- MBA internships: This is more about the job search but this seems to be a new part of the MBA experience. Back in my MBA days, if you could rule out consulting or banking by October, you were in good shape. Today, some first years have a pretty focused game plan by the time they've they've finished their beer at their first MBA kegger.

The advantage of a having a game plan in place early (like knowing that you want to do pharmaceutical marketing on the west coast or corporate finance in the midwest) is you can spend more time networking with companies and researching than your classmates who are still trying to figure out the difference between venture capital and hedge funds. However, there is nothing wrong with actually using the 1st semester to figure out which industry you want to work. You will have access to a wealth of information in the form classmates, employer sessions, and free time to develop an excellent game plan. The key is to not get distracted by bright and new shiny employers or industries that you learn about. Figure out what is most important. If you hate airports, than traveling for consulting will still suck no matter how appealing that employer session was.

Now what is a pre-MBA internship and is this a new development in the arms race? A pre-MBA intership is really just a short-term consulting project or finding someone that you can shadow to learn about an industry or a company. You would probably quit your day job a few months early. The main value comes from demonstrating that you're serious about the industry or making connections at the company.

I would be highly skeptical that you will actually do meaningful work. The first 2 weeks of the intership would be spent on introductions to people and systems. Next 2 weeks getting a project which leaves possibly 4 weeks to actually do some work. For a post MBA employer to be impressed, one would have to assume that they place no value on the MBA training but solely value that the school accepted you. While this may not be a stretch, the company probably wouldn't admit it.

The main value of a pre-MBA internship is demonstration that you are serious about a chosen field. However, this could be accomplished with a consulting project during the first semester via school clubs, field trip to corporate offices, or tattooing the company's logo to your arm.

Summary: The only development in the MBA arms race that I've seen with a strong influence an MBA application or the job search has been extracurricular activity or volunteering. With my clients, the ones who surprise me by not getting accepted tend to be weak in this area. Likewise, the clients that surprise me by getting accepted, tend to have strong demonstrated interests and a track record with extracurriculars. They aren't necessarily Olympic volley ball players but rather social chairs of their local club team.

Thank you notes (or even thank you carrier pigeons) and Pre MBA internships don't have an impact (although as my mother would agree, you should send Thank you notes to uphold rules of etiquette and to be a nice person) and quantitative classes or retaking the GMAT have their occasional place.

What have others seen with the MBA or job search arms race? What new things do you see candidates doing and do you think that it's effective?

Tuesday, September 22, 2009

My First 100 Posts: A Blogging Journey

In late November, my blogging journey started after I promised my wife that she would never have to say the words, "Stop blogging and talk to me/take out the garbage/look at the UFO that just landed and is probing the neighbor's cat!" 100 posts later, I have reached today's milestone. If 100 days is a useful barometer for a presidential term, 100 posts will do the trick for a blog.

I would like to say that I have now been acknowledged as the foremost expert on Pacific Northwestern health care, knitting, and climbing reform. I would also like to say that my on-line brand is now so tight that both ranchers and cattle are envious. However, the one thing that I can say for sure is that there are a few more colonoscopy and animal husbandry jokes on the internet.

In reality, I can safely say that the blog does have a readership (thanks mom!), I've become a contributor to some MBA web sites, been added to blog rolls, had posts featured on Brazen Careerist, and have helped backpackers find Lake of the Angels camp site in the Olympic Penninsula in Washington. To highlight the best of the blog, I added a widget to show future readers the most popular posts. Thank you to Marquis for linking to Love in the Time of MBA's which is a big reason that the post is the most read. Well, the other reason is because it's about dating which leads to sex and I don't need to explain more (sorry mom!)

I've also had fun seeing what google searches bring people to my blog and what people are looking for. For all those who were looking to learn about sperm donation, the price of a colonoscopy, or a business plan for a reality TV show, this probably wasn't what you were looking for but glad that you came by. I did kind of shudder at what kind of Google traffic my Pimp your health plan post might bring.

My goals with starting the blog weren't about traffic because I wasn't interested in spending the time generating it. My first goal was to write and work on my writing. Being a writer was my childhood dream job once I decided that my parents probably wouldn't let me become a bounty hunter. Writing has been my other craft (besides knitting) and blogging has given me a medium to take ideas further, think of new ways to express them, and look for the stories that our out there. I read more critically and think about how I would respond because I have the blog as an outlet.

My second goal was to really participate in the on-line world of Web 2.0 and the community. I was ready to move from lurker and occasional commenter on blogs to a full fledged participant and put my ideas out there. I believe that the online community is just as much of a community as your local sports team, sewing circle, or commune and that developing an online personality is part of participating in those communities.

Thank you to all who have visited, commented, read, or linked. Now that I've proven to myself that I can maintain my blog and keep writing, I'm going to start thinking if I want to move the blog into different phases or keep my current approach. From traffic and comments, I can tell there is a strong interest in my MBA Experience posts and that may be an expertise that I continue to cultivate. Unless my pimp my health plan posts reveals a better opportunity!

Monday, September 21, 2009

Generation Y Disconnect over Health Care Reform

On the Brazen Careerist a millennial aka Generation Y aka anyone under 30, health care reform posts are more becoming more popular than posts about dating or sex. I recently saw a petition with a list of what Gen Y want from the health care reform. After reading the list, I saw the strong sense of social justice and call for equality. However, the proposed changes were for things that already exist that Gen Y doesn't use. There was a lot of bicycles for sea food.

In summary, the petition calls for affordable health insurance that covers preventive and reproductive services, an end to using gender to price plans, and ability to stay on parents' plans until they are 26.

With regards to using gender to price plans or charging women more because they get the bill when a baby is born, that is overdue change. 18 states have figured out that you need both a man and a woman to have a baby. With regards to mandating that dependents can stay on parents' plans until they're 26, certain employer groups provide that option. This would probably be a popular mandate for all since it adds more young people to insurance pools. Only issue is that employer-sponsored insurance is in flux so this may add a mandate to something that may go the way of the Arena Football League.

What's left in the petition is health insurance reform in the form of affordable plans with out of pocket maximums (a limit to how someone will have to pay) and preventive services. All of these things currently exist and are aspects of current health insurance plans that Gen Y doesn't want to buy. They're as popular as day old keg.

With affordability, Gen Y would pay as much for a health plan as a senior would for their Medicare premium. Even in McAllen, TX, with the highest medical costs in the country, a 25 year old could get a plan with out of pocket maximums, preventive services, and everything else for less than $100. You don't getter discounts than a senior, from health insurance to movies to early bird specials.

With preventive services, from a population health perspective, young adults generally don't need preventive services outside of women's health. When I requested my last cholesterol test (with cholesterol level under 200), the doctor told me that my cholesterol wasn't going to change until I turned 40 unless I adopted a West Virginia style diet. From a population health management perspective, those preventive services are best reserved for those who are older or with chronic diseases.

Given Generation Y has access to affordable insurance and a low need for preventive services, why is there a petition for this? The good news is that the petition is already successful. Even Senator Baucus's bill has a "young invincible" insurance option to entice Gen Y to buy insurance.

This is the disconnect. I see the interest in social justice in terms of everyone having insurance. However, I see no indication that Generation Y value insurance sufficiently to pay even the discounted rate. Insurance plans who have done market research see a larger interest in dental insurance because young adults generally use their dental insurance twice a year. The real issue with communicating with Generation Y is more about marketing the insurance plans as carriers with focused marketing campaigns do well with the same insurance plans that everyone else has.
The real Generation Y issue that I see is a better financial forgiveness process when something happens and they are hospitalized, need medication, or need a surgery, and they have no insurance. Hospitals and pharmaceutical companies have charity care programs that could be used to give young adults a second chance and not force the debt on them. Our rugged individualistic society may preach that no second chances and accountability but we also can be a compassionate society when we want to. If that fails, we can put on our ROI hats, an point out the fallacy in trying to get someone in their 20's to pay back tens of thousands of dollars in debt. After that debt forgiveness, it would be expected that the young adult would learn and carry health insurance (assuming they can qualify which is a gap).

Generation Y has been dispelling convention about the perils of job hopping or the importance of home ownership. That's why this conventional request in a petition surprises me. Young adults interaction with the health care system is deliberately infrequent. Address the problem prudently when it happens for that one time and remove that safety net if the same offender doesn't learn their lesson and remains uninsured. I see the social justince in affordable insurance for some parts of the country but for young adults, I see social justice in the form of debt forgiveness for a catastrophic event.

Friday, September 18, 2009

No more Pimp my Health Plan

In the summer, a new term was introduced to the health care debate which was "gold-plated health plans" or "Cadillac health Plans". They were very generous health plans that research showed may lead to overutilization of care because the benefts were so rich and the consumer was shielded from any costs. Kind of like someone who buys a new sports care can't resist drag racing on the freeway.

Senator Max Baucus's recently introduced health care bill had a provision to tax these golden cadillac health plans at a 35% rate. It's like the luxury tax for sports team like the Yankees who exceed a certain level for player salaries. The golden cadillac plan is defined as costing an individual $8000 per year or $666/month. Considering that I can get an individual plan in New Jersey, a state with high medical costs, for $350 for a 35 year old, this isn't just a cadillac plan, it's a Hummer-sized plan.

When these golden cadillac plans were introduced to the nation, the impression was that these were the types of plans that greedy executive who don't like ice cream or warm puppies have. Regular people don't have these plans but people who get paid bonuses that rival the GDP of Pacific Island nations have these plans!

In reality, the richest plans in the country are negotiated by unions who have become very good at getting incredible health care coverage for both active and retired groups. I was really hoping that the Obama administration knew that and would be prepared. Apparently they had absolutely no idea. The AFL-CIO reacted to the news with chants of "Bull sh!t" and went absolutely ballistic. Senators Kerry and Rockerfeller are decrying the increased tax on the middle class. Turns out these golden cadillac plans are mainly bought by the Democratic labor base. Democrats are spinning trying to figure out where else they can get the $215 million that this tax provides. I'm tempted to request the cost of Congress's health benefits to see if they are also golden cadillac plans. Given the cost of east coast health care, the age of Congress, and the benefits, they very well might be.

What disappoints me most is the idea that taxing these plans might be a good idea is getting put in the corner. Some article have called golden cadillac plans a myth and the savings might not be there. However, it's become increasingly clear that shielding consumers from true costs of medical care is not a good idea. Generally, unionized groups such as teachers and state workers have high health care costs and I don't think that they are all sicker than the average population. These golden cadillac plans were created as part of salary negotiations. If unions scale back to Ford Taurus health plans and members get higher wages, tuition waivers, gym memberships, or fruit baskets on all 8 days of Hanukah, it doesn't have to be a salary cut.

Golden cadillac plans were thought to lend to higher health care costs before we found out who actually has these plans. The intent was for those who purchase twice the insurance that they need would subsidize those who have none. It's time to stop pimping and starting to share the love which is the whole idea behind insurance.

Tuesday, September 15, 2009

Olympic Penninsula: Mt Washington/Ellinor Traverse

This weekend was my final climb of the season with my climbing club. It was a new twist on two climbs that I've previously done in the snow as we climbed up Mt Washington and traversed the scree slopes below the ridge that connects to Mt Ellinor.

Mt Washington is a very enjoyable climb with some route finding challenges. The route we took concludes by circling the summit block on a comfortable ledge and a 30 foot class 3 scramble to the top. It takes 4-6 hours to summit and I included some details below.

Here's a picture of on the summit block ledge that I mentioned above:

For climbing up Mt Washington, here is some data that will hopefully help with route finding on the climber's trail or Big Creek trail or Route 1 in the Climber's Guide to Mt Olympus that the Mountineers produced.
1. Trail starts in between the turn off for the Mt Ellinor trailhead and the waterfall that is Big Creek. It's easy to miss but look to the left of the big mossy rock.
2. Trail is pretty straight forward until you reach 4800 feet of elevation. We went right and stopped at a steep scree section when we should have gone left through the woods. Look for discreet orange tape on branches of some cairns. The path will cut through the woods and follows a gully to a basin.
3. One you reach the basin (5000 feet), you will see an appealing gully to the far right. Resist and look at the paths in the ridge on the left or to the right of the highest point in the picture below. The path is straight up from the green backpack of the person farthest to the right.

4. Once you go over the ridge, you will pass a memorial cross (land mark for the traverse route) and see the summit block with ledge to the right. Follow the ledge for a short distance and look for the section for the summit scramble. You will not follow the ledge completely around the summit block.

The Mt Ellinor route from the trail head is a fairly straight forward hike to the top and a good beginner climb. During the winter it features a luge-like glisade route in the snow (I believe that glisade is Swiss for "sliding down the snow on your butt).

However, if you go via the traverse approach that we did, it involves ascending a pretty impressive scree slope. The scree slope is pictured below and it's the gully to the left of the snow that looks steeper than it is. Sometimes the footing was almost North Sister-esque but you would only fall down a few feet if you slipped.

I managed to fall down while just standing still and got a nice bruise and impressive cut on my fore arm. It looks like I was in a knife fight.

For the start of the traverse route, you descend from the Mt Washington summit and cross over to the back of Mt Washington at a white memorial cross that was dedicated to fallen climber. It's around 5800 feet. Keep descending until you reach the lake at around 5220 feet and make your way up that scree slope above to Ellinor. Here is a picture of the lake:

At this point, the only thing standing between you and Mt Ellinor is 700 feet of scree. Hopefully, you'll see some goats along the way.

Friday, September 11, 2009

Reinvigorated about Health Care Reform: The Good, the Bad, and the Ugly

I'll admit, I got tingly, hearing Obama say, "I still believe" and about his vow to be the last president to address health care reform. Kind of like I got during some of those good early Grey's Anatomy episodes when they would play a montage of the different patients and characters wrestling with tough emotional decision while playing music from the latest Emo folk singer.

What's gotten me even more excited is Senator Max Baucus's 18 page framework for his working group on the Senate Finance Committee. The proposal has real specific ideas that address serious issues in health care like a dysfunctional individual market and underpayment of primary care. This proposal is a working draft for his "Gang of Six". While I don't think that everything in it is a good idea, I think that Baucus can now spend more time thinking of a better nickname than "Gang of Six". What about the "The Sick Shooters" or "Maverick Baucus and the Top Gunners"?

We've got some solid ideas and some inspiration back on the health care reform table. It's enough for me to ignore the fact that the Republicans are not interested in health care reform. For me, the work will be between Obama, the Blue Dogs aka fiscally conservative Democrats who will have a tough re-election, and the California Democrats aka liberal wing who can spend more time worrying about their flossing schedule than their re-election chances.

For the purposes of this blog post, I can think of no better way to express myself than my favorite format, the good, the bad, and the ugly

The Good

  • Help for those who need it the most, small groups and individuals: Groups with less than 50 employees and individuals have the worst options when purchasing health care. They get the least benefits, most limitations, and denied most often. Baucus's proposal of risk adjustment that will pay a plan more for insuring sicker members and guaranteed coverage gives consumers more options. Additionally, the proposal requires that plans offer 4 levels of benefits (bronze through platinum) and even a "young invincible" option. It cracks me that they even call it the "young invincible" option when they could call it "Doesn't give a crap about buying insurance option". This limits cherry picking by requiring plans to offer something for everyone and the prices of the different levels are at 1:7.5 ratio.
  • Interesting definition of Affordability: It defines an affordable plan as costing 13% of someone's income. Maybe it's the health care policy geek in me, but it's a pretty clear expectation of how much someone is expected to pay for health care before the government helps. Overall, the specificity of the definition of affordability provides a specific direction on the opinion of how much health care should cost someone. It's not free and Baucus will get specific.
  • Reward the right medical practice: Medicare will pay a 10% bonus to primary care physicians or surgeons who practice in an area with a health care shortage. This is funded by a 0.5% cut everywhere else. Primary care is considered to be underfunded and other areas of care (like imaging) are probably overfunded. It's a nice way to reward primary care for being considered the best value in health care.
  • Rewards quality, prevention, wellness, good outcomes and gives ice cream and warm puppies to nice boys and girls: There are also a whole host of pilot projects and funds for new innovations in care, preventive services, and making quality data more readily available so you actually know if you are less likely to die in your local hospital. These are general provisions that we can all agree on like the fact that we like ice cream and kids like puppies.
The Bad
  • Co-pting the word co-op to replace a public plan: I have blogged repeatedly on how the public plan option is a bad idea since the federal government has little experience with administering health plans and it would introduce a new mediocre government-sponsored plan. While Obama backed off the public plan, Baucus is now calling it a Health Care Cooperative. Only difference is the government would pay someone else to start multiple public plans. If they are really interested in a cooperative, have a real cooperative where members volunteer 2 hours per month and pay claims or answer phones. If members use less services than anticipated and costs are lower, everyone gets a dividend. Baucus's idea is not really a co-op. When everyone sees through the rebranding, I'm waiting for Health Care Cooperative to be replaced by Health Care Communes or Health Care Sewing Circles.
  • Talk about Torte reform or talk health care costs, stop mixing them: Republicans and physicians have focused on malpractice reform as a key to reducing health care costs. However, there is little evidence that malpractice reform will significantly impact medical costs. Texas enacted malpractice reform in 2003 with no drop in medical costs and has some of the highest costs areas in the country. A Harvard study also finds few frivolous law suits or lower costs with malpractice reform. If we want to talk about torte reform in general to prevent law suits, that's fine as I have no interest in preserving a litigious environment. However, holding up torte reform as a solution to lower medical costs is like me claiming that switching to diet soda is the solution to my weight loss plan.
  • Selling Insurance across state lines or a solution looking for a problem: This was in the Baucus proposal and it's an example of clean coal. Sounds good but doesn't really exist. In my current role, I make strategic decisions about individual insurance plans and I would have no interest in this opportunity. Insurance costs more in certain states because medical costs are high not because of state mandates (except maternity coverage). Mandated mental health benefits add $2/month and mandated acupuncture could add $1/month. If we tried to sell a $210 Oregon insurance plan for a 35 year old in New Jersey where it costs $320, we would probably have to charge closer to $300. That would be less than a 10% discount for a plan with a smaller network and no brand awareness. Medical costs in New Jersey are simply higher. We could subsidize our New Jersey business with our Oregon business but than our prices would rise in Oregon. The only opportunity that emerges from selling insurance across state lines and ignoring a state's legislation is that males could get cheaper plans in states that don't mandate maternity coverage. The main result of this legislation would give males a way to avoid contributing towards pregnancies (except by causing them).
The Ugly
  • Potential loss of an industry: Many of the reform proposals feature health exchanges which facilitate the purchasing of insurance plans through a web site or government entity. The goal is to make it very easy to compare and research insurance plans. This would remove business from insurance brokers who currently are paid quite well. While not all brokers create the same level of value, I don't begrudge their profession or ability to make a living. The health exchanges would take a lot of business away from brokers and we won't know if they will provide the same level of service.
  • Republican's best contributions to the health care debate was Joe Wilson's lack of ability to control his mouth: With the complexity of the health care system, it lends itself well towards a vigorous debate and solutions across the political spectrum. The Republicans have stopped taking the debate seriously. Their contributions have been to reclassify the number of uninsured from 46 million to 12-15 million by offering a new methodology. Or they would rather talk about torte reform instead (see my 2nd bad idea). They're even demonizing undocumented immigrants rather than talk about health care (as if the fact that some percent of 10 million undocumented immigrants receiving a health care service outweighs designing a system that can help 300 million Americans). Their only idea of selling insurance across states lines was my 3rd bad idea. As a result, I turn to the different factions of the Democratic party to forge a solution since the Republicans are probably more interested in finding Iphone fart applications than health care reform.

Wednesday, September 9, 2009

My Mom Wants to be Facebook Friends

Previous family generational issues include length and color of hair or number and locations of piercings. Even family generational issues have gone digital as I hit one with my mother. She asked to be my Facebook friend.

National Public Radio had a whole show on this topic so I knew that I wasn’t alone. The only clear path was to not her request linger. I couldn’t treat her request like the one from a coworker, high school friend that I hadn’t thought about in decades or someone that I only knew on-line. The more it lingered, the more it would cause thoughts to fester about why I hadn't made a decision. My main concern was that my mom’s understanding of boundaries paralleled my knowledge of string differential equations. We both knew that they existed but couldn’t recognize them if we saw them or knew how to navigate them.

I went back to the source and posted on my Facebook status, “My mom wants to be my Facebook friend. What should I do?”

I got some responses that were variations of, “Run!”, “Block her!”, “Give up Facebook it’s not worth it.” Some were more philosophical, suggesting that I was screwed either way and should start considering a drug habit or an endurance training regime to compensate. Some older folks that I know professionally chimed in that they were Facebook friends with their kids and there was never a problem. Personally, I would be more interested in their kids’ opinion about the topic.

My uncle (mom’s brother) told me that he threatened to disown his kids when they wouldn’t be Facebook friends with him. His kids are just out of college so it’s a little different but the main point was that yes, I’m Facebook friends with 2 uncles, 2 aunts, 5 cousins, 2 second cousins by marriage, and probably at least a few other relatives that I missed. Given that I’m connected with 25% of my family, friending my mom shouldn’t have been a big deal. But it still was a big deal. For me (and probably others) my mom is either the first to know something or the absolute last person to know something. Communication channels are monitored for everyone’s benefit. If she was my Facebook friend, would our Sunday night conversations include my whimsical comments about my colon or a slipped detail about the weekend?

I talked about it with my wife and decided that I would friend my mom. A quarter of my family was connected to me already. I’m old enough that my mom has already raised me; any news about new habits that I have developed are my own. I could always talk with her and remove her if she behaved badly.

The next day, before I had friended her, my mom called me. Turns out that my uncle had read all 12 comments to her. I made a mental note to block my uncle on Facebook. Surprisingly my mom thought that it was hilarious that I posted the question on Facebook and hearing the dialogue had cracked her up. Being a Facebook friend wasn’t really that important to her so hearing the strong dissenting opinions expressed about a topic that she had little emotional investment was really funny. Kind of like foreigners probably view our health care reform debate. She told me that it was my choice to be Facebook friends with her, she was fine either way. It really wasn’t a big deal to anyone but me, which is probably how it should be.

Now some readers are probably wondering that given all the thought about Facebook friending my mom, why the heck am I blogging about it? Facebook is more parent porn with mundane updates about someone’s day or their observations. My mom wouldn’t be able to get through one paragraph of my dissection of the MBA admissions process of Obama’s public plan option.

However, I do need to keep a closer eye on my uncle.

Tuesday, September 1, 2009

Health Insurance Mandates: Sharing like your Mommy Taught You

There are some ugly words in the health care industry that make people want to throw things. For most, it's words like "pre-existing condition", for some it's "prior authorization". In the world of health insurance toilers, that ugly word is "mandate" or when a government body requires a certain service to be covered. Government bodies probably like the word mandate because they're sticking it to the man. Wait what do you mean the government runs health care! Get your hands off my Medicare you bureaucrats! Sorry, involuntary reaction developed in response to those who haven't lived in the US for the last 40 years and forget that the government is already heavily involved in health care and funds health care for 1/3 of all Americans in the form of 44 million Medicare beneficiaries, 40 million Medicaid beneficiaries (my estimate), and 3 million retired and active military personnel.

After some contemplating during the NPR pledge drive on my commute, I have decided that when mandates are used effectively, they have a certain elegance to them. In more grand terms, I see mandates as the bridge where the free market stops and government programs begin.

The two best example of effective mandates that I can provide are maternity and hearing aids for children.

Maternity: 18 states mandate maternity coverage in the US. In Kansas where they do not mandate maternity coverage, a 35 year old man pays $64 for the same plan that costs a 35 year old woman $104. Given that we need both men and women to make a baby, why do women pay more for the insurance to have a baby? Maternity is generally the most expensive mandate as it can make up 15%-20% of claims cost. However, the ROI on prenatal care has been proven 10 times over and since women don't get pregnant immaculately, I hold this up as an example of an effective mandate. It is an appropriate use of the concept of insurance or spreading medical costs fairly over the population that all will likely use the service. Women are not in a position to negotiate for lower insurance costs so the free market doesn't work in this case.

Hearing Aids for Children: Oregon recently passed a mandate covering hearing aids for children. In this case we are using insurance to fund the services for a select few. However, we are talking about helping children hear so they can stay out of special ed classes, learn in school, and become contributing members of society. If this wasn't mandated, I'm pretty sure someone could pass a hat in the office to cover their child's hearing aids as this should tug at the heart strings of even the most ardent free market advocate. Or even the crustiest members of Congress.

In this case, there wouldn't be a case where the free market would support hearing aids for children. There are too few children who need them and it requires strangers who would never need this service donating $10/year to cover. That is the likely cost in terms of additional insurance premium so it's a cheaper vehicle than a telethon.

In summary, maternity is the only mandate that comes close to exceeding an additional $10 per month. Most mandates are under $1 per month if adding any cost so there isn't evidence to support that mandates are causing huge cost differences between states. The Dartmouth Atlas study or any recent article about McAllen, TX instead shows how variation in provider practice is the main driver of medical costs. Mandates are the noise to distract from the real issues. The only real benefit of allowing people to purchase insurance across state lines is to give men yet another way to avoid contributing to child support through cheaper insurance.

Ineffective mandates: Like different flavors of jelly beans, not all mandates are good. A 2005 Wall Street Journal article points out how some states mandate acupuncture, massage therapy, or chiropractics. Mandates for coverages of a specific provider should be addressed by the free market rather than rely on the state to require financial support of their profession. If acupuncture is effective and important to consumers than insurance companies will find themselves asked to cover it and will lose business to plans that do cover it.

While the 2005 Wall Street Journal articles talks about the thousands of mandates that drive up costs, there's no connections between mandates introduced per year and medical costs. The medical costs with the largest increases are imaging and pharmaceuticals and I have yet to see a mandate that a 3-D image must be used instead of a simple X-ray or for the next generation of heartburn medication. There are also mandates that are covered by plans already, such as telemedicine or requiring that benefits for contraceptive be the same whether it be oral, inserted, or injected. The image of thousands of mandates is more spin than reality.

Some may question my definition of an effective or ineffective mandate, especially the acupuncturist that I picked on. The main difference for me is a consumer-focused mandate vs industry-focused mandate.

Mandating that a consumer be able to access treatment for a condition where the free market has no solution represents the elegant bridge. Treatment can be defined by the plan and it prevents the consumer from having to rely on public plans in the future (either Medicaid or the prison system). Some like to hold up the spector of drug and alcohol treatment as an example of paying for undeserving screw-ups. However, we will pay drug and alcohol treatment in either prisons or through insurance. It's cheaper through insurance and more humane.

Mandating that an entire class of providers be covered sounds more like effective lobbying to me. Or a government takeover of our entire health care system by the Russians! Sorry, there's that involuntary reaction again. I hope we resolve health care reform soon otherwise it might become permanent.
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