BetterCare: Simultaneous Repeal and Replacement of Obamacare

BetterCare - Suggested Basic Law

WHEREAS our complex wholly integrated system of modern health care for all involves the vast range of people, patients, providers, hospitals, pharmaceutical companies, state insurance commissioners, insurance companies, state governments, drug stores, treasury revenues, medical equipment manufacturers, state and federal programs, protocols and standards, scientific research, employers, employees and other participants,
WHEREAS PPACA, the Patient Protection and Affordable Care Act, also known as Obamacare, brought health care to many who never had it previously, and it also brought severe strains on some families confronted with unanticipated large increases in insurance premiums, on some small businesses, on some insurance providers, with constrained choices for many participants, and with several other problems,
WHEREAS we see insufficient competition among health insurance providers in some states,
WHEREAS no complex system is without flaws and opportunities for improvements,
WHEREAS an immediate complete repeal of PPACA puts the nation at unnecessary risk of interruption of valuable and essential life services,
We, the Congress, repeal PPACA in logical parts at logical times. The Congress will replace each part of PPACA, in a step-by-step approach with manageable pieces, when we have legislatively defined a suitable successor replacement for that part. Our intention to assure medical care of good quality and feasible cost to all citizens will guide our process. With this act, we repeal PPACA, continuing the individual parts, the sections, rules and regulations of PPACA only until such time as amendments to this act will replace those parts. This act will be known as BetterCare, a process for PPACA repeal and replacement.

Comment:

Many of the Republicans, including President Trump, won their elections promising to repeal Obamacare. Democrats can work with Republicans to provide a kind of simultaneous repeal and replacement. Thereby, Democrats can improve the general structures and features of PPACA, and Republicans can fulfill of the promise to repeal.

BetterCare will give the Republicans language they can use to describe the repeal to their constituents. Some amendments enabling replacement of some parts can be passed in the Congress and presented to the President for signature along with BetterCare, or at some later date, without interrupting the provision and distribution of health services. BetterCare gives President Trump the repeal and replacement he pledged to his supporters.

---

APPENDIX - SUGGESTED AMENDMENTS TO BETTERCARE

BetterCare repeals and replaces PPACA in parts, each part at a (possibly) different time, by amending the basic BetterCare legislation. Each amendment matches the part of the health care legal system repealed with its replacement, including sources of funding and uses of reduced expenses.

This Appendix contains suggested text of several potential amendments, each followed by commentary.

List of suggested amendments:

#	Topic	Idea promoted by
1	Interstate Licensing and Transactions	Trump & Ryan
2	Funding and Inflation Adjustment
3	Competition, Solvency and BetterCare Trust Fund	Trump & McConnell
4	Limitation on Premium Increases	Ryan & McConnell
5	ESI tax exclusion	Ryan
6	High-Risk Pools	Ryan
7	Congress in the Exchanges

Suggested amendments:

Amendment 1 to BetterCare - Interstate Licensing and Transactions.

1. Interstate Provider Licensing. Licenses to persons to provide health care and granted to persons by any state will be recognized and honored by every other state. Licenses to provide health insurance granted to insurance companies and persons by any state will be recognized and honored by every other state. Insurance commissioners and licensing officers, or equivalent officials, from all the states will meet annually to rectify, to improve and to make more uniform the licensing protocols of the states and to elect their chairperson for the next annual meeting. The Secretary of Health and Human Services will chair the first meeting. The Secretary of Health and Human Services will reimburse each state up to $20,000 (changing annually with inflation) for the itemized expenses of two delegates.
2. Interstate Insurance Transactions. Persons purchasing insurance on state exchanges may purchase from the exchange of their state of residence and from the exchanges of the five states geographically nearest their state of residence.

Amendment 1 would enhance competition among insurance providers as described by the new President. “I’d like to see a private insurance system without artificial lines drawn between states. We need to get rid of those lines and let people and companies cross state lines to purchase the best plan for them.” (Trump, “Crippled America”, 2015, ch 7)

Amendment 2 to BetterCare - Funding and Inflation Adjustment.

Each amendment to BetterCare reasonably projected to effect a change of more than $10 billion in federal and state health care expenditures during the next 10 years must include description of the modification of federal revenues that will fully finance the change in BetterCare. The Secretary of Health and Human Services will adjust each amount annually for inflation as measured by the Consumer Price Index, except as specifically provided otherwise.

Amendment 2 requires that BetterCare will be funded and adjusted for inflation.

Amendment 3 to BetterCare - Competition, Solvency and BetterCare Trust Fund.

1. Subsidies to buyers. To avoid subsidies to buyers causing price increases, BetterCare will not provide for additional subsidies to persons or businesses buying insurance on the state exchanges.
2. Subsidies to insurance providers. To assure reasonable profits to private insurers participating in the state exchanges and to assure satisfactory competition and to moderate insurance premiums, the Secretary of Health and Human Services will pay a subsidy to each insurance company for each person insured by that company via a policy on a state exchange. The insurance company will treat the aggregate of subsidies as a reduction of losses and not as premium income. The amount of the subsidy will be determined for each state exchange. The initial amount of the subsidy will be $1,000 per year per person insured, and this amount will not be adjusted for inflation. The Secretary of Health and Human Services will adjust the subsidy annually according to these rules:  
1. If the number of insurance companies competing on the exchange is fewer than five, the Secretary will increase the subsidy.
2. If the aggregate profits from exchange policies of the insurance companies competing on the exchange is less than five percent of their aggregate revenues from exchange policies, the Secretary will increase the subsidy.
3. If the five-company criterion and the 5-percent-profit criterion are met, then the Secretary will decrease the subsidy.
4. The amount of the annual increase or decrease in the subsidy will not exceed 10%.
3. Subsidies to reinsurers. To assure that extraordinary losses will not disable an insurance company participating in a state exchange, the participating companies may reinsure for individual losses exceeding $2 million per person insured. The Secretary will pay a subsidy of $10 per person insured to each reinsurer of participating companies, treated as a reduction of losses, not adjusted for inflation, adjusted annually according to these rules:
1. If the number of reinsurers for the state is fewer than 3, the Secretary will increase the subsidy.
2. If the aggregate profits, measured over a 10-year period (or available fraction thereof) of the reinsurance companies is less than 8%, the secretary will increase the subsidy.
3. If the 3-company criterion and the 8-percent-profit criterion are met, then the Secretary will decrease the subsidy.
4. The amount of the annual increase or decrease in the subsidy will not exceed 10%.
4. BetterCare Trust Fund. Reinsurers for the companies participating in a state exchange will reinsure for individual losses exceeding $2 million per person insured and not exceeding $5 million per person insured. Reinsurers will refer the excess amounts of losses exceeding $5 million per person to the Secretary of Health and Human Services or the Secretary’s designee. The Social Security and Medicare Boards of Trustees will oversee the BetterCare Trust Fund to pay for losses referred by the reinsurers. The BetterCare Trust Fund will be fully funded to meet all obligations expected during the next 75 years.   
5. Seizure events. The Secretary of Health and Human Services or the Secretary’s designee will seize any company participating in an exchange or any reinsurer of such a company in either of the following events.
1. If that company or reinsurer is unable to pay its obligations to policyholders.
2. To assure that adequate competition among insurance companies exists, if after three or more years of subsidies, there exist insufficiently many companies on an exchange.
6. Seizure process. When seizing an insurance company or reinsurer, the Secretary of Health and Human Services or the Secretary’s designee will effect timely and orderly seizure and administration of the largest one or two companies, use structured bankruptcy or call and pay all loans to the company in the Secretary’s discretion, and if there are material remaining assets, divide them into multiple companies, charter them as public stock corporations, and sell the stock to the public at not more than $25 per share on regulated stock exchanges within one year of seizure, and pay the proceeds less expenses of the Department of Health and Human Services to the owners of the company that was seized.
7. Funding. To fund the provisions of this amendment, including contributions to the BetterCare Trust Fund, payers of income tax will also pay a surtax of 0.2 percent of taxable income up to $2 million dollars and a surtax of 0.4 percent of taxable income for income exceeding $2 million dollars.

   

Amendment 3 provides for and enforces regulated competition of private companies on the exchanges. It provides assurances of solvency. It subsidizes providers of insurance to avoid premium increases for individuals and families. Amendment 3 is consistent with and fulfills President Trump’s normative campaign pledge “The government doesn’t belong in health care except as the very last resort. The main way the government should be involved is to make sure the insurance companies are financially strong so that if there is a catastrophic event or they make some kind of miscalculation, they have the resources they’ll need to handle it.” (Trump, “Crippled America”, 2015, ch 7 ; McConnell, Press Release, Jan 11, 2017 http://www.mcconnell.senate.gov/public/index.cfm/2017/1/mcconnell-on-obamacare-we-must-act-quickly-to-bring-relief-to-the-american-people).

Amendment 4 to BetterCare - Limitation on Premium Increases

1. The year-to-year change in health insurance premiums for the same class of insurance for individuals and for households will be limited to a maximum increase of 10%, with an absolute cap of $1,000 per month per individual and $2,500 per month per household.
2. The year-to-year change in health insurance premiums for the same class of insurance for employers and companies will be limited to a maximum increase of 10%, with an absolute cap of $1,000 per month per individual and $2,500 per month per household.
3. Insurers who file with state insurance departments actuarial statements of indicated premium rate increases that exceed the maxima described above will receive a subsidy from the Department of Health and Human Services to compensate for the excess increase, provided the Secretary of Health and Human Services audits and concurs in the actuarial statement.
4. If, during the last five years prior to passage of this amendment, a person or household or business has experienced premium rate increases for comparable insurance exceeding the maxima described above in any of the five years will receive a one-time refund of the excess premium on application to the Secretary of Health and Human Services.
5. In the year following coverage, the Secretary of Health and Human Services will determine the aggregate excess premium earned by each insurance company and pay that amount to the insurer.
6. In the year following the Secretary’s determination, a surtax on the individual and joint income tax will apply sufficient to pay for the subsidy and the one-time refunds. The surtax will not exceed 0.4% for incomes less than $2 million.

Amendment 4 protects households from extremely large increases in premiums. (Ryan, “A Better Way”, Jun 22, 2016 http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf ; McConnell, Press Release, Jan 11, 2017 http://www.mcconnell.senate.gov/public/index.cfm/2017/1/mcconnell-on-obamacare-we-must-act-quickly-to-bring-relief-to-the-american-people)

Amendment 5 to BetterCare - ESI tax exclusion

WHEREAS the CBO Congressional Budget Office has estimated that the ESI Employer-Sponsored Insurance exclusion increases premiums for employer-based coverage by 10 to 15 percent,

Employers providing ESI may deduct no more than $12,000 per year per adult covered and no more than $6,000 per year per child covered from the employer’s taxable income.

During the first three years of effectiveness of this provision, the Secretary of the Treasury will estimate the aggregate increase income tax resulting and assign these funds to the Medicare Trust Fund.

Amendment 5 reduces insurance premiums. (Ryan, “A Better Way”, Jun 22, 2016 http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf)

Amendment 6 to BetterCare - High-Risk Pools

The Secretary of Health and Human Services will provide $25 billion annually to fund high-risk pools to give financial support for those persons who find themselves priced out of coverage. State insurance commissioners or equivalent state officers will maintain the actuarial solvency of these programs. Premiums for buyers of insurance in the high-risk pool will not exceed 110% of the premiums of insurance with comparable ordinary coverage on the state exchange. High-risk pool insurance will be issued without delay and without waiting lists. Not more than 10% of the number of persons insured in a state will be covered by a high-risk pool, with excess demand satisfied by issuance of comparable ordinary coverage on the state exchange at the usual rates for that coverage.  

Amendment 6 reduces insurance costs for general classes of insurance on state exchanges and limits costs for those requiring coverage in high-risk pools. (Ryan, “A Better Way”, Jun 22, 2016 http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf)

Amendment 7 to BetterCare - Congress in the Exchanges

WHEREAS members of Congress and their staffs must use the health care system to appreciate the experience of their constituents,

WHEREAS if the state exchanges aren’t good enough for a United States Senator, then they aren’t good enough for the people,

Congress will not provide health care insurance as an employer of the members and their staffs. The members and their staffs must obtain health insurance through state exchanges or as covered under a family member’s plan, other provisions of the health care laws notwithstanding.

---

Photo: JapanToday.com (Sep 1, 2015)

Notes from the Observatory: ETF Dividends and Prices

Previous article 

In this article, I report on some recent findings from my little nonrigorous garden of stock market metrics. I’ll be pleased to learn of your consistent or contrary observations.

I found that the factor of ETF (Exchange-Traded Fund) dividend growth over the five years ending Dec 31, 2015 corresponded strongly with price performance in 2016, suggesting a useful predictor.

---

A digression on predicting stock market performance and on companies as portfolios

The distinguished financial empiricist Mark Hulbert published a newsletter on newsletters from the 1980s until closing the Hulbert Financial Digest on March 31, 2016. For nearly as long, he has reviewed the performance of mutual funds and ETFs, finding in them decision and performance dynamics nearly the same as newsletters.

Hulbert found that the previous year’s best performers tended to show mediocre to awful performance the following year. Three or five years of performance information also offered no guidance for an investor. Performance over ten years provides mild guidance though “statistically weak”.

Reliable and readily available price data seldom exceeds 10 years for most individual investors.

The late 1970s and early 1980s were the heyday of the conglomerate enterprise, such as Harold Geneen’s ITT, with subsidiaries in rental cars, hotels, telephones, steel mills and more. CEOs presented themselves as managers of portfolios of businesses. Can we confirm or deny the hypothesis that a firm behaves like a portfolio of businesses?

---

In my observations, I found that the rate of ETF dividend growth over the last five years corresponded strongly with price performance in 2016, suggesting a useful predictor. (See graph, above.) This finding echoes my earlier post in July 2016.

ETF price-to-book ratios show a small positive correlation to price performance during 2016, but this metric doesn’t separate the high performers from the crowd.

For common stocks, the annual revenue growth over the last five years had a small correlation with price performance during 2016, though that judgement hinges on BOFI and ELLI. 

We examined the price history over the previous 10 years for all our ETFs and individual common stocks considered together. Did past performance predict future performance?

No strong trend evident. The spectacular prior price growth of AMBA and ELLI “predicted” ELLI’s continued high performance and AMBA’s underperformance in 2016. We tried omitting ELLI and AMBA in search of an insight.

We were able to confirm the Efficient Market Hypothesis. The previous 10 years of price growth held no secret predictor of performance in 2016.

---

Disclosure:

Daniel Brockman owns MA, MDSO, ELLI, GILD, FRC, VOO and other securities discussed in this article.

Sources:

Securities prices, revenues and distribution history from Schwab.com https://www.schwab.com, Fidelity.com  https://www.fidelity.com/, NASDAQ http://www.nasdaq.com/symbol/spy/dividend-history and Google Finance https://www.google.com/finance.

Jonathan Chevreau, “A loss for all investors” (Financial Post Mar 15, 2016 http://business.financialpost.com/investing/investing-pro/a-loss-for-all-investors-the-hulbert-financial-digest-says-goodbye )

Janet Brown, “Investors Lost A Vital Asset In February” (Forbes Feb 19, 2016 http://www.forbes.com/sites/investor/2016/02/19/investors-lost-a-vital-asset-in-february-and-it-wasnt-money/#284605bb1593)

Mark Hulbert, “The Index Funds Win Again” (New York Times Feb 21, 2009 http://www.nytimes.com/2009/02/22/your-money/stocks-and-bonds/22stra.html)

Mark Hulbert, “What the Past Can’t Tell Investors” (New York Times Jan 4, 2010 https://dealbook.nytimes.com/2010/01/04/what-the-past-cant-tell-investors/ )

Mark Hulbert, “Beating the Market: It’s Still a Tall Order” (New York Times Jan 9, 2010 http://www.nytimes.com/2010/01/10/business/mutfund/10stra.html)

Mark Hulbert, “Advisers Who Deliver Low-Anxiety Returns”, (Wall Street Journal May 16, 2014 http://www.wsj.com/articles/SB10001424052702303851804579560170046544420?tesla=y&mod=BOL_qtlatestnews_latestnews )

Search of Validea’s Guru Investor Blog, https://www.validea.com/blog/?s=hulbert, searched Jan 11, 2017.

Nate Wendler, “Gurus: The Investment Newsletter Judge” (Wealth Management Oct 01, 2008 http://www.wealthmanagement.com/equities/gurus-investment-newsletter-judge)

Daniel Brockman, “Notes from the Observatory: Does ETF Dividend Growth Predict Market Price Performance?” (Jul 1, 2016 https://daniel-brockman.blogspot.com/2016/07/does-etf-dividend-growth-predict-market.html)

IPI Incomes Parity Initiative

A shareholders’ resolution...

---

WHEREAS:

Data: US Census

1. As shareholders, we want the business of [The company] (“company”, herein) conducted in a manner not merely consistent with our own interests, but fairly in the interests of our employees, users and buyers of our products and services, suppliers and the general society.
2. Extreme disparity of incomes in the general society
1. creates a negative economic externality
2. results in social stratification manifesting
   1. distortion of democratic processes and
   2. emergence of a social class resembling aristocracy.
3. In our era, our society produces and distributes goods, services and incomes via corporations such as the company.
4. The company provides an admired, influential, leading example for other companies worldwide.

RESOLVED:

We request that the board of directors implement an Incomes Parity Policy (“Policy”, herein) such that

1. The annualized rate of compensation of the least well compensated employee of the company will be more than 1/70th (one seventieth) of the annual rate of compensation of the most highly compensated employee. This is the core principle of the Incomes Parity Policy.
2. “Employee”, as used here,
   1. during the first year of effectiveness of this Policy, and thereafter, refers to any employee, director, executive officer, whether “exempt” or “non-exempt” or “temporary” or “permanent” or “full time” or “part time” or “casual” or otherwise, without regard to geographic location.
   2. during the second year of effectiveness of this Policy, and thereafter, refers additionally to any person providing labor or services comprised significantly of labor, by formal or informal contract with an agency or union or directly, including all consultants and other workers.
3. “Compensation”, “compensated”, etc., as used here, refer to all salaries, wages, bonuses, equity awards, contractual payments, fees, stock options, payments in kind and deferred income, and similar transactions, including, but not limited to, all forms of compensation mentioned in the Executive Compensation section of the annual proxy statement and other forms of compensation of employees. “Compensation” does include dividends and change in value of shares of stocks and financial instruments awarded to an employee as compensation. “Compensation” doesn’t include dividends and change in value of ordinary common stock purchased by the employee with their own funds.
4. The board will interpret the Policy broadly, to defeat attempts to circumvent the meanings of “Employee” and of “Compensation”.
5. The board will oversee the amounts and timing of adjustments of employees’ compensation.
6. If existing contracts bind the company, the company will honor them, but new, extended and renewed contracts will comply with the Policy. The board, at its discretion, may incur significant and material costs to cancel or modify contracts to achieve compliance with the Policy.

---

The text of the above resolution, excluding graphics, is less than 450 words. I am grateful for the advice of friends who reviewed early drafts.

Sources consulted:

Alphabet Inc.,  2016 Proxy Statement 
Craig McGuire, “How to write a shareholder proposal”  (2012) 
Daniel Brockman, "The 1% and the 99%" (Nov 13, 2011)
U.S. Census, current population survey household income data tables (http://www.census.gov/hhes/www/cpstables/032012/hhinc/toc.htm downloaded Nov 2011, no longer available. See www.census.gov.)

This entire article is a free cultural work (CC0  2016). Anyone may use it for any purpose without seeking permission.

To the extent possible under law, Daniel Brockman has waived all copyright and related or neighboring rights to Incomes Parity Initiative. This work is published from: United States.

On Resolving Trump’s Conflicts of Interest

President-elect Donald J. Trump owns many properties and companies worldwide. A conflict of interest exists if a presidential decision shaping national policy could benefit him personally. A blind trust is a customary way of hiding assets from an owner to prevent a conflict or the appearance of a conflict of interest. 

An article by Dean Baker on the Center For Economic and Policy Research site, and commentary from Russ Abbott and several others, inspired my thinking on a route to divestiture.

There are complications with divesting Mr.Trump’s assets to establish a blind trust. Accurate estimates of the values of major commercial properties can escape even highly experienced appraisers, even as auctions sometimes yield prices of great works of art that surprise professionals. The properties have unique characteristics, including conditions affecting the seller, and the potential buyers have varied perceptions, opportunities and constraints.

Photo: trumphotels.com/las-vegas

With the Trump properties, the brand name influences the value of the asset. And tax effects may reduce the value the seller can realize in an early sale, versus several years or indefinitely in the future.

A strategy something like the following could fairly accommodate these considerations:

1. Appoint 3 Trustees agreeable to Mr. Trump and certified professionally capable by the General Accounting Office, with the Senate Ethics Committee having general oversight.  The 3 Trustees manage the divestiture and conveyance of the proceeds to the blind trust. They (and their staff) organize the Trump assets, properties and companies into suitable accounting entities to “package” the assets for sale. They prepare financial statements and projections for each asset. They hold sealed-bid auctions for each of the entities. These will be net assets, reduced by the debt they bear. Let the market set the value. Each asset not receiving bids in two years and each asset clearly having negative value would go to its own separate bankruptcy.

2. For each asset, escrow all related income occurring after Dec 31, 2016. The buyers of the properties will receive the accumulated income. At the time of the sale, the Trustees will estimate the income tax effect, based on the difference in income taxes for Mr. Trump between (hypothetically) holding the asset and selling it, and the tax effect will be escrowed and sold as part of the property. The escrow will accomplish separation of Mr. Trump from the assets. Mr. Trump will receive no income from the asset after Dec 31, 2016. Bidders at the auctions will need several months to inspect the assets, estimate incomes, and kick the tires before they bid. Prudent management of the distribution from escrow could require a few months after the sale. Disposition of all assets could possibly take three or four years.

3. With great publicity, the Trustees will change the brand of each property from "TRUMP" to "T1" on Dec 31, 2016, with new signage going up promptly. Buyers may continue operating under the "T1" brand. The "Trump" brand will divest for $1 to Trump's children, which they may not use before 2037. Thus everyone will know the "T1" brand labels the divested Trump asset.

4. For those currently using the "TRUMP" brand under license, their right to use the brand will cease at the next scheduled fee payment date, and they will not pay license fees after Dec 31, 2016.

5. For each asset, the Trustees will govern business operations after Dec 31, 2016.

6. The Trump family may not buy any of the assets before 2037.

What do you think?

Sources:

Dean Baker, “Ending Trump’s Conflict of Interest Problem in three Easy Steps”, Center for Economic and Policy Research (Nov 22, 2016) http://cepr.net/blogs/beat-the-press/ending-trump-s-conflict-of-interest-problem-in-three-easy-steps