August 31, 2012
Posted by stevensonfinancialmarketing under Economics
, Government Policy
| Tags: Economics
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Forget Everything You’ve Been Told For a Moment
Think for a moment about some of the economic common wisdom that you’ve been repeatedly told.The myth that the U.S. depends on China to finance it’s government is one many of us have come to accept. But a New York Times article by Paul Krugman titled Fear-of-China Syndrome points out that Rob Portman’s wrong explanation of why the U.S. government won’t take on China isn’t factual at all. Portman is quoted as saying:
“Obama could not run up his record trillion dollar deficits if the Chinese did not buy our bonds to finance them.”
In fact, as the chart below shows, the current account deficit as a share of GDP under President Obama era is significantly down. The current account deficit is a broad measure of the trade balance, including income on investments, since it is equal to capital inflows, or foreign financing:
Foreign Financing is Actually Down
It may seem counter intuitive but, while the government deficit has gone up, the U.S. is actually borrowing much less from foreigners. Krugman explains the reason:
The private sector is deleveraging, having moved into massive surplus as consumers try to pay down debt and corporations hold back on investment in the face of weak consumer demand. All those government deficits have only partly offset this move, so that overall national borrowing from overseas is down, not up.
Here’s another view:
Who “Owns” the National Debt?
While China holds a lot of U.S. Treasury Bonds, it’s only 8% of the total, so it isn’t dominant. China is of course, the largest foreign holder of U.S. bonds, holding $1.1 trillion as of December – down $70 billion from $1.17 trillion in July.
The bigger picture about who the biggest holders of US government debt are might surprise some people. Most is domestically held.
This pie chart shows how U.S. Treasury Bond ownership breas down by owner, using official numbers for December 2011. (The official numbers are updated monthly: The Treasury summarizes our debt position; the Fed estimates the magnitude of foreign holdings by country and reports its own holdings of Treasury securities.)
The United States’ two largest creditors are U.S. citizens and the U.S. government (which owes itself a substantial sum of its own money -The social insurance fund has been using its surpluses to purchase special bonds from the general fund.)China’s holding of the total federal debt comes in a distant fourth—behind the U.S. government, the U.S. public, and the Federal Reserve.
What If the Private Sector Started Borrowing Again?
What would happen if the private sector stopped deleveraging – of borrowing were to increase rather than contract? The answer, says Krugman is that we’d have a strong economic recovery, which would actually greatly reduce the budget deficit. The implication: the deficit is a good thing, helping to support the economy while the private sector unwinds its excessive leverage.Krugman concludes:
So who’s actually financing the US budget deficit? The US private sector. We don’t need Chinese bond purchases, and if anything we’re the ones with the power, since we don’t need their money and they have a lot to lose. In fact, we don’t want them to buy our bonds; better to have a weaker dollar (a point that the Japanese actually get.)
“Obama could not run up his record trillion dollar deficits if the Chinese did not buy our bonds to finance them.”
How Much of a Burden is the Debt To Taxpayers?
Because of the U.S.’s large and historically robust economy, investors view the T-bond as the world’s safe haven, and the worldwide demand for U.S. Treasury securities is enormous. Therefore, rolling the debt over instead of paying it down has never been a problem. Because the debt has always been rolled over, the debt principal has not been a burden to taxpayers. The burden taxpayers bear has always been the interest on Treasury securities—not the principal. The debt burden to taxpayers is the “interest bite”: the portion of tax receipts required to cover the interest on the debt.
When the interest bite is increasing, the debt is becoming less sustainable, and when the interest bite is decreasing, the debt is becoming more sustainable.Three primary factors make the interest bite grow or shrink:
- The debt level.
- The interest rate demanded by the buyers of T-bonds.
- The level of tax receipts.
Focusing for a moment on the third primary factor, the larger the economy and the more people who are working and paying taxes, the larger the government’s tax receipts, are, and the lower the debt burden (interest bite) is. A strong economy strengthens our ability to sustain any given debt level.Upward pressure on the debt burden occurs when:
- The debt level increases.
- The interest rate rises.
- Tax receipts fall.
This graphic shows how big the debt burden us today. In recent decades, the interest bite has ranged from 9% to 19%. The chart above shows that the current interest bite is no higher than it was ten years ago.
It Isn’t the Debt – It’s Economic Growth
Even though the debt level is currently growing at a rapid pace, the interest rate on the new debt being issued remains low. However, as the debt level has been skyrocketing, any increase in the interest rate will quickly cause the interest bite to skyrocket too.
That is, unless it’s offset by additional tax receipts generated by a rapidly growing economy and a more equitable share of the tax burden. Keeping the debt burden at an acceptable level ultimately depends on the health of our economy.
August 30, 2012
Wellness Programs Reduce Medical Costs
Savings generated from wellness programs based on a meta-analysis of multiple workplace wellness programs
BY Amanda McGrory of BenefitsPro highlights a recent study by Zoe Consulting Inc. on behalf of Interactive Health Solutions Inc., a provider of performance-based health management solutions for employers. The analysis is based on multiple years of medical claim data from two comparable population groups.
The reason this issue is so significant, according to Joseph O’Brien, president and CEO of Interactive Health Solutions, is that health care spending has grown to over 25% of total labor expense. However, the study finds that employers using wellness programs experience a significant average medical cost trend reduction that includes:
- 6.1% average annual medical cost trend reduction.
- 13.5% average annual medical cost trend reduction among members with core conditions, including:
- asthma, coronary heart disease, chronic obstructive lung disease, diabetes and hypertension.
- Many health effects from core conditions can be managed through early detection and compliance with prescribed therapies.
- 7.7% reduction in per member per month for the survey’s final year.
- 85% of members maintain or lessen their health risk levels.
- Fewer days off due to workers’ compensation and short-term disability claims.
- 9 day earlier returns to work under workers’ compensation
- 17 days earlier returns to work for short-term disability.
August 30, 2012
Posted by stevensonfinancialmarketing under Social Media
, Thought Leadership
| Tags: Social Media
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The reality of social media is that most companies will never have a million fans. The notion of how many Facebook fans you have. What that notion misses the key point that social media is not about how many people connect to your Facebook page, but how many people talk about you positively and share your content.
The question is how to get people to incorporate your brand and content into their social and real-world dialogues and purchasing decisions.
In thought leadership, the share (the act of someone emailing or posting your materials to social sites) is far more valuable than a Facebook “like.” Mr. Gold states:
When people share your content they are a) endorsing it and b) weaving it into the very fabric of the web…Your social media marketing success starts to be realized via organic search. People search on terms related to your content and your content pops in results on other companies’ sites. This is social success realized through search!
Two Ways to Make Your Social Media Thought Leadership Take Off
Gold makes the following recommendations to help you with your social media thought leadership programs:
- Socially enable your content
- Implement best practices to the production of your thought leadership materials
1. Socially Enable Your Content
Once you have produced great content, announce and celebrate the share. Make people who promote your materials look smart.
2. Implement Thought Leadership Material Best Practices
You need to develop a set of guiding principles and best practices to increase the value, power, viral distribution potential, and success of we try your thought leadership materials. Gold emphasizes that content has to be lightweight – easy to produce, consume, share, and republish. He provides these content development tactics:
- Lightweight, quick, and easy:
- Is this a 20-page white paper or study no one will read, or is it a “lightweight” checklist, guide, chart, or infographic that someone can absorb in an instant?
- Lightweight content is easy to create, consume, and share!
- Valuable, interesting, and educational:
- Is this something that a) is truly valuable and b) really teaches someone?
- I always say, “teach someone something valuable and your brand will stick in their brain forever.”
- Will people want to print this out to post on their wall or bulletin board or take it to a meeting?
- If your materials are too hard to understand for your target audience, they won’t learn anything and they won’t remember it, share it, or value it.
- The mark of a true expert is not just a person who understands everything about a topic, but a person who can explain that topic to others so they understand.
- True thought leaders take complex subjects and make them simple.
- Portable, sharable, and printable:
- Can the materials be easily shared via email, social media, and more?
- Can it be easily printed on a single 8.5 x 11 sheet of paper?
- Can it easily be a printed piece, displayed online as a graphic, put on a PowerPoint slide, and turned into a PDF?
- Optimized for SEO:
- Do you have a good landing page that is optimized for Google and the other major search properties?
- As mentioned above, do you have share buttons prominently placed as big, noisy calls to action?
- Again, if people cannot find the materials, what good are they?
- Can the benefit of what people will learn be communicated in an instant via email, word of mouth, paid search, banners, in print, outdoor, etc.?
- Can you create different versions and update the asset for years to come?
- Version 1, 1.2, 1.3, 2.0, 2.1, etc.
August 29, 2012
Posted by stevensonfinancialmarketing under Brand
| Tags: Brand
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Matt Macari of The Verge reports that, although the jury found that 28 Samsung products had infringed on Apple copyrights, Apple filed an injunction against 8 these Samsung smartphones, available in the U.S. The injunction hearing for the eight smartphones was slated for September 20th, but Judge Lucy Koh, who has been presiding over the Apple vs. Samsung patent infringement case, has moved the hearing from Sept. 20 to Dec. 6. Three of the eight were not judged to have infringed on utility, but design and “trade dress.” There is a preliminary injunction on Samsung’s Galaxy Tab 10.1 in force, though the jury did not hold up Apple’s infringement claims on that product. The 8 phones that Samsung seeks to ban U.S. sales of are:
- Galaxy S 4G
- Galaxy S2 (AT&T)
- Galaxy S2 (Skyrocket)
- Galaxy S2 (T-Mobile)
- Galaxy S2 Epic 4G
- Galaxy S Showcase
- Droid Charge
- Galaxy Prevail
Not A Hard Hit to Samsung?
Forbes contributor Nigam Arora, believes the ban itself is just for show and less significant than it may seem.
First, Apple is not seeking a ban on all of the devices involved in the trial, perhaps becaue some of the devices are now obsolete, not being sold in the United States, or have very low sales.
Second, even if Apple is successful in receiving a preliminary injunction against Galaxy S II, chances are Samsung will lower prices of Galaxy S II devices to clear inventory before the ban goes into effect. Meanwhile, Samsung’s flagship Galaxy S III is not on the list. If Samsung comes up with new incentives to capture budget conscious buyers who would have chosen Galaxy S II, Apple may end up helping Samsung in the short run.
A Windfall for Apple
While the ban may be meaningless in the short term, Apple may still realize great benefits from the verdict, as Nigam Arora calculates that the decision will be worth $450 Billion to Apple. He explains the calculation in Why I Think Apple’s $1 Billion Jury Award May Really Be Worth $450 Billion. He believes that the verdict is economically significant for Apple for 6 reasons:
1. Hurting Google: $200 Billion
The verdict’s result should be higher costs for phone manufacturers who use Google Android and slowdown of the rapid expansion of Android Juggernaut, which Nigam estimates to be worth $150 billion to $200 billion to Apple over the next 10 years.
2. Enhancing Sales Overseas
Apple products have become status symbols especially in emerging markets such as India and China, and the newly rich in these countries who need to display the fact that they have arrived will tend to buy Apple products to do so. The difference from the western world is that in China and India there are a lot more newly rich than in the western world.
3. Strengthening Apple’s Brand Image: $100 Billion
Nigam estimates that the strengthening of Apple’s brand image could be worth about $100 billion over the next 10 years.
4. Winning Over Aspirational Buyers: $150 Billion
Aspirational buyers who previously had to stretch to buy Apple products and have settled to buy products from competitors that looked similar to Apple products may find that the verdict will make it more difficult for competitors to copy the look and feel of Apple products. If aspirational buyers stretch farther to buy Apple products, Nigam’s estimate is that this will contribute about $150 billion to Apple’s sales over the next 10 years.
5. Wavering Buyers: $100 Billion
A stronger brand image for Apple and higher competitor costs with less copying of the look and feel of Apple products should help Apple capture more of the buyers who waver between Apple products and competing products. He estimates that this could add about $100 billion to Apple sales over the next 10 years.
6. Decreased Defection: $100 Billion
The jury found that the Galaxy Tab infringed Apple’s patent that controls the behavior at the end of the screen, which makes Apple users less likely to defect to competitors, which could add about $75 billion to $100 billion to Apple sales over the next 10 years.
Adjusting for Overlap: Final Windfall = $450 billion
Some Apple customers will fall into more than one of the categories described above, resulting in a certain overlap in the estimates above. Estimating overlap at around $200 billion and subtracting this from the total estimate of $650 billion, leaves a a net gain over 10 years of about $450 billion.
Nigam Arora founded two Inc. 500 companies, and has been involved in over 50 entrepreneurial ventures. He am the chief investment officer at The Arora Report, which publishes four newsletters to help investors profit from change. You can follow him here.
August 29, 2012
Research by Incyte Group highlighted by Get Satisfaction shows the weakness of Facebook as a way to engage with brands. There is a wide gap between how customers want to engage with brands on social media, and how companies are using Facebook.
Consumers Prefer Customer Communities to Facebook for Brand Interaction
- 70.2% use Facebook for social networking.
- But only 12.% use it for company, brand or product connections.
- 81% would prefer to look at a company’s website to learn about a product or service.
- Only 19.9% would prefer to iuse Facebook.
The infographic suggests that branded communities built for customers take the interaction further, allowing customers a central location for purchasing products, getting service and FAQ where they can actually interact with other customers, benefit from their experience, and more effectively seek answers to their questions.
3 Reasons Customers Prefer Branded Communities
Research by the Incyte Group shows that consumers say that they prefer branded communities built for customers for 3 primary reasons:
- 42.1%: To get information more quickly.
- 40.5%: To get answers from consumers “like me.”
- 17.4%: To get the most accurate information.
Customer Communities Create Brand Advocates
Providing incentives and rewards can be costly, and yet, the research shows that these are less likely to generate brand advocates than customer communities. Of customer community users:
- 42.1% are willing to freely advocate the brand or product without an incentive.
- 40.5% are willing to advocate only with an incentive.
- 17.4% would not advocate.
5 Steps to Make It Work
According to Incyte, there are 5 steps to satisfying customer needs with branded customer communities:
- Integrate the community with social networks: to allow social media users to more freely share it.
- Make the content easily searchable: by categorizing it intuitively.
- Create multiple entry points to the community: so customers can link at every website touchpoint.
- Provide service and support: self-serve or peer guided to make the experience seamless and easy.
- Give customers a forum: By allowing customers expression of and listening and responding to their needs, you provide a superior brand experience which turns customers into brand advocates.
The benefits of a branded customer community are many. They provide an instant interactive forum for online customers who might not otherwise navigate to a Facebook or Twitter page, enhance their brand experience, and allow them to share their good experiences and advocate for your brand. When there are problems, it provides you a way to show that you are concerned, customer-focused and responsive.
According to Get Satisfaction:
Consumers need more than just a platform where they passively “like” or “follow” brands. Many seek a more trusted, deeper customer experience—one that encourages greater interaction and makes accurate, trusted information easy to find.
August 29, 2012
An excellent article by Forbes explains how Apple built a loyal, energized customer base: they defined themselves by defining their competitors.
Of course, distinctive design, original products, a great user experience and other product attributes were all key drivers of loyalty, but Roger Dooley, the author of Brainfluence: 100 Ways to Persuade and Convince Consumers with Neuromarketing, points out that one of Apple’s marketing coups was “creating an enemy, the PC and its users.”
Social Identity Theory
According to the social identity theory developed by social psychologists Henri Tajfel and John Turner, one’s self image is defined in part by the social group or groups one considers oneself part of. Tajfel’s experiments found that placing people into one or another group by such meaningless criteria as a coin toss was enough to make group members increasingly loyal to their own group and cause them to discriminate against the members of the other group.
The effect is used extensively in politics, of course. But Apple used it to attacked the competition in a brilliant way: rather than attack competitors on the basis of product characteristics, they attacked the PC users themselves, drawing a sharp distinction between Mac users and PC users.
The “1984” Introduction of the Mac
The 1984 ad that introduced the Apple Macintosh personal computer, conceived by Steve Hayden, Brent Thomas and Lee Clow at Chiat/Day,Venice, and directed by Ridley Scott is judged to be one of the most iconic ads ever produced. It was televised only twice: on January 22, 1984 during the third quarter of Super Bowl XVIII, and in December 1983 right before the 1:00 am sign-off on KMVT in Twin Falls, Idaho, so that the advertisement could be submitted to award ceremonies for that year. Starting on January 17, 1984 it was screened prior to previews in movie theaters for a few weeks.
In one interpretation of the commercial, “1984” used the heroine to represent the coming of the Macintosh as a means of saving humanity from the conformity of Big Brother) in an allusion to George Orwell‘s dystopian novel, Nineteen Eighty-Four. According to Wikipedia:
Originally a subject of contention within Apple, it has nevertheless consistently been lauded as a classic, winning critical acclaim over time. It is now considered a watershed event and a masterpiece in advertising, and is widely regarded as one of the most memorable and successful American television commercials of all time.
Mac vs. PC
Presenting PC users as mindless drones became a less viable strategy once most of the market had a computer, of course. To avoid insulting their potential customers, Apple subsequently adopted a softer approach with a “Get a Mac” campaign from 2006 to 2009, featured in Ad Week here.
The “PC” was portrayed by a stiff John Hodgman as a bumbling nerd in a suit, contrasted against Justin Long’s casual, cool “Mac.” Each of the 66 spots called attention to an area where the PC had issues, such as computer viruses, long boot times, and occasional crashes. The innovation was to focus on traditional features and benefits while still sublimating them to the issue of social identity.
Consistant Template: The Get a Mac campaign created by advertising agency TBWA\Media Arts Lab and directed by Phil Morrison, become easily recognizable because the ads all follows a standard simple template: against a minimalist all-white background, a man dressed in casual clothes introduces himself as a Mac (“Hello, I’m a Mac.”), while a man in a more formal suit-and-tie combination introduces himself as a Windows personal computer (“And I’m a PC.”). The two then act out a brief vignette in which the capabilities and attributes of Mac and PC are compared.
The campaign also coincided with a change of signage and employee apparel at Apple retail stores detailing reasons to switch to Macs.
Cultural Adaptations: American produced ads also air on Canadian, Australian, and New Zealand television, and at least 24 of them were dubbed into Spanish, French, German, and Italian.
Although several of the British and Japanese ads originated in the American campaign, they are generally slightly altered to suit local sensibilities. The British campaign stars comedic duo Robert Webb as Mac and David Mitchell as PC while the Japanese campaign features the comedic duo Rahmens and feature several original ads not seen in the American campaign.
The Get a Mac campaign received the Grand Effie Award in 2007.
T-Mobile Takes a Shot At the iPhone
What’s good for the goose is good for the gander. T-Mobile cloned the Apple formula with it’s ads hitting the iphone, AT&T & Verizon to distinguish itself as the largest 4G network.
This time the hip, casual young user was a more gender-inclusive Carly, a bubbly spokeswoman in a pink sundress shown against the same white backdrop and contrasted to 3 virtually indistinguishable suited men. Since her debut promoting T-Mobile’s myTouch 4G in 2010, Carly Foulkes — “the T-Mobile girl” — became one of the most recognizable spokespeople in advertising. In addition to the female-friendly branding, the pink sundress is consistent with T-Mobile’s pink-themed retail stores.
“No More Mr. Nice Girl”
Recently, Carly traded in her pink sundress for a black leather with pink trim look and an ultra-fast Ducati superbike to focus more on the speeds of its 4G network. As she climbs onto the bike and puts on her helmet, the words “No More Mr. Nice Girl” flash across the screen. The commercial spends the next 15 seconds dedicated to video of Foulkes speeding through city streets. “It’s time to set the record straight,” the ad states. “Test drive America’s largest 4G network.” T-Mobile’s commercial depicts a 180-degree shift away from Foulkes’ former girl-next-door persona, with a complete lack of dialog and skintight suit. The new commercial’s “dark” motif also stands in stark contrast to the traditional female-friendly branding.
The new angle, the product of ad agency Publicis Seattle, which the company is called an “Alter Ego” approach is featured as a bigger part of the company’s greater rebranding efforts. Peter DeLuca, T-Mobile’s SVP for brand, advertising and communications, said that:
[the ad is about]challenging the status quo and taking bold steps in the marketplace as a challenger brand. The makeover from the girl-next-door to an edgier, more tech-savvy and spirited Carly is synonymous with the evolution of the T-Mobile brand.
Broadening the Gender Appeal
T-Mobile had received some flak for its magenta-focused theme being too girly and appears to have made a switch to the more familiar “sex sells” strategy consistent with the race models at technology trade shows dressed in tight or skimpy clothing to appeal to the male-dominated tech industry and bring more men on board. Brad Scott, senior director at branding firm Landor Associates says:
“I think they’re trying to universally appeal to the people looking for performance, whether that’s going to appeal more to men or not. Does the image make it more sexy, more evocative? Does it grab your attention? I think so.
Wired’s Alexandra Chang agrees:
While T-Mobile’s ad certainly has sex appeal, it doesn’t target any gender in particular. While watching the ad, I could see how tech-savvy women would find Foulkes’ new edge especially attractive. It depicts a confident woman who’s ready to stand up to a tech challenge — and you don’t see that much in advertising. The gender-bending “No More Mr. Nice Girl” slogan makes the ad even more inclusive.
The challenge for T-Mobile is to leverage this ad campaign with its upcoming brand relaunch and $4 billion investment in network infrastructure, to convince consumers that T-Mobile, which has been relegated as a second-tier brand, is in fact a premium network. The company is also running a parallel “Test Drive” site, which will feature videos of T-Mobile devices tested against other carrier devices.
Use in Financial Services
Progressive adopts obvious elements of the Mac vs. PC formula in its Flo commercials with their stark white background, and the contrasting of the affable Flo (actress Stephanie Courtney) against two stereotypically stiff, suited, bumbling “pants on fire” lying auto insurance salesmen.
Charles Schwab’s Talk to Chuck campaign has also adopted the principle. It used retroscoping to simplify the image while featuring angry investors – the ones who are most likely to switch – complaining about brokers who are talking about abstract concepts like “a vineyard” instead of giving them “straight talk.” These ads coopted customer sentiment to draw a sharp distinction between Charles Schwab’s straight talking discount services and smooth talking traditional financial planners.
The Euro RSCG New York campaign coopting the frustration of fed-up investors who are the customers most likely to be lured from competitors successfully tapped their resentment. As of September, 2006, Schwab was number 1 in consideration, up from third, for the first time since 1978, 7% higher than the nearest competitor. Creative recall and persuasion for print and TV were also number one. New assets were up 36% over the prior year.
The campaign won numerous industry awards. In 2007, it won the Grand Ogilvy Award in the ARF David Ogilvy Awards. Schwab was cited as “the best of the best” for successfully utilizing research to produce an ad campaign that achieves exceptional business results.
Build a Tribe, Build a Brand
As Seth Godin says in Tribe Management,
What people really want is the ability to connect to each other, not to companies. People form tribes with or without us. The challenge is to work for the tribe and make it something even better.
As Roger Dooley points out, building a social identity is about making your customers feel different than the people who use a competing brand, and he points out that Apple’s use of pre-existing stereotypes of Mac and PC users was brilliant:
Even though these stereotypes may not have been accurate, their existence made Apple’s job easier.
August 28, 2012
This article highlights how issues are framed into the polarized polemics. It begins and ends with a personal story that illustrates the battle of corporate interests against the individual.
In this post, I will discuss:
- The inevitability of illness and the need for healthcare reform
- The real agenda behind the move to turn back the clock on healthcare reform
- How the healthcare failure impacts individuals
A personal anecdote will illustrate the real consequences of turning back the clock on health care reform.
Coming to Grips With Illness
A Buddhist practitioner (I say this because Buddhist practice is a form of mental cultivation as opposed to a religion) wrote a moving account of his own difficult path in life, which I will recount later in this article. Lest you find yourself feeling sorry for him, remind yourself of the First Noble Truth of Buddhism: that suffering in life is inevitable. And the reason for that is that we are all subject to sickness, decay and death.
In other words, we all face the trauma of loss in our lives, and during our brief sojourns on earth, we will all suffer the effects of physical decay. Another way to put it, as put forth by a hospice worker:
There are two kinds of people in this world – those of us who have cancer…and those of us who will get it.
Debunking The Myths About the ACA
While the ACA (ie. Obamacare) isn’t a perfect solution, a number of false myths have been perpetrated about it. Lies of this sort are systematic and have been debunked elsewhere in this blog, such as in my article, Affordable Care Act Fact and Fiction: 5 Whoppers. The latest falsehood is the dogwhistle racist one that it “steals” $716 billion from Medicare patients to pay for Obamacare, which Politifact generously rates “half true. ” Actually Romney’s voucher plan is the one that cuts benefits for Medicare recipients while aiming to kill Medicare itself, and replace it with market solutions that amount to a giveaway to private healthcare providers.
Myth: Romney says Obama ‘cuts’ $716B from Medicare to pay for Obamacare
Politifact Florida shows that Romney’s favorite attack line that Obama took $716 billion from Medicare to pay for Obamacare is spurious. Romney made the claim in an Aug. 15, 2012, one-on-one interview with Tampa Bay’s WTSP 10 News:
“Under the president’s plan, he cuts Medicare by $716 billion, takes that money out of the Medicare trust fund and uses it to pay for Obamacare. I think this is something that people are just now focused on and find it very, very difficult to understand why he would cut Medicare for our current seniors.”
According to Politifact:
Was the money moved to pay for the national health care law? Neither Obama nor his health care law literally cut funding from the Medicare program’s budget. Rather, the health care law instituted a number of changes to try to bring down future health care costs in the program.
What kind of spending reductions are we talking about? They were mainly aimed at insurance companies and hospitals, not beneficiaries. The law made significant reductions to Medicare Advantage, a subset of Medicare plans run by private insurers. Medicare Advantage was started under President George W. Bush, and the idea was that competition among the private insurers would reduce costs. But the plans have actually cost more than traditional Medicare. So the health care law scales back the payments to private insurers. Hospitals, too, will be paid less if they have too many re-admissions, or if they fail to meet other new benchmarks for patient care.
Obama and fellow Democrats say the intention is to protect beneficiaries’ coverage while forcing health care providers to become more efficient. Romney has said he will repeal the health care law and institute a new overhaul of Medicare that brings more private insurers into a competitive marketplace. Beneficiaries would receive “premium support,” a voucher-like credit, to buy their own plan.
We should point out that the overall Medicare budget is projected to go up for the foreseeable future, even with the health care law’s cost-saving measures. The law tries to limit the program’s growth, though, making it less than it would have been without the law, but not reducing its overall budget. So claims that Obama would “cut” Medicare need more explanation to be fully accurate.
If you’ve been following the Medicare debate for awhile, you may have heard previous claims that Obama cut Medicare by $500 billion. How did that become $700 billion? Because Medicare spending gets bigger every year, the cost-saving mechanisms in the health care law also get bigger. And, it takes a few years for the health care law’s savings mechanisms to kick in. In fact, the effects of time are the main reason the $500 billion number has turned into $700 billion. The CBO determined in 2011 that the federal health care law would reduce Medicare outlays by $507 billion between 2012 and 2021. Ina more recent estimate released this year, the CBO looked at the years 2013 to 2022 and determined the health care law affected Medicare outlays by $716 billion.So it’s timing that’s making the cuts bigger, not changes to Medicare.
Romney also said that the spending reduction ” takes that money out of the Medicare trust fund and uses it to pay for Obamacare. Romney has a point here, but it’s not about money being moved from one account to another…
At the time the health care law was being finalized and passed, Democrats said it was important to them that the new law not add to the deficit. So the reductions in Medicare spending were counted against the health care law’s new spending. Some new spending is within the Medicare program, such as increasing coverage for prescription drugs and offering preventive care with no out-of-pocket costs. More significantly, though, the law moves to cover the uninsured, by giving them tax credits to buy private insurance. It also expands Medicaid, the state insurance program for the poor. The savings from Medicare offset that spending. We should note that the health law also imposes new taxes, primarily on the wealthy and on the health care industry. That too offsets the new spending.
Romney said, “Under the president’s plan, he cuts Medicare by $716 billion, takes that money out of the Medicare trust fund and uses it to pay for Obamacare.” This wording isn’t as troublesome as other statements we’ve seen on this topic, including from Romney himself. Still, Romney’s most-recent attempt at this claim needs significantly more explanation. In this instance, Romney’s claim gives the impression that the law takes money that was already allocated to Medicare and funds the new health care law with it. In fact, the law uses a number of measures to try to reduce the rapid growth of future Medicare spending. Those savings are then used to offset costs created by the law – especially coverage for the uninsured – so that the overall law doesn’t add to the deficit. We rate his statement Half True.
Why the Drive to Repeal the ACA is Misguided
The drive to repeal the ACA is reprehensible for 3 main reasons:
- First, the drive to repeal represents the efforts of special interests – such as hospital group king and Medicare fraud perpetrator artist Rick Scott (currently the governor of Florida which has the third highest rate of residents without health insurance) to increase the population of uninsured prospects for his subpar discount medical chain.
- The repeal lobby ignores the basic issue that our budget deficit is a healthcare problem (see the graph above) and that the ACA is the first of several steps that actually approaches rather than exacerbates the problem.
- Eliminating the ACA not only explodes future deficits by at least $230 billion according to the CBO, but is a sentence of death and poverty to thousands of Americans who desperately need the reforms against a healthcare system that is abusive and internationally substandard. The facts show that while the U.S. hospitals provide superior care for the wealthy, it increasingly fails those of us who are not wealthy. The fact is projected to expand health coverage 30 million people.
The reforms of the ACA, including the elimination of lifetime benefit caps and pre-existing conditions, and a focus on preventative care are long overdue, and the ACA begins to approach the important issue of lowering healthcare costs, which are bankrupting the nation. It is the beginning of a process of necessary reforms – there is no credible argument that reforms are not needed – that requires dispassionate thinking rather than strident partisan rhetoric.
Florida is a particularly noteworthy example, where Governor and Hospital Group CEO Rick Scott announced that his state is opting out of an expansion of Medicaid, and choosing not to build a state-based health insurance exchange. By opting out of the Medicaid expansion, Scott is leaving a significant portion of Florida citizens without health care. According to the nonpartisan Kaiser Family Foundation, Florida has the second-highest rate of uninsured Americans at 21 percent. If Scott did not opt out, Medicaid expansion would have covered 951,622 people according to Kaiser.
Who Stands to Gain from ACA Repeal?
A Personal Agenda
How does Rick Scott explain away his support for policies that hurt his state’s citizens? His explanation is the lie that Florida can’t afford the expansion. In fact, for the first two years the federal government pays 100% of the Medicaid expansion, and after 2017 when states begin paying their share they will never contribute more than 10% of the cost. Depending on the number of states opting out, the Medicaid expansion helps provide healthcare coverage for more than half of the 31 million Americans without healthcare insurance, or 16 million Americans who are mostly children, seniors, and the working poor according to the non-partisan Congressional Budget Office.
Follow the Money
Solantic, based in Jacksonville, Florida, was co-founded in 2001 by Rick Scott and Karen Bowling, a former television anchor to provide urgent care services, immunizations, physicals, drug screening, and care for injured workers. The corporation attracts patients who do not have insurance, cannot get appointments with their primary care physicians, or do not have primary care physicians as an alternative to the emergency room care that these types of patients often seek. In 2006, Scott said that his plans for Solantic were to establish a national brand of medical clinics. In August 2007, the company received a $40 million investment from a private equity firm and said that it expected to open 35 clinics by the end of 2009, with annual revenues of $100 million once all these clinics were open, compared to $20 million at the time. As of March 2009, Solantic had 24 centers, all located in Florida.
Scott’s $62 million investment in Solantic represents the biggest single chunk of his $218 million in wealth, has been put in a trust under his wife’s name as an attempt to show that he is longer involved in the company as governor of Florida, as it represents a conflict of interest. This attempt to profit from the misery of the uninsured has put him and his money at the forefront of the fight against the ACA. As governor, Scott has also aggressively pursued policies like testing state workers and welfare recipients for drugs, switching Medicaid patients to private HMOs and shrinking public health clinics – all these changes could benefit that $62 million investment, even though Scott denies that there is any legal conflict between his public role and private investments. According to the Tampa Bay Times:
But In Florida, nothing bars Scott from promoting policies that could benefit a company from which his family benefits financially.
- Scott supports bills that would move nearly 3 million Medicaid recipients into private managed care plans. Solantic accepts traditional Medicaid at only one location but it contracts chainwide with several private Medicaid plans. If passed, the law would dramatically increase Solantic’s potential patient base.
- Scott favors legislation that would require all adult welfare recipients — about 58,000 people — to have drug tests at their own expense. About 100,000 more would be affected by his plan to do random drug screenings of all state employees at a maximum cost of $3.5 million to the state. Bowling said Solantic would not bid on that job as long as Scott’s shares remain in the trust.
- Scott’s budget slashes funding to public health departments, which handle checkups, immunizations and travel shots for many people who don’t have private physicians. Solantic, which charges $50 for a basic physical and recently started catering to international travelers, could pick up some of this business.
- Scott appoints the heads of the Agency for Health Care Administration and Department of Health, which license, inspect and investigate complaints against providers such as Solantic. Herron, the ethics lawyer, said it’s legal. “It’s counterintuitive to our understanding of how the world works, but that’s the law, strictly construed,” he said.
- As Solantic has grown, so too have the number of state agencies using its services. And in the urgent care business, high volume, along with low overhead, is crucial to profits…Solantic billed state agencies $110,657 for services in 2010 and $20,061 so far in 2011.
What Interests Finance Repeal?
Questionable characters like Mike Huckabee, who appears in ads by Super PAC “Restore America’s Voice” recruiting citizens to pressure Congress to repeal the healthcare act, would prefer to substitute ideology and medical profiteering for practical solutions. Huckabee played a key role as “Restore America’s Voice” spokesman when the organization took a lead in the fight against passage of Obamacare. It is resuming its lead role in a new TV campaign featuring Mike Huckabee. Who are “Restore America’s Voice?”
The group is a Super PAC that reported spending a total of $112,315 on independent campaigning through October 2010, with 100% benefiting Republican candidates. The latest numbers show them raising over a million dollars. As a Super PAC, it may raise unlimited sums of money from corporations, unions, associations and individuals, then spend unlimited sums to overtly advocate for or against political candidates, and as of August 26, 2012, 803 groups organized as Super PACs have reported total receipts of $349,763,463 and total independent expenditures of $214,759,909 in the 2012 cycle.
Additionally, Karl Rove’s Crossroads GPS and the American Action Network comprise a $1 billion campaign by the he extreme right to bring down President Obama and healthcare. This plan, which includes ending Medicare as we know it and dismantling Medicaid, is a coordinated effort is funded largely by secret contributions from millionaires, billionaires and special interests. The HCAN Blog (Health Care for America Now) provides the facts:
Here’s a snapshot of the money behind Obamacare repeal and other conservative causes:
An explosion of political advertising:
- Opponents of Obamacare have spent $235 million on ads, including $18 million from Crossroads GPS, $27 million from the U.S. Chamber of Commerce and $9 million from the American Action Network. There has been little public disclosure of where that money came from, but the health insurance industry has a history of funding both the Chamber and American Action Network.
- A conservative group called Concerned Women of America is currently spending $6 million to run negative ads. That’s more than the group’s entire budget in recent years, but the organization isn’t explaining where the money came from – and it doesn’t have to.
Secretive spending to fund efforts to block the law:
- The lobbying group America’s Health Insurance Plans transferred $86 million to the Chamber during 2009 and another $16 million in 2010 to fight Obamacare, bringing the total to more than $102 million. Figures for 2011 and 2012 have not surfaced yet. Even as the health insurance trade group paid the Chamber, AHIP was publicly professing to support the law.
- Health insurer Aetna Inc. contributed $3.3 million to the American Action Network and $4.5 million to the Chamber of Commerce in 2011, according to areport by SNL Financial.
- American Action Network yesterday announced a $1.2 million campaign urging 35 GOP House members in competitive races to stand firm and vote for repeal.
Engineering a failed lawsuit:
- The National Federation of Independent Business, the lead plaintiff in the case decided last month by the Supreme Court, accepted million-dollar contributionsfrom outside, non-member sources to cover the costs of the lawsuit, including a payment of $3.7 million from Crossroads GPS in 2010.
- The American Action Forum filed three amicus briefs urging the Supreme Court to overturn the 2010 health reform law.
Arranging to buy the current Congress – and possibly the White House:
- In February, Politico reported that billionaire industrialists Charles and David Koch, leading benefactors of the anti-Obamacare front group Americans for Prosperity, planned to contribute or steer a total of $88 million to conservative causes during the 2012 election cycle. In May, Politico updated the story, reporting that Koch-related organizations planned to spend about $400 million in the 2012 election cycle.
- American Crossroads and the affiliated Crossroads GPS are expected tocontribute $300 million to support the White House bid of Mitt Romney, who has pledged to reverse the Affordable Care Act on his first day in office.
- American Action Network spent $26 million in the 2010 election cycle, including more than $20 million in election communication and $4.9 million in negative ads against Democrats, according to the nonpartisan Center for Responsive Politics.
- During the 2010 election cycle, Crossroads spent $14 million on independent expenditures while refusing to register as a political committee, while the GOP front group 60 Plus Association made more than $1 million in independent expenditures to spread lies about Obamacare and Medicare.
A Personal Story: The Inevitability of Deteriorating Health
We all need healthcare, and while we might not recognize this fact right now, all of us will experience deteriorating health that will eventually overtake us. This is poignantly demonstrated in the following account:
I exchanged doctor’s note with my friend before our dharma class. We both smiled as we passed the notes. It was not fake smiles. It is an accumulation of what we have learned in Buddhism. I will give her a fake name of Beautiful Lotus, to protect her identity.
She worked very hard at two jobs to send her kids to college and for advanced degrees. Now in old age – like my children – she rarely hears from them.
Had open heart surgery.
Had breast cancer.
Had a colon damaged during a colonoscopy.
Recently in the hospital several times for intestinal bleeding.
It started bleeding again last week.
She ended up in a wheel chair.
She had the type of insurance that Obama as banned. It had a cap.
She sold her house to get the money to pay for rehabilitation.
She now can walk with a crutch, and is happy that she is out of the wheel chair.
The manager of her retirement fund is in prison. She and others lost their savings.
She sought refuge in the Buddha studying hard to ease her suffering.
Bắc Minh (That’s me)
Suffered extreme physical abuse from parents when I was a child.
Worked with mononucleosis to support family.
Wife ran off with young woman leaving me with the kids. Divorced she went to college with her lover.
Sold the house in Wyoming. Profits went to ex-wife.
Father and adopted son died in the same week.
I had a Prostatedectomy that had the worst complication that involved 3 minor and 4 major surgeries. I had 3 bags. Ileostomy bag, abdominal cavity drain and urine bag over the span of 2 years.
I take care of adult son with mental illness. He doesn’t work. Ex-wife doesn’t help.
Ileostomy reversed no bags.
Declared healed I will wait one month before discontinuing antibiotics. Prostate is cancer gone.
What was in the notes that we exchanged with smiles?
Her note from the doctor said that she is in in early stages of dementia and Alzheimer.
My note from the doctor said that I have cancer in my neck and throat. It is not related to prostate cancer that was cured.
Both of us have come a long way.
We did more than go to the pagoda and chant. That is not enough. We mindfully meditate 15 minutes a day. There is no need to go overboard with the meditations. During the day we make it a point to be mindful about 3 times a day. For example, I am mindful when I peel potatoes, or when I drive the car, or when I do my back exercises, or when I take a shower. Both of us like to chant at the pagoda a couple of times a week. We go to dharma lessons where we continually learn how to apply the Buddha’s teaching to our life. It is one think to talk the dharma it is another thing to walk the talk. I also studied Zen from a teacher who did not intellectualize Zen.
We just want to be happy. At this stage in the game that is enough for us. Don’t worry. Be Happy.
More Articles on Healthcare Reform
Political Lessons: The political right has coopted the political left’s rhetoric about protecting the rights of the individual against authoritarian control and profiteering, and are using this false argument to justify an agenda that supports the wealthiest special interests against the welfare of the American public at large.
The Democrats, who supposedly represent the interests of the middle and lower classes against the profiteering of the wealthiest class, are also subject to the same lobbying pressures as the Republicans, and attempts to reform the economic, political system have been weak to meaningless. It is difficult to envision any political solution to the problems that beset the American economy and healthcare system.
Meanwhile, the media can’t be relied upon to present the issues clearly, as they prefer to frame the debate according to essentially meaningless ideological partisan lines.
Personal Lessons: So how can we as business leaders and citizens cut through rhetoric to get to the facts? What’s needed now more than ever are critical thinking skills, not taught in school. Since there is so little critical thinking in evidence today, this is a subject I plan to highlight in future articles.
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