Health Insurance Drives Sky-Rocketing Health Care Costs

My girlfriend, Sandy, and I had our first springtime “spa-day” last week.

Being “girls” we talked about our travels, our families, and fashion while enjoying a pedicure.

Sandy worked in the health care industry before her recent retirement, and I have consulted extensively to large health care organizations over the years.

Not surprisingly the conversation quickly turned to health care – the Republican proposal to repeal and replace “Obamacare” and the just published Congressional Budget Office analysis of that proposal.

Beyond our professional experience, we are consumers. We are experiencing the increasing cost of health care insurance, co-payments, drugs and other expenses.

Spending Other People’s Money

Over our sun-drenched lunch, Sandy and I talked about the growing role of government into our health care system and about some of the unintended consequences.

During his very wonky Power Point press conference, Paul Ryan accurately pointed to the spending of “other people’s money” as a powerful driver in the alarming rise in the cost of health care.

Let’s break this down.

  1. Obamacare requires that every American citizen must be covered by health insurance. Americans are required by force of law buy to insurance from a private insurer if they are not covered by an employer plan and have an income above the Federal Poverty Line.   That insurance must include benefits you or I might or might not want.
  2. Your individual premium is calculated on age, number of insured in the family, and the average cost of all the mandated benefits – whether you may use them or not – because someone else insured by the same company may – indeed – use those benefits. That is called sharing all the risks.
  3. If you do not buy insurance, the Internal Revenue Service will impose a penalty (i.e. a tax on you) that is used – in theory – to help pay for health insurance or Medicaid for your neighbor whose income and family size qualify them for help paying their legally required insurance premiums.
  4. All insurance payment premium payments for health insurance are paid into the insurance companies’ premium account(s). Premium accounts  are a pool of money in which your individual contributions can no longer be identified or separated out for your specific use.

Once our dollars are pooled with every other tax payers’, we have no control over how they are invested or spent.  They become someone else’s to spend on any person or any benefit – at any price the insurer agrees to.

The more services the government mandates insurers to cover from first dollar or after a minimum co-payment, the less sensitive the consumer is to how much that service costs.

For example, last Tuesday my allergy doctor suggested a vapor treatment for my pollen-driven chest. I said okay. It never occurred to me to ask how much does the treatment cost because I won’t get a bill. The charge will merely be an object of curiosity when the insurance company sends me an explanation of benefits they paid.

If I had to pay the bill for that treatment, I would have asked more questions about the cost and efficacy.

Are government bureaucrats creating an almost irresistible temptation for the health care providers? In a word, YES!

If the insurer is required to pay – no questions asked – for tests and treatments, the profit-making health care eco-system is going to prescribe more tests and charge more for them.

The Affordable Care Act (Obamacare) mandates for first dollar coverage of preventive and diagnostic testing exaggerate these consequences.

The more services are mandated without adequate cost controls, the more the insurers must charge in premiums and co-pays.

Faced with exploding insurance costs for all of us, is it time to change the assumptions about personal responsibility for your own health care and government’s power to mandate that responsibility be underwritten by the taxpayer?

The Purpose of Health Insurance

“Sandy, I think I remember paying bills from the pediatrician when Craig was a kid – like his well-baby care? What do you remember from your children?”

“Yes”, she replied “I remember paying the pediatrician”. Sandy was living in the mid-west at that time and remembers she took her children to community childhood immunization clinics that were “much less expensive” than the pediatrician.

When Craig was born, insurance paid for hospital costs for both of us – but I paid a contracted amount – directly – for my obstetrical care – spread over the pregnancy.

I was in graduate school and working for the University of California’s Statewide Office of Administration at the time. That meant I had really good (state employee good) health insurance.

What I experienced was normal practice in the 1970s.

I don’t remember when the practice changed and I stopped paying doctors’ bills and started paying only a co-payment – and it doesn’t matter. The point is health insurance started out as hospitalization or serious illness insurance – not the primary vehicle for obtaining routine care.

Health care coverage, today, is not only protection against major illness, major accident or hospitalization. It is, also, really pre-payment of anticipated routine services – an indeterminate number of services each at an indeterminate cost. Indeterminate is driving rising premiums and deductibles.

Necessity is Driving Innovation

While Congress is debating how to insulate more people from a price and service model no longer affordable for either the American tax payer or the individual middle class consumer, a few health care practitioners are developing real solutions in real time for real people.

Here are two examples I found – without even trying – that are working in local practices today.

As of January of this year, my dentist is offering patients an annual contract for care. For a monthly fee paid automatically via credit card, the dentist will provide all preventive care and fillings. Other services are paid by the patient at a discounted price – determined before service.

The monthly expense is two-thirds of what my previous dental insurance company charged for a smaller benefit. If I were to need a crown, I would still pay less, out of pocket, than the previous premium plus co-pays.

Not only is this a good deal for the patient, it is a good deal for the dentist. If a majority of his patients subscribe to his plan, it smoothes out the cash flow peaks and valleys of a traditional small business and it allows him to schedule his employees – hygienists, dental assistants and office staff –efficiently.

This efficiency removes time consuming disputes with insurance companies.

Taken as a whole, the dentist can grow his practice while, at the same time, controlling his payroll costs. In other words, he can make a larger profit on same or lower revenue.

While we were talking, Sandy remembered a friend whose family practitioner has a similar program for healthy patients not yet eligible for Medicare. That doctor charges a flat fee of $2000 a year for all routine and sub-acute office visits plus annual preventive care – including blood draws and other routine laboratory testing.

That patient must still purchase major medical (i.e. hospitalization and catastrophic illness) coverage. But, according to my quick Google search, those policies start at about $600 a year.

This approach is definitely a money saver. It’s less than the cost of Medicare plus a Medicare Supplemental Plan for someone who meets the health criteria implied in the contract.

Here, too, the regular payments help to smooth the doctor’s cash flow and simplify insurance claims processing – benefitting the bottom-line.

Both of these patient/provider contracts are treated equally with employer-based health care premiums for tax purposes through the use of Health Savings Accounts – an objective of the GOP sponsored plan.

Could these be early signs of return to a health care model more typical in the 1970s? A model middle class Americans and their health providers can afford.

When routine health care was something consumers paid out-of-pocket, we paid attention to how much it cost. We shopped around for the best deal.

Old fashioned competition is the elixir of innovation – a tonic the American health care system urgently needs.

Graphic — screen shot by author.  With all thanks to MSNBC and my Samsung Smart TV

CBO Waves Yellow Flag at GOP Healthcare Bill

By the time I had printed out a copy of the just released Congressional Budget Office (CBO) cost estimate of the GOP proposal to “repeal and replace Obamacare” my inbox had filled up with draconian headlines and alerts:

A complete reading of the 27 page report paints a more complicated picture but does urge caution as the House of Representatives moves to debate, amend and attempt to pass the American Health Care Act (AHCA).


To reach the cost estimate, the CBO had to begin by making a set of assumptions.

1. Health care is an entitlement – just like Social Security and Medicare.

2. The nation’s health care eco-system is a permanent fixture that cannot be evolved and made more cost-effective.

3.  Health insurance is and should be the future primary source of payment for an individual’s health care.

4.  The non-group insurance market place will see a smaller portion of premiums returned as benefits to insured individuals – resulting in higher out-of-pocket expenses for the insured.

5.  Higher out-of-pocket expenses are, by definition, bad for the insured individual.

      6.  Absent a government mandate and associated tax penalty, about 14 million Americans will choose to go without health insurance.

7.  Absent a government mandate, many employers will stop offering health insurance to their employees.

Everyone in business knows step one in making a go/no go decision on any proposed project or product rollout is to validate the underlying assumptions. If even one of the assumptions is proven to be invalid, then the rest of the analysis is immediately called into question.

The project cannot be green lighted until all of the assumptions are deemed valid – either by addressing the flaw in the proposed project that invalidated an assumption or by proving the assumption, itself assumed the wrong input or outcome.

Below I’ve made a quick pass at whether the American Health Care Act should be “green or yellow lighted” – based on CBO assumptions.

Health Care Is an Entitlement

Let’s give the Democrats their due. Regardless of its flaws, the Affordable Care Act of 2009 firmly established health care as an entitlement due every American.

Other entitlement programs – i.e. veterans’ benefits, government pensions, Social Security and Medicare all require some prior contribution by the individual beneficiary. The beneficiary is said to have “paid into the system”– before receiving a specific and defined benefit.

For example, in Social Security there is a legally defined, published maximum benefit paid monthly regardless of how many additional dollars the recipient may have (or is) paying in Social Security taxes.

Payroll taxes (Medicare, Social Security etc.) deducted from your wages are deposited into a trust fund to be used to pay your benefits in retirement. Congress considers these benefits to be “earned”.

Contrast the new health care entitlement. It is paid for entirely by current income tax payers, in addition to taxes paid for their own future Social Security and Medicare benefit (or taxes on these benefits), and by future tax payers (borrowing). Borrowing that is moving the nation ever closer to the “fiscal cliff”.

There is no dedicated new funding source to pay for this new entitlement.

The taxes – now suggested for repeal by the GOP bill – are a mirage. They “move the chairs around on the deck of the Titanic”. The tax paid in column A is credited back in column B or passed on in higher health insurance premiums. There’s no new money except borrowed money!

Show Us the Entitlement Money

Republicans in the House of Representatives need to affirm healthcare is an entitlement and then develop a new funding source to pay for it. They are, after all, the “party of fiscal responsibility. Or, they’d like to have us believe they are?

The GOP (Study Group) should recognize that voters’ theoretical – i.e. gut reaction – to the idea of “government controlled health care” (2010) and their opposite reaction to getting a new health care “benefit”(2012) are both rational.

Voters are afraid of government mandates but will punish anyone who tries to take away a benefit bestow by those mandates once they’ve experienced it.

In 2016 voters supported “repealing” the higher cost of Obamacare era insurance premiums, co-pays and deductibles. They did not vote to give back the additional benefits received from Obamacare!

Accepting that a new entitlement exists does not mean the entitlement cannot be changed. The fact is that there are too many mandates, rules, and required benefits under the current law.

But any change made must demonstrate that is a fairer, better deal for a majority of Americans. Most Americans must be able to see and feel – experience – that the change is a better deal and be willing to pay for it, directly, or it is not going to work in practice.

Health Care Eco-System is Static

The CBO analysis completely misses the most compelling problem. Their analysis assumes the current structure is here to stay and that all reforms will be made through and not to the existing health care delivery model.

That assumption is incorrect.

The cost of health care services, drugs, appliances and anything else associated with the delivery of health care in America today must be changed – lest it bankrupt the nation.

The government is consumed by the question: How to pay for insurance premiums covering the unaffordable existing health care model?

At the same time, the American private sector (the consumer) is already experimenting with new models – more efficient and less costly.

Twenty of the nation’s biggest employers are banding together to create the Health Transformation Alliance aimed at using modern technology to control the rising cost of employee health care benefits. These employers, including American Express, Verizon and IBM (Watson) all understand the power of information to spearhead innovation.

These major employers are making an investment in reform because they remain committed to maintaining health insurance as a necessary employee benefit – calling into question, as well, the CBO’s 7th assumption.

These two CBO assumptions are incorrect. That means the 10 year projected cost estimate is reduced to pure conjecture.

14 Million More Uninsured in 2020

Not even the CBO “believes” this assumption.

Instead, they argue that an expanded range of choices in insurance products available to younger Americans – after the expiration of government mandates – will actually attract more young and healthy Americans to the non-group insurance market after 2020. This will positively impact the ratio of younger/to older Americans involved in the market place.

CBO projects a 10 percent reduction in overall insurance premiums as a result.

But – and here I agree with the CBO – the American Health Care Act – needs to be improved for older Americans still too young to qualify for Medicare.

These are people whose income exceeds the ridiculously low federal poverty guidelines – making them ineligible for Medicaid – who cannot afford health insurance premiums of $12,000/yr or more – that are only slightly reduced through $4000 “tax credits”.

Some of these people are, also, sicker and more expensive to care for.

A Roadmap for Dialogue

To their credit, the CBO has done an extraordinary job of laying out the challenges not just to the current House AHCA proposal but to the underlying problem of health care delivery costs, as well.

How much better off would the nation be if Congress – both Republicans and Democrats – were to embrace the cost estimate as a starting point?

“What-if” the ACHA were viewed as a bi-partisan starting point from which our health care eco-system is encouraged to evolve?

  • “What-if” Medicaid could be reformed and modernized into an attractive, affordable option for some middle-aged, middle income Americans as well as those too poor to pay health care?
  • “What-if” members of Congress were to work with all the stakeholders (from the President to the smallest tomato grower) to examine, question and rethink each CBO assumption?
  • “What-if” Congress started a discussion that engages provider, payer and patient in a singular effort to achieve better quality and lower cost health care for all – i.e. those who must rely on the health care entitlement and those who must pay for it?

But, as the CBO report cautions, it’s not possible to put such far-reaching improvements into place by 2020 as the AHCA requires.

Congress must learn from its past mistakes. Reforming the healthcare entitlement must be both bi-partisan and implemented over a 10 year time horizon that allows for intermittent adjustments as circumstances require.

Photo at US Capitol by Author — March 2,2017

Here’s What GOP American Care Act is not — Affordable

“If you want your legislation to last, it has to be bi-partisan,” — Ron Johnson, Republican Senator from Wisconsin, told the No Labels Problem Solvers Conference in Arlington, Virginia, on March 1.

He illustrated his observation, echoed the next day by my own Congress member, Anna Eshoo (Democrat – California), by pointing to Obamacare and Dodd-Frank. Both were rammed through Congress without a single Republican vote and are now targets of a Republican majority in Congress. Sadly, it appears the House Republicans have not learned the lesson.

Every comment made by House GOP leadership, the White House, and Republican members of the Senate point to a decision to ram the Budget Reconciliation Legislative Recommendations Relating to Repeal and Replace of the Patient Protection and Affordable Care Act through Congress on a party-line vote.

Once again, the victory will be pyloric and short-lived.

Healthcare is 20 percent of the United States economy. It impacts each and every American. It’s a huge problem and it can only be solved through a bi-partisan debate in full view of the American people.

Obamacare Impacts 330 Million Americans

Right after the conference, I shared a lunch table in the Longworth Congressional Office Building cafeteria with a couple from Mississippi.

Just as it does in almost every conversation in the Capitol, healthcare costs came up as we were just sharing our experiences from meeting with our representatives.

Owners of a small business, the Smiths described the difficulty they have in providing health insurance to their employees. The individual monthly premium is $400 a month – split 50/50 between the employee and the employer. “It’s the most we can do to pay half the cost.”

The median income in Mississippi is about $37,000/year – meaning a family of four participating in employer-based health insurance is paying 17 percent of their pre-tax income for health insurance. The policy has very high deductibles. In a word it’s “unaffordable”!

An average family of four in Mississippi is only a few dollars above the federal poverty line. But if their employer offers health insurance, they are not eligible to enroll in Obamacare – where the same monthly premium would be heavily subsidized.

Friday, standing, jet-lagged at my regular grocery store I was chatting with the man standing behind me in line. I said I’d been in Washington and the conversation, inevitably, turned to healthcare. He said he pays $1000 a month to cover his healthy family of four on an employer-based plan.

Before the Obamacare mandated changes in his coverage, he complained, he always had an annual preventive physical. Now, he has to pay $40 for the initial visit, $40 dollars for each of the routine tests and $40 for the follow-up visit. He concluded his prevent care is too expensive when prioritize against co-pays for his children. He figures he will go to the doctor when he gets “really” sick.

Nothing in the newly released GOP plan addresses either of the problems which these accidental meetings illustrate.

  • It does nothing to reduce the cost of health insurance because it does nothing to change the underlying healthcare cost crisis.
  • It does nothing to reduce the employer-based premium increases triggered by Centers of Medicare and Medicaid (CMS) Obamacare mandates.

Healthcare is an Entitlement

The Republicans’ most conservative members are still resisting reality. They claim that they must repeal Obamacare because the country cannot “afford another entitlement”.

Get over it.

  • Supreme Court ruled there is a universal right to care for all people at the emergency room door.
  • Once the government provides a benefit to some portion of the people – it cannot be taken away – only expanded in the name of equity.

But the conservative wing of the Republican caucus is partially right: The USA cannot afford another entitlement that is not paid for before and after it is granted.

Rather than repeating the mistake the Democrats made when they enacted Obamacare on a party-line vote the Republicans should take the time necessary to craft a bill that clearly addresses the coverage issues and is paid for.

A Down Payment on Reform

Paul Ryan must have been joking when he said “every American should read the bill”. Take a look here.

I read it but I didn’t understand all of it – just like most members of Congress!

Speaker Ryan surely recognizes the importance of slowing down the process of moving the proposed legislation to give his team a chance to garner at least some bi-partisan support for the plan.

That begins with the Congressional Budget Office (CBO) “scoring the bill”. How many people will get coverage under the American Health Care Act (AHCA) at what cost to the tax payer, and what’s the indirect impact be on employer-based insurance health insurance premiums?

CBO scores are notoriously inaccurate – over-estimating the benefits of legislation and under-estimating the costs. But they offer a starting point for a negotiation.

The current 120 page bill is nothing more than a “strawman” that will be modified by the long process of moving legislation into law.

In business the “strawman” plan is assumed to be a “starting point” — something that every member of the team can “take shots at” (debate and amend) in an effort to improve the proposal and, through participation, to encourage skeptics to “buy-in”.

For example, what-if Republicans (based on CBO estimates) offered to improve out-year Medicaid funding in exchange for Democrats supporting equal tax treatment for Americans with employer-based and private purchased health insurance?

No Democrats may come around to voting for the plan but, at least, the American people will see Ryan and his team willing to compromise to improve the bill.

Because of the limitations of the Congressional Budget Reconciliation process, the AHCA cannot address the underlying problem: the cost of health care. The reality is that no health insurance plan Congress generates can be affordable and effective without addressing the underlying problem.

To insure that Congress takes on the larger problem with urgency, the current bill must be amended to include concrete triggers guaranteeing healthcare cost containment legislation is written, investigated, debated and passed prior to the effective dates of AHCA.

For example Democrats get stronger drug pricing controls and the Republicans get malpractice reform.

Only by incorporating these guarantees in this first bill can we, the people, be assured the subsequent legislation will ever be introduced – let alone passed.

The battle ahead will be fierce — fiery.

Reimagineamerica will continue to observe, educate, clarify (if possible) and prepare each of you to be an active advocate in the battles to come.

Photo Credit: the author’s iPhone with thanks to MSNBC live broadcast

What Americans Don’t Want to Hear About Healthcare

I decided against going to a Healthcare Town Hall Meeting with a local Congressman because I knew the outcome before the gavel went down.

There will be a lot of speculative hysteria surrounding potential changes to Obamacare benefits or changes to Medicare.

Let’s relax. Entitlements once granted never go away – they take on a life of their own.

What attendees won’t be told is that Obamacare is collapsing under its own weight – insurers are fleeing in droves unable to sustain the coverage losses they’ve experienced over the last few years.

Nor will they hear the Congressional Budget Office prediction; Medicare Hospital Trust Fund will be bankrupt in 2020 and the larger Medicare Provider Trust Fund will be exhausted in 2028.

But Obamacare and Medicare are not the problem – they are just a symptom.

Medical Bills Are Killing Us

In a seminal piece written for Time Magazine in the summer of 2013 Steven Brill laid out the problem in detail.

Medicine in 21st century America is big business. It’s very profitable for employees and stockholders.

The United States of America spends more on healthcare than the next 10 biggest spenders combined! Based on exhaustive comparative studies of Adult Welling Being the additional $650 billion a year does not result in better outcomes for Americans.

McKinsey Consulting studies have shown that the average private healthcare employer has a net operating margin (profit) of 16.2 percent compared to ExxonMobil’s 8.2 percent.

Spending for healthcare services, drugs, devices and facilities equals 20 percent of total USA Gross Domestic Product (GDP) or about $4 TRILLION a year – every year.

By comparison, the American Association of Civil Engineers estimates the total national backlog of needed infrastructure (airports, trains, highways, energy grids, etc.) will equal only $3 trillion by 2020.

Healthcare Spending is Out of Control

We see the headlines – EPIPEN price increases from $57 to $600 per prescription in a decade.

New York is the financial capital of the world – right? Wrong, of the 18 largest employers in New York four are banks and eight are hospitals.

We have heard for years that employer based (and private) insurer payments to doctors, laboratories and hospitals needed to be increased to cover the losses health care providers experience in serving Medicare patients, Medicaid patients and the uninsured.

If Medicare is “unprofitable” why does every major for-profit healthcare system aggressively pursue those patients? It’s simple. The Medicare payment formula includes a guaranteed percentage of profit!

It stands to reason, then, that if there are 23 million more insured patients the providers’ need to recover “uncompensated care” costs has decreased but medical spending continues to increase dramatically.

While healthcare is something we all need; we’ve come to expect someone else to pay for. On average, the patient pays only about 12 percent of the total bill.

That’s made us insensitive to prices and providers greedier. The escalating greed is reflected in the skyrocketing price of health insurance.

Medicare Cost Data for All

If we want good healthcare coverage with reasonable insurance premiums, Americans must become active consumers. We must advocate for a system without hidden costs.

If we want the impending debate in Congress to conclude with a better outcome than just “Obamacare2.0”, we, the people, are going to have to hold our representatives’ feet to the fire!

We must insist they begin with a comprehensive investigation of the underlying costs of healthcare.

Rather than focusing on perpetuating yet another “entitlement”, Congress’s objective must be to reduce the cost of care for all Americans – not just those who receive government subsidized care.

Brill argues that Medicare can compute the real (true) cost of delivering each health care benefit they cover. They reimburse providers based on cost of service delivery in the provider’s region in the country – i.e. cost of a day in hospital costs more in California than in Idaho.

Then Medicare applies a percentage of profit authorized by Congress to the provider. Cost plus profit is the contracted price Medicare pays to providers – no negotiation.

But Medicare is prohibited by Congress from sharing that cost data.

As consumers we have to start to shop for the best deal even if someone else is going to pay the bill!

As voters we must insist Congress allow Medicare to share their cost data — putting other insurers in a stronger negotiating posture with healthcare providers. The result would be a better deal for both patient and insurance carriers.

Manage Costs or Ration Care

As a nation, we cannot continue to fund a healthcare system that has no self-discipline. To do so would pass an immoral debt onto several generations of Americans not yet born.

If we are going to make the promise universal health care (not single payer health care) an affordable reality for all we must be willing to make changes in the ways we consume and pay for healthcare – that includes Medicare patients.

  • A redefinition of what health insurance is and what it pays for.
  • A reorganization of how we deliver healthcare to increase efficiency and reduce costs.
  • Rapid adoption of technology to both better determine diagnosis and treatment and to manage chronic disease
  • Greater transparency so that patients can make smarter decisions about where and how they will receive necessary care.
  • Greater transparency around the relationship of drug development costs and drug prices
  • Medical malpractice tort reform.
  • Identification of realistic funding sources for health insurance subsidies, Medicaid, Medicare and veterans’ health care.

The good news is there is a great marketplace of ideas about how to tackle all of these issues.

The bad news is that all of the good ideas are being drowned out by the political rancor on both sides of the aisles of Congress and the army of special interest lobbyists who feed that rancor.

Over the next few weeks, I’ll explore each of these opportunities with you – so that we can help our fellow citizens understand both their possibilities and possible perils.

It is up to us to engage our elected representatives in “fixing healthcare for all”, not fighting to score political points for the 2018 mid-terms.

The Only Solution to Dysfunctional VA: Shrink and Reshape Mission

When a potential client asks for help regaining their corporate momentum before I say “yes, I’ll write you a proposal” I have to answer one question for myself. Is the potential client in the right business?

Can the client regain their momentum just by fixing some business processes, changing some jobs and applying different technology? Or, is it time for a major strategic shift?

Regaining momentum may require shifting the company product or sales strategy to sustain the brand value and satisfy their customers. The transformation activity required could be costly – time, business disruption and money.

Would it be smarter to wind the current business down and start over?

If I were advising Congress on the future of the Veterans Administration (VA), I’d suggest the latter.

Time for Gastric Bypass Surgery on the VA

There are 21 million living veterans today. 40 percent of those are Vietnam War vets. In most cases, they’re suffering from age more than combat. Barely 10% served in Iraq or Afghanistan during the last 10 years.

The number of living veterans has declined by 1 million over the last five years. The budget of the VA has increased by 27 percent during the same period.

The VA serves < 7 million clients and employs > 230,000 civilian staff including 700 lawyers. That’s a ratio of 30 veterans to 1 employee and declining.

30% of current VA employees are eligible to retire. While this represents a potential loss of institutional knowledge, it also represents an opportunity build a new VA with a more focused mission.

100 years ago, in wake of World War I, Congress promoted the Veterans Bureau to a full Veterans Affairs cabinet department. Now would be the perfect time to demote it, again.

VA Should Stop Duplicating Government Services

100 years ago there was no Social Safety Net for average Americans – no Social Security, no Medicare, no Disability Pensions, no Obamacare, no Federal Home Mortgage Guarantee program and no federally guaranteed student loans.

100 years ago, it made sense to establish a department that could provide these sorts of benefits to veterans of World War I who had been injured in combat and would require long-term care. After World War II it still made sense.

But today the VA is duplicating services other government departments provide more efficiently and effectively to the general population!

The case for integrating 21st century veteran benefits into the 21st century American social safety net is clear.

Generally speaking, being a veteran is just one data element in an otherwise “ordinary American” personal history.

For example, a veteran qualifies for veterans benefits after 24 months of honorable activity duty. In 90 plus percent of cases, that veteran will also earn Social Security and Medicare benefits from civilian employment.

Being a Veteran Is Not a Rare Disease Requiring Quarantine

Military retirees (20 years of honorable service or disabling combat injury) receive health care through Tricare, a Department of Defense (DoD) insurance program similar to Obamacare. It allows the veteran and his/her family to see any doctor of their choice.

At age 65 Tricare converts into Medicare with government paying supplemental Part B insurance premium. Medicare could similarly provide VA eligible veterans’ non-combat related health care.

Tricare proves that being a veteran is not a medical condition. There is absolutely no rational reason why a veteran who does not have special combat-injury related health needs can only be treated at a VA operated medical facility.

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The next Secretary of the VA should be required, as a condition of confirmation, to develop a plan, beginning in 2015, to right-size the VA health care system and turn it into a 90% insurance/10% highly specialized, combat-injury related health care system.

VA Determines Eligibility

VA’s role should be limited to and focused on establishing a veteran’s eligibility. Even this can be constrained going forward.

For several decades, members of our all-volunteer military have signed enlistment and re-enlistment contracts spelling out their eligibility for education, home loans and other benefits. Some of these benefits are, also, codified in law.

All of their benefit entitlement information could be transmitted automatically from DoD to Department of Education or the Federal Home Loan Agency, for example.

Taken together, all of these changes would result in a VA that is focused on its core mission – to provide services for disabled veterans and their families – urgently and effectively.

Winding down VA services, in parallel with staff retirements, could result in major savings to future tax payers – including veterans!

Photo Credit: Getty Images

  • It is up to YOU

    Get Involved

    In the coming weeks, will do what our Presidential Candidates and other politicians are not - throw out some positive and plausible ideas to "right the ship of state".

    Ideas you can ask candidates about during the Fall Campaign.

What You Should Learn From the Veterans Administration Scandal

A few years ago a woman sat down next to me in the departure lounge at Reagan National Airport and commented on the weather. Our flight had been delayed. We were stuck for at least another hour. To pass the time we struck up a conversation.

I introduced myself as a tech industry executive who had made an unsuccessful run for Congress on a platform advocating a simpler and more efficient government. Anne said she was a retired military officer who had joined General Shinseki’s staff at the Veterans Administration to do her part to reshape government to address the complex challenges of the 21st Century.

For the next hour Anne described the obstacles that had to be cleared to remove the most blatantly incompetent VA staff member.

Her narrative could be inspiration for a Seth McFarlane comedy featuring Whoopi Goldberg and Dolly Parton playing the fossilized bureaucrats and Tina Fey the former officer – except that there’s no happy ending.

Long Story Short: Outdated Record Keeping Is Bad For Business

I’d had some VA experience of my own. My team evaluated and recommended rejection of a proposal from SAIC to Kaiser to design a second generation Electronic Health Record (EHR) based on the VA’s VistA system. SAIC was and remains the VistA prime contractor.

After 35 years and annual information systems budgets in the billions of dollars, VistA continues to be a number of disconnected electronic note pads dependent on people walking printed reports from one computer station to another – what we call “a system-on-legs”.

No audit trail – no accountability.

This is business as usual for a government department still organized to respond to needs of World War II veterans – stoically resistant reform that addresses 21st century reality.

Resisting Even Common Sense Accountability

Business as usual, that is, until a Veterans Administration primary care doctor in Phoenix retired. He couldn’t reconcile his duty to his patients with VA policies. His phone call to CNN triggered a scandal now splashed across the nation’s news media.

Is it possible that the combination of bureaucracy and antiquated systems caused the unnecessary deaths of 40 veterans? Congress and the White House exclaim their outrage – if only we had known – we “just read it in the newspaper”.

VA staffers fall back on their standard excuse – doubling our budget is still not enough money.

We’ve Heard It All Before

The American people are very familiar with this pattern of government behavior. A scandal erupts. The denials, followed by the excuses, the hasty investigation, the Congressional hearings, the sacrificial resignation and some symbolic action by Congress to treat a single symptom instead of understanding or attacking the underlying cause.

Think intractable Medicare Fraud. Think Obamacare’s $1 Billion website  Think FEMA’s response to Hurricane Katrina.

President Obama and his three predecessors all came to Washington proclaiming their determination to make the Federal Government “work”. Clearly they’ve failed.

Where are the “tiger teams” President Obama promised in 2009? Where are the teams of “experts” empowered to modernize and simplify, to integrate the activities of separate government agencies – to improve service at a lower cost to tax payers.

Knee Jerk Reaction both Predictable and Pointless

The VA Scandal is just the latest example of government bungling driven by politics.

It’s predictable – Congress fires first and aims the gun second.
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  • Predictable: the Cabinet Secretary resisted and then succumbed – to resignation.
  • Predictable: Congress is rushing out legislation to make it a tiny bit easier to retire or fire fossilized bureaucrats at the VA, only.
  • Predictable: Congress is urgently calling for some veterans to get primary care outside the VA system in limited circumstances.


Just as predictably, none of these steps will make the slightest dent in the intractable federal bureaucracy or streamline government. It’s an axiom of good management – more money, more people, the same antiquated processes and systems just makes the problems more visible and more acute.

Why Not Solve the Underlying Problem Instead?

Congress and the Administration resisted the urge to quiet the scandal and fix the problem. It’s time to right size and reform the VA!

The underlying issues – bureaucracy and antiquated systems, are common across the major agencies of the Federal Government.

The specific issues at Veterans Administration boil down to one simple fact: The VA duplicates services other government departments provide more efficiently to the general population!

I have many friends who are Vietnam era and Afghanistan/Iraq veterans. To a man they opt for Medicare or corporate health insurance benefits rather than the VA for their regular (non-combat injury) medical care – faster, more convenient, better quality – they believe.

Congress should enroll eligible veterans in Medicare or Obamacare for all non-combat related veteran health care and focus the VA on its core mission – caring for our wounded warriors.

Photo Credit: Karen Bleier/AFP/Getty Images

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Can Government Execute with Private Sector Effectiveness?

With great relief, but little flourish, the Department of Health and Human Services released its (ACA Exchange) Progress Report claiming the fix-it “team is operating with private sector velocity and effectiveness”. I’m not too sure what private sector velocity is but that’s not the point of the sentence.

The point is that when it comes to the basic business processes that government must EXECUTE in order to effectively serve the citizens – like Information Technology (IT) or internal financial controls – government can’t compete with the private sector. Survival is a strong motivator. Governments don’t need profits to remain viable. Businesses do.

In government, as in business, the best strategy is only as good as the organization’s ability to execute. At the beginning of a strategic engagement, I interview each of the “C-Suite” Executives separately to establish a baseline understand of the organization, opportunities and obstacles. Of course, I’m not going to give out all the “secret sauce” but one of my last questions always is “how do your internal processes, systems, and IT systems impact your ability to reach your goals”.

Their answer is critical. If current systems hamper execution then the new strategic plan must be scaled back to fit the execution capability. Or, alternatively, the systems must be improved. Improving the systems takes time. Management must decide whether to scale back their ambitions or take the extra time required to upgrade their systems to capture anticipated opportunities.

It is the same in government. To get effective, efficient government we must improve the capability and capacity of government information technology teams at every level of government.

Over the last 20 years the private sector has increasingly retired home-grown systems in favor of buying and deploying pre-packaged software. It started when CEOs voiced their frustrations over business opportunities being lost “because the system can’t handle that” – “it’ll take 6 months to change the system”.

In technology, need inspires entrepreneurship. Entrepreneurs begin by developing pre-packaged systems based on “current in industry best business practices” for ubiquitous functions like order entry and procurement – systems designed to be rapidly customized to the business’s unique situation by “users” accessing standardized templates. In-house IT is more focused on analyzing and designing solutions, using software to enhance business operations and less on writing software and installing new fixes to old systems.

It’s the opposite in government. There’s a common ethos among government employees – what they do is different more noble, more complex, more important than the scheming, unscrupulous private sector. This carries over to IT. Government managers reason no commercial-off-the-shelf (COTS) software package or for-profit software company could possibly satisfy the complex and “special needs” of government. They just keep patching existing old systems – no matter the cost in dollars or in lost efficiency. Contractors refer to this as the “Not Invented Here” (NIH) syndrome.

Need proof that the government could “buy” software just as effectively? If you are one of the millions of Americans whose health insurance policy is being cancelled – you are as close to coverage as clicking on and putting in your zip code! eHealth will even calculate your eligibility for subsidies! It does the “back-office” functions that move an enrollee to an insured accurately!

eHealth is a Center for Medicare and Medicaid Services (CMS) contractor. This profitable Silicon- Valley-based on-line insurance brokerage has publicly said it could have partnered with CMS to deliver a total AC Exchange solution – for +/- 5% of the currently quoted cost.

Private Sector Effectiveness

Congress must not allow this golden moment, this opportunity to regularly achieve “private sector velocity and effectiveness” from government IT investments. There are lessons that can be learned from the ACA debacle, the most significant signaling a need for stronger public/private technology partnerships. Those lessons must lead quickly to a 21st century approach to government technology acquisition and deployment.

Woodrow Wilson imagined a government working at the “velocity and effectiveness” of the private sector when he established Civil Service to execute the will of Congress. But, alas, that was before there was Information Technology!

Photo Credit: Sarat Varanasi/ACG

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President Obama and the Affordable Care Act Fumble

Affordable Care Act Roll-out Failure Surprised President Obama
I have managed a lot of big, complex business program rollouts – sometimes as a functional manager and sometimes as the consultant or coach. I have worked with teams from 1 to several hundred all co-located or scattered across several continents. I’ve been the direct line manager and I have managed through a variety of matrix management models in organizations as diverse as HP, the State of California, and Hawaiian Airlines.

One thing has always been constant – I believed in the people I lead and they trusted me to lead them. If a leader gives the team clear goals, good tools and clear lines of responsibility and holds them accountable for the results – 99% of the time they will deliver.

The one caution I always give my team – in the first hour, of the first day is – “don’t let me get surprised”!

In work and in life “stuff” happens. Sometimes it is good “stuff” and sometimes it is bad “stuff”. The important thing to remember is that “if I know as soon as ‘stuff’ happens, I can manage it to a soft landing”.

That little speech ends with one clear warning. “But, if you let me get surprised, it will only happen once.”

It is not enough to just give the little speech about surprises. An executive or a manager has to walk the walk as well as talk the talk. I would not take on a project that was not actively led by an executive sponsor with real profit and loss responsibility.

I learned from Andy Grove, the first CEO at Intel – for whom I managed Strategic Staffing, the wisdom of being a little paranoid about “stuff” happening. During the course of a project I work with groups and individuals on a continuous basis as well as conducting mile stone reviews led by the executive sponsor. “Don’t tell me, show me. I’m going to test that myself.”

Hands-on Executive Builds Trust

When it is time to “bring the project live” it’s all hands on deck – from the most senior business executive to the most remote factory worker. The executive sponsor and I can’t actually fix machinery that doesn’t work or find a computer program “bug” but our presence communicates the importance of the project, the value of the work being done and the importance of a successful outcome to the bottom-line. Being there, even if it’s just to order the pizza, demonstrates our accountability and builds trust.

The President of the United States is the Chief Executive of the nation. Governing is about execution. Execution is the conversion of politics and policy into delivered government services. The President surrounds himself with a hand-picked White House staff and a coterie of trusted political allies in Cabinet positions across the federal government. Their job is to execute but their first priority is making sure the President is never surprised and/or embarrassed. When the President is surprised, the people lose trust in government.

Affordable Care Act

From the beginning of his first term, the President endorsed the concept of “tiger teams” to break down barriers to government reform. The ACA rollout was a perfect “tiger team” moment.

Health care is 18% of the US economy. The Affordable Health Care Act is one of the most complicated and ambitious pieces of legislation ever enacted. It mandates the coordinated action of some of the most notoriously inefficient departments and agencies in the federal government. The concept has consistently polled with less than 50% support among a skeptical public. The initial rollout had to be flawless.

But there was no “tiger team” – no one executive appointed to coordinate across the government, between the government and the private insurance sector, between the federal government and the state governments. No single person responsible for delivering policy, regulation, public communication, Congressional communication and the enabling technology needed to convert the promise of the ACA into a reality!

There is a troubling juxtaposition between the President pictured in the Situation Room during the Bin Laden raid and the absence of any evidence the President and his health care policy and technology team ever conducted an ACA milestone review. In both situations the President was equally responsible for the “go/no go” decision.

Restore Public Confidence

If there had been a “tiger team”, a single accountable executive, and a series of quarterly milestone meetings of all the ACA stakeholders – including both majority and minority Congressional leaders – it is likely the technical and policy “surprises” of the past few weeks would have been identified and fleshed out at least a year ago. Once identified, the issues could have been managed to a “soft landing”.

The President and Congress must learn from the ACA debacle. To restore public confidence the Chief Executive must work with Congress and his Cabinet to modernize and reform the governing model – to focus on execution.

That starts with firing the people who let him get surprised!

Photo Credit: MCT/Getty Images

  • It is up to YOU

    Get Involved

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ACA Exchange Debacle Demands Government Reform Technology Procurement

It was a good thing that my coffee cup was resting on the counter when NBC’s Tom Costello reported that the Affordable Health Care Act’s (ACA) floundering web-site cost $450 million dollars. Otherwise the cup would have crashed to the floor – an expression of my shock.

The purpose of the ACA Exchange is simple. Help Americans shop for health insurance. Based on age, family size, and income – visitors are directed to a variety of qualified private insurance options or the appropriate state Medicaid agency.

It is unconscionable, incomprehensible – to spend $450 million dollars on an e-commerce application. It reaches the level of criminality when the website does not even work!

NBC News went on to compare the $450 million ACA development cost to the $150 million Apple invested to develop the iPhone which has delivered a Return-On-Investment (ROI) of 1000% and counting. I would argue that a more appropriate comparison might be software service providers Google or Amazon.

Google is a Verb

Google is not merely a technology company – it’s become a verb. We don’t search the internet, we Google. Google “went public” in 2004. At IPO the total capital investment from the founders and their venture capital partners was $26 million.

Another good example of simple, frugal software development that transformed an industry is While on Wall Street, Jeff Bezos observed the growing importance of e-commerce as a Business to Business (B to B) tool. He gambled it could be even more powerful as a Business to Consumer (B to C) tool.

Google and Amazon both had the advantage of being built from the ground up – unencumbered by legacy systems or artificially set external timelines. Their founders embraced a set of modern, open-systems architectural principles – simplicity, flexibility, modularity, and loose integration. They invested their own money.

Navigators Make Internet Accessible to all Users

Google and Amazon kept it simple. They both help users to navigate the internet for information, products and services. By delivering the user to the partner’s door, Google and Amazon, also, made themselves valuable to the “seller”.

Google asks nothing of the search customer except “how can I help you find that recipe for making ketchup or that explanation of gene code sequencing”. Amazon asks nothing of the customer until they’ve filled their shopping cart and then it’s limited to name, address and credit card number.

Similarly, they minimize the amount of data that needs to be passed and processed by a partner. That allows partners to connect to Amazon or be “searchable” by Google without changing the partner’s internal systems.

The success of Google and Amazon redefined E-Commerce. Success spawned hundreds of B to C specialized online navigators – for example health insurance broker For a decade, has been a Center for Medicare and Medicaid Services (CMS) contractor! CMS is the agency responsible for rolling out the Affordable Care Act!

The ACA Exchange is a navigation tool – just like Amazon or – developed as an online service introducing millions of under-insured Americans to hundreds of insurance companies that want to sell them approved health insurance plans. If it actually worked, the ACA Exchange would be a direct competitor to for the same individual health insurance market customers.

The government shouldn’t be allowed to compete directly against competent and successful private sector companies. has demonstrated it can serve a public purpose at no cost to tax payers.

Even if such public/private competition were somehow justifiable – is shouldn’t cost $450 million dollars of tax payer money. That is just absurd!

Efficient, Effective Government

Nothing that happened in the ACA Exchange rollout had to happen. But it was predictable that it would. It’s just the latest in a long series of expensive government technology failures.

Out of ACA debacle must come a 21st century approach to government technology acquisition.

  • More focus on public/private technology partnerships.
  • New technology procurement policies and practices that prioritize “buy” over “co-develop” and “co-develop” over “make”.
  • Competitive bids in all circumstances.
  • Stiff penalties imposed on both Government IT Managers and external contractors for project cost over-runs.
  • More authority for the Government Accountability Office and Inspectors General to stop projects as soon as they identify a risk of failure to deliver well tested functionality on-time, on-budget.

I’m tired of Congressional outrage, I want action. How about you?

Get involved. Forward this blog to your Congress person with your own comments.

Photo Credit: Christina Scotti/Fox Business

  • It is up to YOU

    Get Involved

    In the coming weeks, will do what our Presidential Candidates and other politicians are not - throw out some positive and plausible ideas to "right the ship of state".

    Ideas you can ask candidates about during the Fall Campaign.