miercuri, 11 septembrie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

AFL-CIO Lays Out "Laundry List" of Formal Complaints Regarding Obamacare; The Bright Side of Obamacare

Posted: 11 Sep 2013 07:30 PM PDT

On February 19, I wrote Opting Out of Obamacare (the Unaffordable Health Care Act); Not Even Labor Unions Want It.

The issue has now come to a head as the AFL-CIO Lays Out "Laundry List" of Formal Complaints Regarding Obamacare.

The Hill reports AFL-CIO nearing formal criticism of ObamaCare
Unions, after a contentious and difficult process, are on the cusp of issuing formal criticism of ObamaCare at the AFL-CIO convention.

Council is expected to consider a resolution, subject to fierce internal debate, that will call for changes to the Affordable Care Act (ACA) — setting up a potential floor vote this Wednesday before the convention closes. Frustration has grown within labor as the Obama administration has failed to offer a fix to temper union worries over the law.

A copy of the draft resolution, obtained by The Hill, praises aspects of ObamaCare and states that the AFL-CIO supports the law's goal of providing healthcare coverage for all. But the four-page document lays out a laundry list of complaints against ObamaCare — at times taking aim at the administration.

The draft resolution says that "federal agencies administering the ACA" are "threatening the ability of workers to keep health care coverage through some collectively bargained, non-profit health care funds" under their interpretation of the law.

In addition, the resolution claims "some workers might not be able to keep their coverage," and the law will be "highly disruptive" to union members' health plans, known as multi-employer or Taft-Hartley plans. ObamaCare "will effectively use taxpayer dollars to subsidize employers that refuse to take responsibility for providing their employees health care" while taxing nonprofit plans to benefit insurance companies.

The measure also states that "the ACA should be administered in a manner that preserves the high-quality health coverage multiemployer plans have provided to union families for decades and if this is not possible, we will demand the ACA be amended by Congress."
Obamacare For Dummies: The "Affordable Care Act" In One Chart

I picked up the link to The Hill from ZeroHedge who also posted this amusing chart of Obamacare.



Fraud Free-For-All

One look at the above chart easily explains what I wrote earlier today: "Obamacare Fraud Free-For-All Now Underway"

The Bright Side

But please look on the bright side: the fraudsters, the insurance companies, and the 1% who represent the fraudsters and insurance companies should make out like bandits.

If that's not enough to give everyone who voted for Obama a warm, glowing feeling, what is?

Change You Can Believe In

Sarcasm aside, please recall that Obama did not promise change. He only promised "change you could believe in".

People believed, but as I see it, the fraudsters, the war-mongers, and the 1% are still in control.

To be perfectly fair, there is a legitimate "bright side" for some small set of disadvantaged souls who are better off with this plan. Rest assured that's an accident.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Obamacare Fraud Free-For-All Now Underway; "ObamaMarket" Enrollment Starts October 1

Posted: 11 Sep 2013 12:26 PM PDT

Rick Newman, writing for Yahoo!Finance Exchange says Obamacare Could Be a Fraudsters' Free-For-All
Have any idea where to find a health insurance exchange? Up to speed on what a healthcare "navigator" is? Know whether you'll need a new government-issued ID card to qualify for Obamacare when it goes live on October 1?

Scam artists hope you're as clueless as possible, because they're counting on widespread confusion about the Affordable Care Act to tap fresh opportunities for milking the unwary.

Scams are nothing new, but three factors make the Affordable Care Act a uniquely rich opportunity. First, the law affects nearly every American in some way, since it requires most people to have health care coverage. Second, it won't be standardized nationwide, the way Medicare and Social Security are, since states have the freedom to administer the law in different ways. Third, the law is brutally complex, which has sown confusion even among health care experts. The result is a sweeping new law that's shrouded in confusion and varies based on where you live, which is an invitation for abuse.

The proper response to fraudulent marketing, of course, is to hang up, delete or slam the door and then contact the FTC. But Obamacare comes with a few wrinkles that make it a bit harder to tell who's legit and who's bogus. The law, for instance, requires each health-insurance exchange to develop a network of "navigators" whose role is "to educate the public about qualified health plans, distribute information on enrollment and tax credits, facilitate enrollment, and provide referrals on grievances, complaints, or questions." Among other things, navigators will make sure people know they need insurance, and help enroll them in Obamacare if necessary.
Network of "Navigators" = Network of Fraud

Newman cited several instances where "navigator" had an icon for "healthcare.gov" that instead landed on a page where people could get "navigator help" for $40.

One site was shut down, two others changed the logo following complaints. But $40 is small potatoes compared to those out to steal your personal information and credit cards.

Overseas operators have already started their phone calls.

HealthCare.Gov

For those interested, here's the real link to HealthCare.Gov. Plan and cost information will be available October 1.

I went through a series of questions that I answered honestly. Here was the bottom-line result for me: Don't expect to save any money.

Specifically ...

"You may be eligible to get quality health insurance through the Health Insurance Marketplace. But based on the information you provided, you probably won't qualify to save money on your monthly premiums or out-of-pocket costs. You'll find out for sure when you apply for coverage starting October 1, 2013."

Pre-Existing Conditions

I do not have Pre-Existing Conditions. For the purpose of this article, however, I checked a a box stating that I wanted information about them.

Here are some snips:

  • Being sick doesn't keep you from getting coverage
  • Starting in 2014, being sick won't keep you from getting health coverage. An insurance company can't turn you down or charge you more because of your condition.
  • Once you have insurance, the plan can't refuse to cover treatment for pre-existing conditions. Coverage for your pre-existing conditions begins immediately.
  • This is true even if you have been turned down or refused coverage due to a pre-existing condition in the past.


The Pre-Existing Condition Exception

Grandfathered individual health insurance plans--the kind you buy yourself, not through an employer, do not have to cover pre-existing conditions. And I suspect they won't.

ObamaMarket Insurance

People with pre-existing conditions and their own healthcare plans will be forced into "ObamaMarket Insurance" either because of rising costs or because the plans will drop people with pre-existing conditions.

ObamaMarket Open Enrollment

  • You can apply for Health Insurance Marketplace insurance when open enrollment starts on October 1, 2013. Coverage starts as soon as January 1, 2014.
  • Open enrollment ends on March 31, 2014. Outside of open enrollment, you can't enroll in Marketplace coverage unless you have a qualifying life event.

Qualifying Life Event

The ObamaMarket glossary defines "Qualifying Life Event" as follows:

A change in your life that can make you eligible for a Special Enrollment Period to enroll in health coverage. Examples of qualifying life events are moving to a new state, certain changes in your income, and changes in your family size (for example, if you marry, divorce, or have a baby).

Curiously, the QLE glossary says nothing about change in job status by you or a significant other, self-employment changes, massive hikes in insurance rates, or other such events.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

States Have an Incentive to Promote (Not Stop) Disability Fraud; So How Much Fraud Is There?

Posted: 11 Sep 2013 12:21 AM PDT

In response to Just How Distorted is the U.S. Unemployment Rate Number?, reader Bjorn asked "care to take a guess on the percentage of fraud among the population receiving disability compensation?"

Fraud Incentive

My Reply Follows:

I suspect fraud is in the neighborhood of 25-50% (and higher would not surprise me one bit). The reason is that States Have an Incentive to Promote (Not Stop) Disability Fraud.

This all goes back to 1996 when president Bill Clinton promised to "end welfare as we know it". He did indeed do just that, and fraud is the result.

Why?

The federal government pays disability, but states pay part of welfare costs. This creates a huge incentive for states to actively promote disability fraud (simply to get people off state-sponsored welfare programs).

Fraud escalated dramatically in the wake of the housing crash as jobs became scarce.

I discussed this previously in Unwilling to Work; 25% in Hale County AL Collect Disability, 14 Million Nationwide; A Simple Solution

Here is the key snip.
Clinton Ends Welfare As We Know It

In 1996 Bill Clinton signed a welfare reform act, that he proclaimed to be the "End of Welfare As We Know It". It was. People moved off welfare on to even easier to get disability programs.

Part of Clinton's welfare reform plan pushed states to get people on welfare into jobs, partly by making states pay a much larger share of welfare costs.

The incentive "worked" using the term loosely. Welfare rolls shrank but disability rolls soared.

Welfare Costs States Money Disability Doesn't
[From the NPR report "Unfit For Work" - Please read this snip. It's key to understanding the fraud promotion claim]

A person on welfare costs a state money. That same resident on disability doesn't cost the state a cent, because the federal government covers the entire bill for people on disability. So states can save money by shifting people from welfare to disability. And the Public Consulting Group is glad to help.

PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability. "What we're offering is to work to identify those folks who have the highest likelihood of meeting disability criteria," Pat Coakley, who runs PCG's Social Security Advocacy Management team, told me.

The company has an office in eastern Washington state that's basically a call center, full of headsetted women in cubicles who make calls all day long to potentially disabled Americans, trying to help them discover and document their disabilities:

"The high blood pressure, how long have you been taking medications for that?" one PCG employee asked over the phone the day I visited the company. "Can you think of anything else that's been bothering you and disabling you and preventing you from working?"

The PCG agents help the potentially disabled fill out the Social Security disability application over the phone. And by help, I mean the agents actually do the filling out.

There's a reason PCG goes to all this trouble. The company gets paid by the state every time it moves someone off of welfare and onto disability. In recent contract negotiations with Missouri, PCG asked for $2,300 per person. For Missouri, that's a deal -- every time someone goes on disability, it means Missouri no longer has to send them cash payments every month. For the nation as a whole, it means one more person added to the disability rolls.
Disability Fraud

Who is making the case for the other side? Who is defending the government's decision to deny disability?

Nobody.

And that in a nutshell explains soaring disability roles and massive fraud.
When Jobs Are Plentiful

When jobs are plentiful, most people would prefer to work. But, when jobs are scarce, and welfare pays more than a minimum wage job, many would prefer not to work.

I wrote about this aspect on August 20 in Why Work for $7.25 When Welfare Pays $15.00 in 12 States and $8.00 in 33 States? Is a Low Minimum Wage the Problem?

When states come in and actively promote fraud as a means to get people off welfare, guess what happens?

Disability fraud is the answer.
Thank Bill Clinton!

Key Stats

Here are some stats from "Unfit for Work"

  • Every month 14 million Americans receive a disability check.
  • In 1961 the leading cause of disability was heart disease and strokes, totaling 25.7% of cases. Back pain was 8.3% of cases.
  • In 2011 the leading cause of disability was a hard to disprove back pain, totaling 33.8% of cases. The second leading cause was an equally difficult to disprove "mental illness" at 19.2%. Strokes and heart disease fell to 10.6%.
  • In Hale County Alabama 1 in 4 receive disability checks.
  • One thing nearly every case in Hale County Alabama has in common is Dr. Perry Timberlake who defines disability in a rather creative way.
  • Once people go onto disability, they almost never go back to work. Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce.

Quantifying the Fraud

Fraud varies state by state with welfare benefits and by how aggressive states are in pushing people off of welfare on to disability programs.

Given the incentive of states to push people into disability programs, and for people to never leave disability once in the program, a reasonable person would expect fraud to be rampant.

I guess 25-50% of disability claims are fraudulent, but higher would not surprise me in the least given back pain has soared from 8.3% to 33.8% and "mental illness" is at 19.2%. Combined, that is whopping 53% of disability claims! 

Unemployment Numbers

Inquiring minds are asking "how does this affect unemployment numbers?"

That's a good question, so let's crunch some numbers. 

With 14 million collecting disability benefits ...

  • 25% Fraud would add 3.5 million to the Labor Force
  • 33% Fraud would add 4.7 million to the Labor Force
  • 50% Fraud would add 7.0 million to the Labor Force 

Let's assume 25% fraud, a rather modest assumption given the incentives for states to promote fraud coupled with the fact that a whopping 53% of disability claims are for suspicious reasons.

The examples below assume use of my practical definition of unemployment: Those who want a job, but do not have one. I also assume those fraudulently collecting disability payments would want a job if the payments stopped.

Base Numbers (from the latest jobs report - see BLS in Wonderland)

  • Civilian Labor Force: 155,486
  • Unemployed: 11,316,000

To the base numbers we need to add those not in the labor force but want a job.
That number is 6,285,000 (for a chart and further details, see Just How Distorted is the U.S. Unemployment Rate Number?)

Calculation Assuming 25% Fraud

Labor Force: 155,486,000 + 6,285,000 + 3,500,000 = 165,271,000
Unemployed: 11,316,000 + 6,285,000 + 3,500,000 = 21,101,000
Unemployment Rate: 21,101,000 / 165,271,000 = 12.77%

Calculation Assuming 33% Fraud

Labor Force: 155,486,000 + 6,285,000 + 4,700,000 = 166,471,000
Unemployed: 11,316,000 + 6,285,000 + 4,700,000 = 22,301,000
Unemployment Rate: 22,301,000 / 166,471,000 = 13.40%

Calculation Assuming 50% Fraud

Labor Force: 155,486,000 + 6,285,000 + 7,000,000 = 168,771,000
Unemployed: 11,316,000 + 6,285,000 + 7,000,000 = 24,601,000
Unemployment Rate: 24,601,000 / 168,771,000 = 14.58%

That is the disability fraud angle. It does not include those fraudulently receiving standard welfare (nor does it include those working part-time but want a full-time job).

The welfare fraud calculation is complicated by the fact that many on welfare work. Nonetheless, it's reasonably safe to add another 0.5% to 1.0% to account for welfare fraud (for those not yet pushed into disability fraud).

Comparison to BLS

Using my practical definition of unemployment, and factoring in disability fraud (but not welfare fraud), a realistic unemployment rate ranges from 12.77% to 14.58%.

For comparison purposes, the BLS has a base unemployment rate of 7.3% and a U-5 Rate of 8.7% (supposedly counting those who want a job but did not look).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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