The plan breaks with IBM’s normal approach by creating a “company within a company” to take charge of the Watson business, signalling both the high hopes of Ginni Rometty, chief executive, and the challenges IBM has faced in building a business around Watson. ...
Michael Rhodin, the IBM senior vice-president named to run the new Watson division, said the nature of the technology had inevitably led to some delay before it could be applied in new fields.
In areas such as healthcare or financial services, which IBM believes are ripe for the technology, large amounts of specialised data have to be “fed” into the system, which then applies machine learning to improve the accuracy of its responses before it can become more widely useful. ...
IBM recently raised its forecast of the annual revenues it will make in 2015 from data analytics – of which Watson is a part – by $4bn, to $20bn.
IBM Chief Executive Virginia "Ginni" Rometty has told executives she hopes Watson will generate $10 billion in annual revenue within 10 years, according to an October 2013 conference-call transcript reviewed by The Wall Street Journal. She set that target after the executive in charge of Watson said its business plan would bring in $1 billion of revenue a year by 2018. That would make Watson the fastest IBM business unit to reach the $1 billion milestone.
But Watson had total revenue of less than $100 million as of late October, according to the transcript. One of its first big projects, with the University of Texas M.D. Anderson Cancer Center, was "in a ditch" in early 2013, said Manoj Saxena, the executive overseeing Watson. ...
Citigroup Inc. has been collaborating with IBM since March 2012 to develop a version of Watson that can recommend financial products to consumers. It hasn't been launched yet. A Citigroup spokeswoman said the bank is "continuing to identify and test uses for Watson."
So far, just a handful of customers are using Watson in their daily business. With the supercomputer's help, health insurer WellPoint Inc. determines if doctors' requested treatments meet company guidelines and a patient's insurance policy. Elizabeth Bigham, a WellPoint vice president, said Watson initially took too long to "learn" WellPoint's policies.
Ms. Rometty, IBM's chief executive, met with WellPoint CEO Joseph Swedish to help resolve the problems. IBM reworked Watson's training regimen at WellPoint's request, and the system improved. "It has become part of the way we do business," Ms. Bigham said. ...
Under former CEO Samuel Palmisano, IBM routinely met Wall Street's financial expectations. Since Ms. Rometty took over in early 2012, IBM has stumbled more often as new technologies threaten some of its lucrative franchises. IBM shares have lagged behind the overall stock market.
"They need to have something special and they are hoping [Watson] is it," says Stephen Baker, author of "Final Jeopardy," a book about the making of Watson. Rivals like Google Inc. could threaten IBM with "tools within shouting range" of Watson that give customers most of what they need at much lower cost, he added. ...
In 2012, Memorial Sloan-Kettering Cancer Center in New York began work on an adviser to recommend cancer treatments. Dr. Mark Kris, a Sloan-Kettering oncologist, said an early version of the Watson tool could be used on patients later this year if it passes tests.
At his office, he pulled out an iPad and showed a screen from Watson that listed three potential treatments. Watson was less than 32% confident that any of them were correct. "Just like cancer, it is much more complex than we thought," Dr. Kris said.
IBM's deal with M.D. Anderson last year is the largest Watson deal, valued at nearly $15 million. IBM executives hope it could grow to $100 million.
The project initially ran awry because IBM's engineers and Anderson's doctors didn't understand each other. IBM's developers worked elsewhere and only visited Houston every few weeks to talk to doctors.
Selected reader comments follow:
There's a simple law of nature that whenever you have a solution that's in search of a problem, it will fail.
Watson was created as a demonstration of a technology. It wasn't designed to address any problem. Trying now to force it in to a solution doesn't work.
Instead of trying to be an expert system and possibly violate HIPPA regulations, why not set Watson at a task for which it is better suited. Rooting out Medicare and Medicaid fraud?
Yeah, its that simple. Watson would pay for itself in no time.
Unfortunately it's not glamourous and Rometty needs a big flashy win to cement her in the CEO seat. No offense but Sam left her with a house of cards with a wind storm on the horizon. In terms of the 'Big Data' space IBM is woefully behind the curve.
Also, with Medicare, Medicaid and insurance reimbursement shrinking, do you really think that doctors want to pay $$$ for a machine that they have to teach to go 'ping'? If a doctor is unsure of himself, he has peers he can talk with. A free lunch or a cup of coffee is much cheaper than Watson's monthly electric bill. ;-)
The Watson Group will be headed up by Big Blue's former senior veep of software solutions Michael Rhodin and will try to milk some more revenue out of the supercomputer that beat human competitors on the US quiz show three years ago. ...
The Watson unit is hoping to have 2,000 people on the payroll by the end of the year, from the several hundred working there now. It will have its own HQ in New York's Silicon Alley district. The business has already acquired its first (public) customer in DBS Bank, an Asian financial services group. The group said it would use Watson to improve its clients' experience, starting with applying the supercomputer to its wealth management business to give better advice to affluent customers.
Can she pivot? That’s the question. Rometty has been trying to follow her predecessor Sam Palmisano’s playbook but it isn’t working. She needs a new strategy. This is actually a great opportunity for both Rometty and IBM, but the second half of this prediction is they’ll blow it. Rometty and IBM will survive 2014 but it won’t be pretty. ...
The system's decision engine and advanced natural-language processing technology was launched as a new moneymaking machine at a glossy event in New York on Thursday. So far, it seems, the clever mainframe has proved less a panacea and more a pain in the neck for IBM.
As of 2013, about seven years after it was conceived, Watson has beaten the aforementioned gameshow but generated less than $100m in revenue. Some of its projects are "in a ditch", according to the Wall Street Journal, yet IBM's CEO Virginia Rometty hopes the tech will generate $10bn per year in 10 years.
Watson, though, is not cooperating. It takes a long time to set up and train for new tasks, and when it starts to provide predictions, they're not always much use to begin with, the WSJ claimed. A look at the supercomputer's underlying architecture tells us why.
A selected reader comment follows:
I believe IBM will be in the future a case study on how short term profit goals can destroy an unprecedented amount of brand image and trust in a short record time
Selected reader comments follow:
There are reasons why many people root for Obamacare to drive insurance companies extinct. What Wellpoint is doing with Watson to stiff medical practices is one of them. And when bills are denied, guess who ends up in collections and who is angry at the insurance companies?
As a whole, the group houses DB2, WebSphere, Informix, Rational, Tivoli and Lotus. By next year the plan is that these products will generate half of IBM’s profits.
That’s under the mandate of a 2010 roadmap that says "about" 50 per cent of profits will come from software by 2015 – up from 45 per cent now. If it hits the 50 per cent number, software will widen its lead over hardware and the renowned services unit.
The plan also calls for an EPS of $20, meaning Smith’s group must also inflate profits for shareholders.
The goal is more remarkable given software accounts for just a quarter of IBM’s net sales – 24 per cent. Services are still the big earner, accounting for 56 per cent. ...
Smith, who took post 18 months ago following various senior executive roles at IBM in the UK and Europe, needs to be clever: he's required not just to sell more, but sell more without incurring additional costs. Running the UK and Ireland operation means Smith will be contributing to the overall success of IBM software and systems group, run by executive vice president and group executive Steve Mills in the US.
So what’s the plan for extracting a disproportionate amount of profit from his unit?
Partners. Smith plans to sign up more in 2014, whom he hopes will customise and distribute more of software group's products. The idea is IBM can reach more customers working through third parties than it could going direct. Smith calls this switch a cultural change. Also, IBM is hiring and training more people with the “right” skills to make "complex" sales. ...
He said sales have been re-tooled, with the software group in the UK and Ireland hiring and training the “right” kind of salespeople.
IBM has been laying off staff - 6,000 have gone globally since 2009 and 300 from the UK and Ireland last year as part of cost cutting and restructuring.
Smith wouldn’t comment on plans in the UK and Ireland for further layoffs, but did claim his sales team was growing.
He said his team has been hiring, while IBM is looking at more training, so sales can make “a more complex value proposition” rather than “traditional product based sales".
He added: “What you are seeing in IBM it’s fair to say is a rebalancing in terms of the skills to respond to the market opportunities. We are making huge investments in people.”
Since 2008, IBM has been unable to grow revenue, and revenue has declined in six consecutive quarters. Importantly, during the last five years, IBM has spent over $17 billion on acquisitions. This means that IBM has a negative organic growth rate as competitors like Salesforce.com, SAP, and Oracle have taken share. Unlike in the past, CIOs have plenty of cloud and business service companies to choose from; it is no longer IBM and no one else. It used to be said that "hiring IBM never got a CIO fired." Now, the same can be said for a half-dozen companies. ...
To reach $10 billion in annual revenue, IBM believes that Watson can be used as almost a super-consultant to offer solutions to business problems, finance issues, etc. in addition to health care. Unfortunately, there are kinks to be worked out. Most notably, Watson isn't compatible with IBM's data center technology, which makes it far more difficult for IBM to regain its enterprise monopoly. Moreover, the company has been working from behind in the cloud revolution, leading to struggles in its server business. Other firms may develop similar offerings, limiting Watson's upside and margins.
IBM is trying to figure out a way to grow Watson 100 fold over the next decade, which is a monumental task. For a company that hasn't grown revenue in five years, that task may very well prove impossible. It also shows the challenge IBM's size poses. Even if it hit this target, Watson would only boost revenue by $10 billion in 2023 while the company generates over $100 billion today, meaning less than 1% annual growth. With current downward trends in IBM's revenue from existing business, IBM could very well have less revenue a decade from now than it does today even if Watson were to hit the target. To be truly successful, IBM will need to deliver three or four Watson sized successes. With less than $100 million in revenue, it looks like IBM will fail to deliver one.
IBM has been slow to react to the growth of the cloud and how it has changed enterprise IT spending. One reason for this is the company's dogmatic focus on its five year EPS roadmap. When companies focus on hitting near term earnings target, they often will push off investment or focus on financial engineering to deliver good short-term results with disastrous long-term consequences. In no sector is this truer than in technology where heavy investment is required to maintain a competitive advantage. IBM would be better off throwing out its guidance, focusing on its core business, and repositioning the company for growth. Instead, management continues to stick to its plan of pulling various levers, namely buybacks, to boost EPS while the legacy business is on fire and growth businesses underperform. ...
If Watson doesn't hit targets, you are left with a company that has declining legacy sever and services businesses, hardware issues overseas, and limited growth opportunities. These challenges will keep pressure on revenue, resulting in lower cash flow and EPS and declining share buybacks. IBM should trade closer to 13x FCF to reflect the challenges it faces, or $140-$150 per share. The Wall Street Journal Report re-emphasizes the fact that IBM is a must sell.
The department store chain that suffered the outage is Myer, Australia's analog for the UK's John Lewis or North America's Macy's inasmuch as it is positioned beneath more upmarket alternatives.
In 2008, Oracle published a case study (PDF) trumpeting that Oracle Retail has been implemented at Myer over several years, to give it “a unified view of inventory levels, purchasing, and supplier contracts so they could make better buying decisions.” The case study names IBM as the implementation partner. In 2012, IBM let it be known that its WebSphere software would power Myer's new website.
That site was put to the test on December 26th, traditionally the opening day for a period of heavy retail discounting in Australia. The site quickly crashed under a rush of mouse-wielding bargain-seekers, many of whom would have chased the exclusive deals offered online. The site stayed down until January 2nd. December 26th and January 1st are public holidays in Australia, while the 27th, 30th and 31st of December were theoretically normal business days on which Myer and IBM would have been able to drag their tech teams off the beach and into the office. The weekend of December 27th and 28th afforded further opportunity to work on the site.
As the outage continued, Myer executives told various media, including The Australian Financial Review, that its own IT team and IBM folk around the world were doing all they could to get the site back online. ...
Update: Friday January 3rd IBM has sent The Reg the following "IBM statement attributed to an IBM spokesperson".
"An IBM team of local and global experts worked around the clock with MYER to resolve the issue with its online store. The technical issue was caused by a communication breakdown between internet servers and a software application. IBM and MYER will work together to conduct a thorough review to ensure this issue does not reoccur. IBM is committed to supporting MYER to continue to provide high quality service to its customers."
In a five-page letter sent to IBM CEO Virginia Rometty on December 13 and made public by the governor's office on Friday, Dayton detailed 21 specific problems tied to IBM's Curam software. "Your product has not delivered promised functionality and has seriously hindered Minnesotans' abilities to purchase health insurance or apply for public health care programs through MNsure," Dayton wrote. "I request that you immediately deploy whatever people or resources are needed to correct the defects in your product that are preventing Minnesotans from obtaining health insurance through MNsure."
Maximus, of Reston, Va., is the lead contractor on the $46 million project, while IBM’s Curam software determines each applicant's eligibility for Medicaid and state and federal subsidies and tax credits. Acquired by IBM in 2011, Curam software is designed specifically for health and social program management, and IBM says it's used in more than 80 government projects around the world.
Fortunately, the beauty with IBM is that it is a highly predictable company. This is what allows the company to issue roadmaps, outlining specific goals for revenues, profits, EPS etc., which many other companies couldn't dream of issuing. The "sticky" nature of its business and its predictability is exactly what drove Buffett into purchasing his stake in the company, uncharacteristically buying into a tech company. They have a total services backlog of $141 billion as of the 3Q 2013, for example. ...
So, IBM has some work to do, but there is a fairly clear path to growing revenues open to them. It certainly isn't the dire situation some make it out to be, with IBM out of ideas and options. You already have a company with expanding margins, explosive net income and EPS growth, and a very shareholder friendly management team making well-timed buybacks and giving generous dividend increases. Adding in growing revenues into the mix could be a catalyst towards some very nice future stock prices.
Pros: Great company with a superb reputation to have in your resume. Flexible hours and ability to telecommute for most jobs. May be asked to fly out anywhere in the world where customers are. Which is great if you like to travel.
Cons: Old buy network at the management level and politics between managers, groups and product silos. Very low chance of advancement especially if you get pegged really good with some product(s). They buy a lot of companies and will do anything needed to make quarterly numbers. That is both good and bad. Salaries are in the low to mid end on the scale.
Advice to Senior Management: Empower people more and compensate commensurate with industry standards. Promote people according to their talents. Yes, I would recommend this company to a friend. I'm optimistic about the outlook for this company.
Pros: 1. Really, really smart people you work and admire. 2. IBM does a lot of interesting things. 3. Global brand name and presence.
Cons: 1. Large company = weak relationships and tons of bureaucracy. 2. There's a lot of non-interesting work that you're forced to do as well. 3. For consulting, they do a terrible job of matching skills and interests to projects.
Advice to Senior Management: Focus on the employee and eliminate the bureaucracy, and you will keep your talent. No, I would not recommend this company to a friend. I'm optimistic about the outlook for this company.
Pros: IBM overall is a great company with a very strong grasp on their business model (depending upon the group you belong too). Tons of discounts for other companies that they may partner with or provide service for. A lot of smart people. Fully supports remote employees.
Cons: The cons - seem a bit contradicting to the pros, mainly because there is a TON of red tape that you have to go through to get anything done. Their internal software is horrible and seems to always fail—especially when you need it the most. The Lotus Symphony product suite is horrible, sluggish, and is a pain to work with.
Compensation and promotions is very limiting. Salary increase is minimal, and their structure in how they "grade" your performance is a bit ridiculous.
It seems like they are constantly buying companies to benefit the market they are attacking; however, once the purchase has been made it seems like there is no direction in where they are wanting to go.
Advice to Senior Management: Focus on internal tools so that when it comes to presenting material on a webinar you don't have to wait 20 minutes fighting the tool just to get the meeting started.
Review full salary compensation so that employees are getting compensated accordingly.
Get rid of anything and everything that says "Lotus" on it.
Cons: Terribly top heavy company—I have seen teams with 3 developers and 2 PMs. The variable pay—you won't get 100% no matter how good you perform. Average payout is 40% only. No proper development projects in .NET in Kolkata location. Extremely unfriendly managers who care the least of the well being of the employees.
Advice to Senior Management: Start a horizontal too—this vertical oriented assignments ruin the technical capability of a resource. Reduce the number of managers—turn it from an inverted pyramid (almost) to a pyramid.
“Employers across this country have made promises to their employees which will not be honored. Simply stated, pension liabilities dramatically exceed their assets. ...
“Companies all over America are scrambling to get out of their pension obligations — known as de-risking. They hand the duty of paying out pensions to an insurance company and purchase a group annuity contract, either “allocated” specifically to each employee, or “unallocated,” which just names the policy owner, typically the pension fund. Those terms matter in the event the insurance company fails.
When a pension plan de-risks:
“But if you have an individual (allocated) annuity, or a certificate in an unallocated annuity, then, depending upon where you live, lifetime state coverages range from $100,000 to $500,000. In California, it is a total of $250,000. Remember, under the PBCG, it is $60,000 a year for life.
“So your California reader, Helen, who has worked over 30 years for AT&T, could easily have close to a million dollars in present pension value. The company de-risks, transfers pension obligations to XYZ Insurance and five years later they fail. She could face substantial losses,” Stone points out.
A pension crisis faces even the financially strongest companies, counties, cities and states. For most employees, pensions in America have become a failed experiment, a historical footnote, a ship sunk by incompetence, dishonesty and fraud. And it all began at a time in our nation’s recent history when a solemn promise was made by employers to their employees:
“Work diligently, be loyal, and you will retire well taken care of. There is little need to save much money for retirement, so just enjoy life. Your future is secure.”
Americans, a trusting, hardworking people by nature, believed the promises, stayed with their employers and spent their money because of that promise. And then came failures of century-old legacy companies such as Bethlehem Steel and airlines whose planes were shining examples of all that was great about America.
Their retirees saw pensions slashed or evaporate completely. Today, just look at city and county bankruptcies across our country and their underfunded pensions. Now, to escape these enormous liabilities, employers — large and small — are looking for ways to dump pension obligations. The term for it is de-risking. ...
For the employer, it’s a sweet deal. They hand the insurance company a large pot of money and then are off the hook, and this happens often with very little warning or notice to employees. While Prudential may appear sound financially today, who knows what will happen in 10 or 15 years.? Nobody is too big to fail and should Prudential falter, the retirees are the big losers.
“Retirees lose all of the comprehensive protections intended by Congress under the Employment Retirement Income Security Act (ERISA), including the financial safety net provided by the Pension Benefit Guarantee Corp., which steps in to protect employees when a pension fails.
Companies across the country are selling off their pension responsibilities, usually to an investment fund or insurance company, without the retirees' consent. In practice, this removes all protections under the federal Employee Retirement Income Security Act, including the safety net provided by the federal Pension Benefit Guaranty Corp.
American companies are calling it "pension de-risking," a flowery term that obscures what it really is — pension stripping, because federal protections are being taken away from retirees who earned these pensions over decades-long careers. ...
Why should we care? It is unclear that the insurance industry has any ability to meet their new obligations to retirees. After all, it was only a few years ago that we were first exposed to "too big to fail." Massive companies, like AIG and Lehman, due to years of mismanagement, corporate arrogance and over-leveraging, threatened to undermine our entire economy. ...
What is even more troubling is the fine print related to pension stripping and how it impacts residents of other states. Retirees who relocate to other states after their pensions are transferred may unwittingly divest themselves of insurance industry provided state guaranty association coverage.
While annuitants living in New York are protected up to a lifetime maximum of $500,000 if these newfangled replacement annuities go belly-up, some states offer a pittance of that coverage. Annuitants in Arizona and eight other states or U.S. territories are entitled to only $100,000 of lifetime protection. In more than half the U.S. states (28), the lifetime ceiling is only $250,000 and in 10 others the lifetime cap is $300,000. ...
Private sector retirees labored their entire adult careers to fund their financial security in retirement. It is unacceptable that now, in their golden years, they are living in fear of their pensions are taken away, sold off or transferred to another company, without any input in the decision.
When the United States established Social Security in 1935, it was in response to the catastrophic poverty facing our country's elderly. Likewise, the ERISA pension protection law was enacted by Congress in 1974 to protect the interests of employee benefit plan participants and their beneficiaries, not the wealthiest and greediest corporations. Let's not turn back the clock and ignore our great state's retirees.
“The 30-year corporate job with a gold watch isn’t there anymore,” said Dane Stangler, vice president of research and policy for Kansas City, Missouri-based Kauffman. “A lot of people are not ready to retire. We are living healthier for longer, and they are looking for a main income or a supplementary income.”
“If you are laid off from a decent job, if you start your own business you don’t have to worry about the biases of any personnel office as it looks over applicants’ resumes,” said Gary Burtless, a senior fellow at Brookings Institution and former economist at the U.S. Labor Department.
Selected reader comments follow:
As equities prices and pensions’ funded status rise amid low interest rates, most DB plan sponsors are facing a “perfect storm” of circumstances that makes reducing their pension obligations through derisking look more attractive. ...
What Is Derisking? Derisking is transfer of risk from the plan — and ultimately the plan sponsor’s financial statements — to the participant, in the case of lump-sum distributions, or to insurance companies, in the case of annuity purchases. As a reminder, the decision to derisk is a settlor function not subject to ERISA, but the implementation of the decision is an ERISA fiduciary decision. As with all fiduciary decisions, a carefully thought-out and well documented process is critical. ...
Pension consulting firm Towers Watson reports that almost 75 percent of respondents in a 2013 derisking survey “either have implemented, are planning to, or are considering developing a formal ‘journey’ plan to de-risk their DB plan. A journey plan details actions a plan sponsor will take to de-risk its pension plan once certain trigger points have been reached. Forty-two percent of respondents had a journey plan in place before this year, while 8 [percent] implemented a plan this year.” ...
Choosing a Course of Action. No matter what course of action for derisking a plan sponsor chooses, a detailed implementation plan must be carefully constructed. As part of this, it can’t be emphasized enough that making a settlor decision is a fiduciary function. Documented due diligence at each phase is required; derisking is an activity that already has resulted in litigation by affected participants, and that trend is likely to continue.
The NRLN is interested in learning whether any NRLN grassroots members age 65 and older have been turned down for Medicare Advantage or Medigap insurance (a supplemental policy to Medicare). A couple of examples might help you better understand the type of information we are seeking.
EXAMPLE 1: A retiree is insured by insurance company A under a Medicare Advantage policy and can’t switch:
EXAMPLE 2: A retiree is insured by insurance company B under a Medigap policy and can’t switch:
he NRLN would appreciate hearing from you about any difficulty you may have had switching from one Medicare Advantage insurance plan to another Medicare Advantage plan or to a Medicare Medigap plan. Let us know whether you have a pre-existing condition, but you need not specify what pre-existing condition you have unless you want to do so. Send you response by January 17th with your name and city where you live to email@example.com. If you have questions about this request you may send your questions to this email address or call toll free 1-866-360-7197.
Bill Kadereit, President National Retiree Legislative Network.
The increase is mentioned in a Hewlett-Packard 10-K filing to US financial watchdog the SEC. The paperwork states on page 118:
As of July 31, 2013, HP estimated that it would eliminate approximately 29,000 positions in connection with the 2012 Plan through fiscal year 2014 ... Due to continued market and business pressures, as of October 31, 2013, HP expects to eliminate an additional 15 per cent of those 29,000 positions, or a total of approximately 34,000 positions, and to record an additional 15 per cent of that $3.6 billion in total costs, or approximately $4.1 billion in aggregate charges. ...
It seems inevitable that some of the 5,000 positions to be eliminated will be in Europe. The company, which employs 330,000 worldwide, warned of possible redundancies in early 2014 in a pre-Christmas missive to staff.
FAIR Health, Inc. was established in October of 2009 as part of the settlement of an investigation by then New York State Attorney General, Andrew Cuomo, into the health insurance industry’s methods for determining out-of-network reimbursement. The Attorney General alleged that it was a conflict-of-interest for health insurers to determine “usual, customary and reasonable” (UCR) charges for out-of-network services on the basis of data compiled and controlled by the industry. To determine UCR, the insurers had relied on a database compiled and operated by Ingenix, Inc., a wholly-owned subsidiary of the UnitedHealth Group. Additional allegations charged that the data was a flawed, and that the database was a “black box,” opaque to providers, patients and other stakeholders. FAIR Health was formed to take over and improve the database and to bring transparency, objectivity and reliability to its construction and to the data products derived from it.
The IBM employee prescription plan coverage for pre-Medicare spouse was an incredible gouge.
Yes, we took a risk by dropping the IBM plan & 2011-2013 premium savings paid for a car.
Just be sure to order about three weeks ahead of the time you really need the med or the refill.
We scan in a prescription and upload the .pdf file to the site. Call center is US-based!
Meds show up from Germany, NZ or SE Asia in the mailbox. Your country of origin may vary.
Use a credit card that pays the most in points! Kiplinger usually has a chart that shows the best three.
"This investment option is a unitized fund and not a mutual fund and as such is not registered with the Securities Exchange Commission (SEC). The performance presented for this option may not be calculated in the same manner as the performance of mutual funds. Other data shown also may not be comparable to mutual fund data."
I have no "inside" knowledge about this, but I'm pretty certain that the original intent was to provide more value to IBM employees. Back in the early 80's, mutual fund fees and expenses were much higher than they are today. So the very low internal costs of IBM's offerings were a substantial advantage back then. Fast forward to today, and the overall 401K market has become much more competitive. Mutual Fund admin and marketing expenses have gone down a lot, thanks in large part to John Bogle's "up-start" Vanguard
Today, IBM's ultra-low fund expenses are much less of an advantage, because most of the alternatives have become much less expensive. Still, IMO, if you discount the "Trust IBM" aspect, they are still VERY good.
If you want to track NAV on a daily basis and buy/sell frequently, neither IBM's 401K offerings or mutual funds are good. Both IBM, and virtually all mutual funds, impose penalties for weekly/monthly trading. IMO, ETFs through a discount brokerage would be preferable for this case.
The first three tiers are generally Index funds. They are emulating established benchmark funds and can do so with extremely low management fees—around 0.1% (plus or minus). The Tier IV funds carry the expense and research of the respective mutual funds, and therefore have a much higher investment expense.
Yep, I enjoy the 30%+ returns, and hope they continue for a loooooong time! There are some excellent services out there such as smart401k.com which, given your risk tolerances, will give a specific recommendation for the IBM funds. I have no interest in the firm, other than as a satisfied user.
While Extend Health was in the middle of going public last year, Towers Watson acquired it, creating Towers Watson Exchange Solutions, which is poised to soar with its focus on private insurance exchanges. These exchanges allow big companies to largely get out of the business of insuring their employees by giving them money to buy insurance on their own exchanges, which are similar but entirely separate from the new federal and state insurance exchanges required under the Affordable Care Act. ,,,
And affordable health care is not only topping news feeds these days, it's also at the top of many people's benefits wish lists. So it stands to reason that Towers Watson's health care consulting business is the company's growth engine. Benefits — including pensions and health care — makes up about 55% of Towers Watson's consulting work. The company also works for pension plans and insurance companies on risk and actuarial calculations and with companies of all types on talent recruitment and retention. ...
When the company's consultants are brought in to work on a client's benefits, Towers Watson helps set the prices that employers will charge for different options and handle the enrollment and other administrative details. While some employers have to cut back benefits based on "what their financial realities are," the company helps them make the tough choices, he says. But that's a painful choice. ...
Haley says he expects more than 20% of the employees in the U.S. with health coverage will be covered by a private exchange in the next five years. Companies including Walgreen's, Sears and IBM — a Towers Watson client — have recently announced plans to move employees to private exchanges. ...
As he watches the glitch-ridden rollout of the state and federal insurance exchanges, Haley says he's determined to make employees' experiences with private exchanges "absolutely excellent."
Haley was instrumental in the early 90's helping IBM restructure their employee benefits programs—and has obviously continued to have the ear of the present corporate management.
About 3 and a half minutes into this speech, Mr. Haley says:
"In the area of Benefits, the employer value proposition is something that employers are generally rethinking a little bit, as a result of the global financial crisis. That impacts on the design of pension plans, it impacts on a de-risking, which is a key area for pension plans right now. And, of course, the Affordable Care Act which is changing healthcare in the US is also causing employers to just rethink employer value proposition for healthcare."
De-risking is a word I'd never heard before, but it sure seems to describe Dr. Rhee's explanation that our healthcare insurance was just too expensive for IBM to maintain.
I'll include here an article from today's Washington Post, titled Corporate pension plans at strongest funding in years.
The odd thing about the article and its title is that the title sounds really good from our point of view as retirees, but the whole article talks about how the healthier pension funds make it easier for large corporations to de-risk by transferring the obligations to insurance companies. The article has quotes from 3 Towers Watson executives, and yes, the word de-risk does appear in this article.
When Mr. Haley can present de-risking healthcare insurance for all retirees, he has offered the business principle that the offloading the expense of fulfilling the contracts with us is a good business decision. An essential corollary to this is that anything opposing the tunnel vision that prevents IBM from seeing us as retired human beings, completely, or largely so, at the company's mercy, is counterproductive. De-risking requires focus.
If this de-risking is allowed to stand for healthcare insurance, what is to prevent IBM from doing what this article (and Towers Watson) suggests—de-risk our retirement funds to an insurance company which will annutize these funds, in such a way as to maintain their profits?
It might be worth reading the Wikipedia entry on the A&P; when you've got that entry up, search on the word 'pension'.
But rather than just assuring the future of the shrunken number of traditional pension plans that make retirees guaranteed payments for life, the improved funding levels also make it more feasible for more firms to shed pension obligations altogether. Firms can do that either by offering lump sums to workers or to transfer the future liabilities — and the money set aside to meet them — to insurance companies that convert them into annuities.
“From a financial management perspective, as the funded ratios get closer to 100 percent, it becomes feasible to do things you couldn’t three or four years ago,” said Alan Glickstein, a senior retirement consultant at Towers Watson.
The decline in traditional pension coverage, coupled with inability of many Americans to save for retirement outside of pension plans and the ever increasing cost of medical care, has contributed to growing concern that a growing number of Americans are at risk of downward mobility when they enter retirement. ...
“The improved funding environment will provide pension plan sponsors with some intriguing opportunities for 2014,” said David Suchsland, a senior retirement consultant at Towers Watson. “We expect the actions we’ve seen among companies to de-risk their pension plans over the past several years will accelerate as funding levels continue to improve.”
Every retiree would continue to receive the same monthly benefit. Your vested benefit can not be reduced.
It's possible that as part of the process, a lump some would be offered, but you can't be forced to accept the lump sum. It might be a good deal, but probably wouldn't be for most people. (Why would IBM offer a good deal?)
The main risk for the retirees is the health of the insurance company vs the health of the IBM pension plan. If IBM kept the pension plan and it became underfunded, IBM would have to add funding. If IBM went bankrupt, and the pension fund was underfunded, the PBGC would step in. That would mean that some people could see their benefits reduced.
If an insurance company gets in trouble, and the insurance company goes bankrupt, the PBGC doesn't cover it.
A concern is that since insurance companies are profit driven, they might make riskier investments in an attempt to increase profits than the IBM pension fund would.
But there is some protection for the annuitants . Insurance companies participate in re-insurance pools with other insurance companies to back each other up. State regulators would step in and try to get other insurance companies to take over the annuities. If that fails, then each state has insurance guaranty funds that would step in. The downside is that the level of benefit that is guaranteed varies from state to state. Some states have pretty low levels of benefit guarantees. Other states have pretty good levels of coverage.
The insurance industry likes to point out that even in the Great Depression and in the financial crisis of 2008, not one policy holder lost their annuity as a result of an insurance company bankruptcy.
Well your question (pasted in italics above) is interesting for many reasons. I won’t pretend to be an expert but I do know that IBM tried to halt pension growth for older (fully pensioned) employees and lost that battle in court i.e. pensions for older retirees could still increase as years go on (I think that was the resolution).
But now you also have 401K’s, and for the older pensioners you have additional payments that IBM makes (maybe not for newer retirees) to something called the Pension Benefit Guarantee Corp. IBM pays millions to this company or at least some other quasi-federal entity. My fear would be if IBM sells your pension, there is then some obscure law that allows the new owner of your pension to freeze it, reduce it or even eliminate it. It sure looks complicated when you dig in even a little.
I guess my answer albeit foggy to your question is that we wouldn’t know what would happen to our pensions but could assume it would be bad not good. Maybe someone can correct, embellish or even support my admitted assumptions here.
Here’s some info:
If the pension plan is sold to an insurance company, the new owner cannot reduce or eliminate your pension. They must pay you the same thing you are getting now.
IBM did not lose their attempt to freeze pensions. The IBM pension plan was frozen at the end of 2007. No one is earning new benefits. No new employees are added to the plan.
The link you provided about the lawsuit is Cooper v. IBM, which was about the 1999 Cash Balance conversions and also the earlier pension plan changes in 1995. IBM lost on a minor point about the 1995 plan discriminating against older workers. But they won on the legality of the Cash Balance conversion, which greatly reduced the pension benefits for employees who were forced into it. The net is, IBM won the legal battle on 95% of the potential financial liabilities it faced.
I realize 30+ years is a long time and pension plans along with SS were never setup for this on a broad scale. There is a reasonable chance that whoever is paying my pension will not be around in later years. To me the better risk mitigation is to have the pension managed and paid by IBM due to PBGC coverage. This is opposed to relying on a state agency who might not be able to get a new company to take over my insurance annuity and stick me with severely less income.
In the 90s, IBM (and other companies) tossed that concept out on it's head when they "early retired" people at full pension, who could still be in their late 40s (I was 49). Adding another 15-16 years to an already growing life span puts the whole concept of pensions in jeopardy. Statistically I will collect longer than I worked. How is that sustainable?
Pensions do NOT depend on having a sufficient number of workers to support them. They depend entirely on a company setting aside a proper amount of funding and investing it well to pay the benefit to the retirees. The right way to do this has been known for decades.
Allowing workers to retire early simply means that additional funding has to be set aside in the pension plan. Again, the actuarial rules to support this have been know for decades.
Also, the average life expectancy for someone age 65 has inched up just a few years since the 1970s. There was no sudden jump where people went from living just a few years past 65 to 20 additional years that caught actuaries by surprise.
Pensions and health insurance ARE different under ERISA law, which covers retirement benefits.
ERISA says that once you are vested in a pension, the vested value can not be reduced or eliminated. As an aside, the law does allow the earning of future increases in the value of your pension to be reduced or eliminated for active employees. But that does not affect what has been already earned and vested, and does not affect anyone who is already retired. IBM made such changes in 1991, 1995 and 1999.
ERISA does not provide for vesting of retiree medical benefits. A company can reduce, change or eliminate medical benefits any time they want.
Although IBM always includes the standard boilerplate that says they reserve the right to make changes in the future, blah, blah, blah, what they are allowed to do must still comply with the law. And the law says they cannot reduce the vested value of your pension.
As you correctly state, the de-risking employer has a fiduciary responsibility to transfer the annuity obligation to a responsible financial organization. What happens if the liability is transferred to a secondary, or tertiary organization. Does IBM keep a fiduciary responsibility over something they could no longer control? Does anybody have a fiduciary responsibility? Are there salivating lawyers waiting in the wings?
Too many unknowns yet to be resolved.
If you look at the annual reports that IBM has submitted to the SEC for the past 15 years, you'll see that IBM's executives have filched about $1.3 billion of untaxed assets from the employees' retirement trust funds. The original contributions had been made by the IBM of 1943 through 1992. Those contributions, plus accumulated investment returns, were enough to perpetually sustain the program as it was contemplated by the Watsons and their followers.
The only reason that the current IBM executives would have in slaughtering this ~$1.3 billion cash cow for them would be their decision to cash out immediately, if and only if, the sale price could continue to support their current income stream. That won't happen so long as IBM can finance its buy-backs with money borrowed at 1% to 2%.
My best guess is that the executives of IBM, having ended the defined benefit program, will simply wait for all of us in the original program to die, and that they will cash out as the program nears its end, about 15 - 20 years from now.
But the steep cutbacks in retirement and health benefits that tens of thousands of Boeing workers were forced to swallow have far larger implications for middle-class America.
Boeing's stingy treatment of its highly skilled workforce offers a vivid example of how America's new economy has created gaping economic inequalities and steadily squeezed the economic life out of the U.S. middle class over the last three decades, even as corporate profits and CEO pay have skyrocketed.
Boeing's case epitomizes that sharp economic divide. For just as the company was wringing concessions from its workers, its board of directors approved a 50% increase in the company's stock dividend and a $10-billion stock buyback that will richly reward investors and executives who get paid in Boeing shares. ...
In 1980, 84% of American workers at companies with 100 or more employees received lifetime pensions from their companies, and 70% got health insurance fully paid for by their employers. Today, fewer than 30% have lifetime pensions and only 18% have fully employer-paid health insurance.
What these numbers mean is that every year hundreds of billions of dollars in benefit costs have been shifted from company books to the pocketbooks and checkbooks of average Americans, helping to boost corporate profits and to leave roughly half of the baby boom generation facing near poverty in retirement.
Boeing's new contract will accelerate that trend. And it's not as if hard economic times forced Boeing to slash labor costs. Its profits and demand for its planes are at record levels. ...
Boeing said it had to cut costs to meet "aggressive international competition." But Boeing's sole major global competitor is Airbus, based in highly unionized Germany and France, and Airbus puts a premium on maintaining its high-quality workforce and treating its workers generously.
German companies over the last 25 years have raised the pay and benefits of middle-class workers five times faster than U.S. companies. And German corporations have kept high-tech jobs at home, so that today 21% of Germany's workforce is in manufacturing versus 9% in the U.S. What's more, the German strategy has rolled up $2 trillion in export surpluses while the U.S. has suffered $6 trillion in trade deficits. ...
But rolling back the clock on the shrinking middle-class share of America's economic pie has proved virtually impossible lately. For now, the Boeing formula represents the kind of successful corporate power play that prompted Pope Francis recently to chastise modern capitalism for imposing "the dictatorship of an impersonal economy lacking a truly human purpose."
"There's this feeling of, 'Oh my goodness, how am I going to do this?'" says Maldonado, the retiree experience leader for the Aon Hewitt Navigators exchange. "It can be frightening."
But Maldonado says fright usually turns to delight once they discover the wide range of plan choices and money-saving opportunities that were never available under their employer's group plan, as well as the one-on-one assistance to fine-tune their ideal mix of cost and coverage.
"Then it starts to feel a whole lot better," she says. ...
"It's become an upgrade for seniors," says Extend Health co-founder and CEO Bryce Williams, now managing director of exchange solutions for Towers Watson, which acquired his company in 2012. "Our average rate increase across all Medicare plans has been only 2.8 percent per year over the last three years. Since many of our client companies are cost-of-living-adjusting their retiree contribution amount by 3 percent per year, in essence the deal is getting better for retirees each year."
IBM, Time Warner and more than 300 other major corporations have gladly outsourced their retiree plan administration to Towers Watson's OneExchange. Williams says longtime employees are rewarded with better coverage for their money.
"We have 97 percent retiree satisfaction with this program," he says. ...
Private Medicare exchanges serve only seniors and the pre-65, Medicare-eligible disabled. They're run by private brokers such as Aon Hewitt, Mercer and Towers Watson, which assume the administrative duties in exchange for the broker's commission that is built into the price of each insurance plan. In Medicare, there is no competition on price or plan features. ...
By switching to an exchange, companies are better able to budget for their retiree plans without the specter of year-to-year cost increases hanging over the boardroom. That can mean less anxiety for retirees.
Maldonado says the private Medicare exchange advisers, such as those on her Aon Hewitt team, lend a personal touch that's often missing with group plans and Medicare customer support.
"We build relationships with our retirees, and a lot of them call us every year," she says. "You have someone you can talk to who will ask questions and help you think about something you've maybe never had to think about, such as what you really want in a plan. That is unique."
Dear Mr. Meggyesy,
This is in response to your email to Barbara Brickmeier regarding reimbursement for your Medicare Part B premium. I apologize for the delay in my response.
The Medicare Part B premium you pay is an expense eligible for reimbursement from your Health Reimbursement Arrangement (HRA). As you know, Medicare Part B premiums are also reimbursable expenses under the IBM Special Health Assistance Provision (SHAP). If you choose to be reimbursed for your Medicare Part B premium through your HRA, if there is any excess premium amount remaining that is not reimbursed from your HRA, you can submit the remaining amount under the SHAP. The question you reference on the claim form asks "Are you receiving coverage for Medicare Part B premiums from any other source?" If so, you must provide the amount. For the HRA, you would select "Other" as the source. This question is specific to Medicare Part B premiums, and not for medical expenses which are not considered premiums.
The intent of the SHAP is to provide eligible retirees with assistance towards the premiums they pay for Medicare Part B coverage. You are not eligible to submit your Medicare Part B premium expense to the SHAP for the purpose of being reimbursed twice for the same expense for which you claim reimbursement from your HRA. In addition, please note that before submitting an expense for reimbursement from the HRA, you are required to certify on the HRA claim form that the expense has not been reimbursed from any other source, and will not be submitted for future reimbursement.
If you wish to use the SHAP for reimbursement of your Medicare Part B premiums, you must submit your premium expense to SHAP first, then you can claim the amount of unreimbursed Medicare Part B premium from your HRA.
With respect to your concern regarding use of the word "coverage" related to Medicare Part B premiums on the SHAP claim form, based on your input, we will consider clarifying this language on the claim form.
I trust this answers your question. Thank you for writing
Kyu Rhee, MD, MPP. Vice President Integrated Health Services
The website is horrible. The claims page doesn't show the patient names or any reason why the claim was denied. If doesn't even show any way to see what the exact claim data is. If you use the "export to excel" button you do get the deny reason.
There was a 2013 PBS NewsHour story that ran twice first in November on the weekend edition and again December 23 on the weekday show that addressed the great variability in the cost of generic drugs. The website GoodRx.com has an extensive drug costs data base that is searchable by zip code. It is truly amazing what the range of prices are for the same drug.
In 2008, the Jessie Trice Community Health Center in Miami invested $120,000 to start Prestige Health Choice, a for-profit Medicaid health plan that the state pays a flat monthly fee per enrollee to provide care. Fourteen other community health centers also participated.
Last year, Jessie Trice got a $759,000 payout after Florida Blue, the state's largest insurer, bought a minority ownership stake. Jessie Trice used part of that windfall to open a health center in suburban Miami and to convert an existing facility into a dental clinic.
As Florida shifts nearly all of its 3 million Medicaid recipients into private managed care plans this year, Prestige expects to triple its enrollment to more than 300,000 members. That could lead to more profits for Jessie Trice and the other health centers. Through Prestige, they are also less reliant on policies set by other insurers, and gain more control over how Medicaid funds are Medicaid funds are spent. ...
A number of community health centers have already formed nonprofit Medicaid health plans, including ones in California, Rhode Island and New York. Prestige is one of a handful of for-profit plans created by the centers, but more are looking at that business model as a result of two overlapping trends: the increasing number of people eligible for Medicaid under the federal health law and state decisions to shift enrollees into managed care plans.
In September, IBM Corp. and Time Warner Inc. announced that they are moving retired workers to a private health insurance exchange, giving them money to buy their own coverage. Starting Jan. 1, 2014, the companies’ Medicare-eligible retirees will purchase health insurance through Extend Health, a private exchange owned by consulting firm Towers Watson & Co. The Utah-based company has signed up about 300 employers, including Caterpillar Inc. and DuPont. ...
“Until now most retirees only had to worry about a couple of health care options,” said John Grosso, head of Aon Hewitt’s retiree health task force. “Now employers are explaining that there are a wide variety of options in a post-reform environment that could be a better fit. There are many more choices in plans, greater competition and federal subsidies to offset costs. Most employers are looking to preserve the value of their benefits. It’s a change, but it doesn’t have to be for the worst.” ...
While retiree health benefits for new hires are becoming a thing of the past, longtime retirees are not likely to see any changes to their coverage, Wojcik said.
“That’s the last group of people employers want to make changes for,” he said. “The longer you’ve been retired and the longer you’ve been on the plan, the less likely your former employer will change your coverage. It’s much easier for an employer to eliminate retiree health benefits for new hires. For those close to retirement it’s a little harder, but easier than changing it for retired employees.”
But the doctor Johnson credits with the lifesaving heart surgery seems to disagree, according to progressive news blog Uppity Wisconsin. ...
In numerous speeches and op-eds, Johnson claimed the work of Dr. John Foker would not have been possible under the Affordable Care Act and its stifling regulations. If his family had lacked the freedom to access doctors qualified to reconstruct his daughter’s heart, Johnson argued, his baby wouldn’t have survived. ...
According to Uppity, however, Foker is not only “generally supportive” of the Affordable Care Act, but contends that President Barack Obama’s landmark health care law does not go far enough.
"Unfortunately, it was written by the insurance and drug companies, so not great,” Foker told Uppity via email. “Most of the many flaws of American medical care are still present."
Foker argued that Republican lawmakers should relish the ACA’s “private-solution” approach to health care reform as he criticized the GOP for obstructionist political tactics. “They’re never happy,” Foker concluded
Contrary to Johnson’s fears, Foker was, and remains, a professor at the University of Minnesota’s medical school -- a public institution -- and performed the lifesaving surgery on Johnson’s daughter at the government-funded university’s medical center.
Moreover, the innovative procedure that Johnson credits for saving his daughter’s life was not developed as the “wonderful result” of health law “freedom,” but was first performed in the more socialized health systems of Brazil and France, as pointed out by Think Progress' Igor Volsky.
Assuming the pilot was willing to take bids for her services, would you have any idea of how to evaluate the worth of that particular pilot compared to anyone else who might be at the controls? How long would it delay the flight while you and other passengers haggled over that fee?
And what of the risks in having a pilot focused on whether she negotiated good deals with her passengers, rather than getting everyone safely to their destination?
While haggling with pilots is absurd, the idea that individual Americans should negotiate the prices each pays for health care is getting a lot of serious discussion right now. The reason is the Affordable Care Act, a.k.a. Obamacare, which critics are desperate to find some way to stop.
For weeks, politicians and writers in the opinion pages of The Wall Street Journal and other critical outlets have declared Obamacare a failure with plenty of victims. Those are silly assertions because the law only took effect this week, on the first day of 2014.
These critics are all outrage with no detailed alternatives, except the mantra that competition will magically bring down health-care costs. The libertarians at the Cato Institute argue "we need market competition more than ever. Not the mealymouthed substitutes bandied about by most health policy wonks. We need something that none of us has ever seen - real competition in a free health-care market."
No. We need something easier, simpler, and already proven to cut costs. ...
More than four decades ago the Supreme Court defined a fair market as the "price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts." How many of us have "reasonable knowledge" of medical procedures, costs, or even the difference between a neurologist and a nephrologist?
Is an accident victim writhing in pain, life's blood flowing out of his body, free of compulsion?
And how many of us know the assortment of facts needed to price an MRI, an angiogram or just a dozen stitches? Or, for that matter, whether any of those procedures is the best alternative, or even necessary? ...
We don't have a free market for health-care services. If we did, we would see a narrow range of prices for the same service. After all, a Ford F-150 pickup with the same options costs about the same in Washington, West Virginia, or Wyoming. Not so hospital and medical costs, a fact brought home in the 2012 Pricing Report of the International Federation of Health Plans, a trade association for health insurance companies. ...
The total cost for an appendectomy ranges from $8,156 for a fourth of these procedures to more than $29,426 for the most expensive 5 percent. The average cost is $13,851.
Economists learn before they get their undergraduate degrees that such huge variations are signs of inefficient markets or even faux markets. Such wide price variations may even indicate collusion among some providers to jack up prices, which is generally illegal.
But even if we ignore these huge price variations, the trade industry report illustrates another problem: American health-care costs are completely out of line with the rest of the modern world.
In France the average daily cost of a hospital stay is $853; in the U.S., it's $4,287.
An MRI costs on average $335 in Britain and $363 in France, but $1,121 in the U.S.
Routine and normal childbirth costs, on average: $2,641 in Britain and $3,541 in France but in the U.S. averages $9,775. Caesarean section delivery runs $4,435 in Britain, $6,441 in France; $15,041 in the U.S.
This pattern holds for all 21 procedures examined in the report.
Excessive health-care costs drain both the public purse and private purses, make manufacturing uncompetitive and force employers to divert attention from running their firms to dealing with health insurers. ...
Canada, Germany, and France each spend about 11.5 percent of their economy on health care, compared to 17.6 percent in the U.S.
We could have eliminated the income tax in 2010 had we adopted the Canadian, German, or French health-care systems.
Look at your pay stub and how much goes to federal income taxes, then think about the unnecessary economic pain American health care causes you.
One important distinction between other modern countries and the United States is that they all provide universal health care, while 48 million Americans had no health insurance in 2012 and another 30 million had coverage for only part of the year. Millions have coverage riddled with loopholes and exceptions, not paying for such vital services as an ambulance, even when the patient is unconscious. And all private health insurers try to avoid paying claims in various ways, from requiring onerous paperwork to denying a procedure was necessary.
On top of all this are restraints on trade in American medicine, like limiting the supply of doctors and nurses. The American Medical Association has acknowledged that it worked to hold down the number of physicians to push up income for doctors. Under state licensing rules, many of even the best-trained foreign doctors cannot practice here. ...
Congress expressly forbids Medicare from negotiating wholesale price discounts for the Medicare Part D program initiated by President George W. Bush, so Americans pay far more for drugs available in other countries, which negotiate huge discounts. ...
We could experiment with the kind of price competition that the Cato Institute proposes. It might even work, though I doubt it. But why? We already know that universal coverage with a single payer is much cheaper than what America spends now. And we know that the quality of U.S. health care is far from the best - 37th in the world, according to the World Health Organization, which ranks France No. 1.
When opponents of the Affordable Care Act argue for patients negotiating health-care prices they make as much sense as proposing that passengers haggle over pay with an airline pilot.
The G.O.P.’s case hinges on the employer mandate, which requires companies with fifty or more full-time employees to provide health insurance. It also regulates the kind of insurance that companies can offer: insurance has to cover at least sixty per cent of costs, and premiums can’t be more than 9.5 per cent of employees’ income. Companies that don’t offer insurance will pay a penalty. Republicans argue that this will hurt companies’ profits, forcing them to stop hiring and to cut workers’ hours, in order to stay below the fifty-employee threshold.
The story is guaranteed to feed the fears of small-business owners. But the overwhelming majority of American businesses—ninety-six per cent—have fewer than fifty employees. The employer mandate doesn’t touch them. And more than ninety per cent of the companies above that threshold already offer health insurance. Only three per cent are in the zone (between forty and seventy-five employees) where the threshold will be an issue. Even if these firms get more cautious about hiring—and there’s little evidence that they will—the impact on the economy would be small.
Meanwhile, the likely benefits of Obamacare for small businesses are enormous. To begin with, it’ll make it easier for people to start their own companies—which has always been a risky proposition in the U.S., because you couldn’t be sure of finding affordable health insurance. As John Arensmeyer, who heads the advocacy group Small Business Majority, and is himself a former small-business owner, told me, “In the U.S., we pride ourselves on our entrepreneurial spirit, but we’ve had this bizarre disincentive in the system that’s kept people from starting new businesses.” Purely for the sake of health insurance, people stay in jobs they aren’t suited to—a phenomenon that economists call “job lock.” “With the new law, job lock goes away,” Arensmeyer said. “Anyone who wants to start a business can do so independent of the health-care costs.” Studies show that people who are freed from job lock (for instance, when they start qualifying for Medicare) are more likely to undertake something entrepreneurial, and one recent study projects that Obamacare could enable 1.5 million people to become self-employed.
Even more important, Obamacare will help small businesses with health-care costs, which have long been a source of anxiety. The fact that most Americans get their insurance through work is a historical accident: during the Second World War, wages were frozen, so companies began offering health insurance instead. After the war, attempts to create universal heath care were stymied by conservatives and doctors, and Congress gave corporations tax incentives to keep providing insurance. The system has worked well enough for big employers, since large workforces make possible the pooling of risk that any healthy insurance market requires. But small businesses often face so-called “experience rating”: a business with a lot of women or older workers faces high premiums, and even a single employee who runs up medical costs can be a disaster. A business that Arensmeyer represents recently saw premiums skyrocket because one employee has a child with diabetes. Insurance costs small companies as much as eighteen per cent more than it does large companies; worse, it’s also a crapshoot. Arensmeyer said, “Companies live in fear that if one or two employees get sick their whole cost structure will radically change.” No wonder that fewer than half the companies with under fifty employees insure their employees, and that half of uninsured workers work for small businesses or are self-employed. In fact, a full quarter of small-business owners are uninsured, too.
Obamacare changes all this. It provides tax credits to smaller businesses that want to insure their employees. And it requires “community rating” for small businesses, just as it does for individuals, sharply restricting insurers’ ability to charge a company more because it has employees with higher health costs. And small-business exchanges will in effect allow companies to pool their risks to get better rates. “You’re really taking the benefits that big companies enjoy, and letting small businesses tap into that,” Arensmeyer said. This may lower costs, and it will insure that small businesses can hire the best person for a job rather than worry about health issues.
Yesterday I posted about a Fort Worth Star Telegram article that leads with the tale of Whitney Johnson, a 26-year-old new mother who suffers from multiple sclerosis (MS). Her insurer just cancelled her policy, and according to Johnson, new insurance would cost her over $1,000 a month.
The good news is that the thing that makes it a horror story isn't that Whitney Johnson lost her insurance and can't afford new coverage, because it turns out Johnson actually was able to purchase coverage for $350 a month—not the $1,000 she initially had told the newspaper.
What makes it a horror story is that when the Star Telegram learned that Johnson actually was able to get coverage, they did nothing to change their original report, even though it was at best incomplete. As Maggie Mahar, who wrote the post linked above, puts it:
This major daily’s nearly 200,000 daily readers saw the story that would lead them to believe that Americans who received cancellation notices were “left in limbo.” Most, it concluded, would wind up uninsured – or paying more than they could afford. As I’ve pointed out many times – and as more and more coverage is revealing – the opposite is true.
Mahar researched the stories of three other "Obamacare losers" included in the Star Telegram's report; it turns out Johnson's story was not alone in being incomplete. In fact, of the four people in the report, three were tea party members. That alone doesn't prove anything, but when you've got a bunch of tea partiers who just so happen to make the perfect Obamacare victims, it can't hurt to be skeptical. ...
In the end, as frustrating as it is to see Obamacare horror stories that don't add up, it's actually good news that they usually aren't what they seem to be, not just for the "victims" but also for the success of Obamacare. As long as Obamacare works, that's not something sloppy reporting can undo.
The bubbles with numbers greater than one mean the United States is losing more life to a particular condition than the average member country in the Organization for Economic Cooperation and Development. A bubble with a number less than one means Americans are losing fewer years of life, although you don't see many of those, because, in every category measured in 2008, the United States did worse than than average.
One thing I haven’t seen mentioned much, however, is that another aspect of recent developments — the rapid rise in Medicaid enrollment, despite Republican efforts to block it — adds to the prospect of continuing good news on health costs.
Medicaid gets a bad rap. It’s a poor people’s program, and it’s widely assumed that this means poor care. In fact, there’s not much evidence that this is true, and claims that Medicaid patients can’t find care are greatly exaggerated. Beyond that, however, Medicaid is the piece of the US health care system (aside from the VA) that does the best job of controlling costs. It does this by being able to say no. For example, it’s able (in a way Medicare so far can’t) to say that it won’t pay for me-too drugs that are far more expensive than equally or almost equally good alternatives. This ability to say no, combined with its size, means that Medicaid covers people far more cheaply than private insurance, and probably than Medicare.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
The stock market ended 2013 at an all-time high -- giving stockholders their biggest annual gain in almost two decades. Most Americans didn't share in those gains, however, because most people haven't been able to save enough to invest in the stock market. More than two-thirds of Americans live from paycheck to paycheck.
Even if you include the value of IRAs, most shares of stock are owned by the very wealthy. The richest 1 percent of Americans owns 35 percent of the value of American-owned shares. The richest 10 percent owns over 80 percent. So in the bull market of 2013, America's rich hit the jackpot. ...
Where did those profits come from? Here's where redistribution comes in. American corporations didn't make most of their money from increased sales (although their foreign sales did increase). They made their big bucks mostly by reducing their costs -- especially their biggest single cost: wages.
They push wages down because most workers no longer have any bargaining power when it comes to determining pay. The continuing high rate of unemployment -- including a record number of long-term jobless, and a large number who have given up looking for work altogether -- has allowed employers to set the terms. ...
If all this weren't enough, the tax system is rigged in favor of the owners of wealth, and against people whose income comes from wages. Wealth is taxed at a lower rate than labor.
Capital gains, dividends and debt all get favorable treatment in the tax code -- which is why Mitt Romney, Warren Buffet and other billionaires and multimillionaires continue to pay around 12 percent of their income in taxes each year, while most of the rest of us pay at least twice that rate.
Among the biggest winners are top executives and Wall Street traders whose year-end bonuses are tied to the stock market, and hedge-fund and private-equity managers whose special "carried interest" tax loophole allows their income to be treated as capital gains. The wild bull market of 2013 has given them all fabulous after-tax windfalls.
America has been redistributing upward for some time -- after all, "trickle-down" economics turned out to be trickle up -- but we outdid ourselves in 2013. At a time of record inequality and decreasing mobility, America conducted a Great Redistribution upward.
“You know,” declared Senator Bernard Sanders, the Vermont independent, who caucuses with Democrats, “we have a strong ally on our side in this issue — and that is the pope.”
That Mr. Sanders, who is Jewish, would invoke the pope to Mr. Reid, a Mormon, delighted Roman Catholics in the room. (“Bernie! You’re quoting my pope; this is good!” Senator Richard J. Durbin of Illinois recalled thinking.) Beyond interfaith banter, the comment underscored a larger truth: From 4,500 miles away at the Vatican, Pope Francis, who has captivated the world with a message of economic justice and tolerance, has become a presence in Washington’s policy debate.
As lawmakers return to the capital this week and mark the 50th anniversary of President Lyndon B. Johnson’s declaration of a “war on poverty,” Democrats — including those Catholics whose politics have put them at odds with a conservative church hierarchy — are seizing on Francis’ words as a rare opportunity to use the pope’s moral force to advance issues like extending unemployment benefits and raising the minimum wage. ...
But though the pope has caused unease among Republicans as they reconcile his critique of capitalism and “trickle-down theories” with their free-market views, some Catholic Republicans see opportunity in his words.
Representative Paul D. Ryan of Wisconsin, a potential 2016 presidential candidate who speaks of poverty in the context of his faith, has praised Francis for “breathing new life into the fight against poverty,” and is working on a Republican plan to address the issue. Newt Gingrich, the former House speaker and now a co-host of CNN’s “Crossfire,” said he would talk more about poverty on the program.
“I think every Republican should embrace the pope’s core critique that you do not want to live on a planet with billionaires and people who do not have any food,” Mr. Gingrich said. “I think the pope may, in fact, be starting a conversation at the exact moment the Republican Party itself needs to have that conversation.” ...
“What Francis is saying goes to the soul of the party,” said John Feehery, a Republican strategist, who is Catholic. “What does the party actually believe in? What is its purpose? Is it just to have unbridled capitalism without any moral core?”
Mr. Ryan, the chairman of the House Budget Committee whose 2012 proposal for cuts in social programs drew criticism from Catholic bishops, has tried to answer that question. In a speech titled “Free Enterprise, Faith and the Common Good,” he argued that free enterprise and the Catholic principle of “subsidiarity” — handling matters through the least centralized authority — can address poverty better than big government.
As to Francis’ “trickle down” comment, Mr. Ryan told The Milwaukee Journal Sentinel last month: “The guy is from Argentina, they haven’t had real capitalism in Argentina.”
The filings show that the network of politically active nonprofit groups backed by the Kochs and fellow donors in the 2012 elections financially outpaced other independent groups on the right and, on its own, matched the long-established national coalition of labor unions that serves as one of the biggest sources of support for Democrats.
The resources and the breadth of the organization make it singular in American politics: an operation conducted outside the campaign finance system, employing an array of groups aimed at stopping what its financiers view as government overreach. Members of the coalition target different constituencies but together have mounted attacks on the new health-care law, federal spending and environmental regulations. ...
Its funders remain largely unknown; the coalition was carefully constructed with extensive legal barriers to shield its donors. ...
Lloyd Hitoshi Mayer, a University of Notre Dame Law School professor who studies the tax issues of politically active nonprofits, said he has never seen a network with a similar design in the tax-exempt world.
“It is a very sophisticated and complicated structure,” said Mayer, who examined some of the groups’ tax filings. “It’s designed to make it opaque as to where the money is coming from and where the money is going. No layperson thought this up. It would only be worth it if you were spending the kind of dollars the Koch brothers are, because this was not cheap.”
Tracing the flow of the money is particularly challenging because many of the advocacy groups swapped funds back and forth. The tactic not only provides multiple layers of protection for the original donors but also allows the groups to claim they are spending the money on “social welfare” activities to qualify for 501(c)(4) tax-exempt status.
Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.
Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.
The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”
What made his comments so stunning is that he built Bloomberg Data Services on the notion that data are what matter most to investors. The terminals are found on nearly 400,000 trading desks around the world, at a cost of $1,500 a month. (Do the math — that’s over half a billion dollars a month.) Perhaps the fact that Wall Street was the source of his vast wealth biased him. But the key principle of the business that made the mayor a billionaire is that fund managers, economists, researchers and traders should ignore the squishy narrative and, instead, focus on facts. Yet he ignored his own principles to repeat statements he should have known were false.
And what about those facts? To be clear, no single issue was the cause. Our economy is a complex and intricate system. What caused the crisis? Look:
Bloomberg was partially correct: Congress did radically deregulate the financial sector, doing away with many of the protections that had worked for decades. Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses.
The previous Big Lie — the discredited belief that free markets require no adult supervision — is the reason people have created a new false narrative.
The comforting answer — that no fraud was committed — is possible, but implausible. “While officials of the Department of Justice have been more circumspect in describing the roots of the financial crisis than have the various commissions of inquiry and other government agencies,” he wrote, “I have seen nothing to indicate their disagreement with the widespread conclusion that fraud at every level permeated the bubble in mortgage-backed securities.” ...
Until relatively recently, it was rare for corporations to face criminal charges without the simultaneous prosecution of managers or executives. That changed over the past three decades, as prosecutors shifted their focus away from individuals and toward corporations, as if fault resides not in executives, but in corporate culture.
That shift, in Judge Rakoff’s view, largely explains the lack of banker prosecutions from the financial crisis. It also explains the JPMorgan Chase settlement in the Madoff case. A likely consequence of this approach is more wrongdoing, since, as Judge Rakoff argues, imposing compliance measures that are often just window-dressing is far less potent than “the future deterrent value of successfully prosecuting individuals.” ...
As the myriad cases against JPMorgan Chase and other banks demonstrate, misconduct was not limited to the mortgage bubble. But unless prosecutorial weaknesses are remedied, justice will continue to prove elusive.
According to the station's investigation, Kingston and his staff have expensed $4,182 worth of "meals for business purposes," and recorded $4,289.33 in free meals from third-party interest groups, including the Congressional Institute and the Georgia Bankers Association.
As a member of the House Appropriations Committee, Kingston has traveled to four continents, racking up $24,313 in per diem allowances. While the allowances were allotted for more than just lunch money, midday meals were included. ...
Beyond taxpayer dollars, Kingston has enjoyed many free meals on the campaign trail. WSAV 3 reported $145,391.26 in expensed meals and catering for campaign events, $26,066.45 of which was charged at the Republican Club of Capitol Hill, an exclusive, members only venue.
"Isn't this a free lunch?" a WSAV 3 reporter asked Kingston.
"This is what we need in America," Kingston responded. "We need workfare over welfare. I learned a lot when I was 14 and 15 years old doing chores inside and outside the household and as a result i grew up with a good work ethic. ... It's hard in today's society to have a discussion where you want to challenge the status quo because of the 'I gotcha' politics.
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