Friday, September 14, 2012

Mandatory Health Care?

September 2012 - I'm sure many of you have been patiently waiting for me to document my thoughts on the Supreme Court's ruling around mandatory health care.  Those few of you who know me might find it much to your surprise that I'm in favor of having the government mandate we all have health insurance, though I do have some concerns that I'll note at the end.  My mind thinks best with examples so I'd like to toss two out for fodder.

The first example is an insured adult who goes into the hospital for emergency care.  This person has been paying into the system and has unfortunately come to the point where they need to make a large withdrawal.  After the care is all said and done, while they will most likely be responsible for some of the bill, the lion's share will be picked up by their insurance company and the community of folks who have been paying into the plan - including themselves.  This is how things are supposed to work.  They had an unexpected emergency and insurance has helped them out.

The second example is a person who has the same need for emergency care, but no insurance.  Because we're all moral people and here to help all human kind, this person will get the same level of care as the person in our first example.  The difference is that this second person will be unable to pay the bill as they don't have insurance.  If the doctors decide to go after payment, this person would be in no position to pay $10's of thousands of dollars and would have to file bankruptcy - relieving them of all debts.  The doctors, who don't work for free, would have to increase rates and ultimately increase the costs for those folks who have insurance.

What the government is trying to say is, if needed, we will get the care we need - whether we can pay for it or not.  And to ensure the costs are fairly distributed across all parties, let's make sure we're all contributing.  To me, this is fair.

Here is the one concern I have.  There are going to be people who can't afford insurance.  In these cases the government has the right to temporally help them out.  I think this is the right thing to do.  My concern however is that we won't provide the right incentives for this person or family to find a path towards self reliance.  My concern is that we'll be too compromising and end up with a large portion of people abusing government assistance.

Now, I follow a personal philosophy to not complain about problems unless I have a solution.  I don't have a solution to better provide incentives, and so by my own regard, I don't have a right to complain.  However, my hope is that the folks coming up with the health care solutions have given "incentives" some thought and can help define a road to self sufficiency for folks needing assistance.

Thursday, December 31, 2009

Should all Americans have universal health care?

January 2010 - My new health insurance kicks in today. It looks much the same as last year's, which looked similar to the year before that. Other than price increases, of which I don't have the patience to calculate, my health care has had negligible change in the past 10 years.

This year I'll go to the same doctor, dentist, and pharmacy. Unless I slip and fall on the ice while shoveling, I'll probably use similar medical services as last year - a couple of checkups and some high blood pressure pills.

The question I've been asking lately is, should Americans have universal health care? This sounds selfish, but I'm comfortable with my coverage. Why should I support something that could alter my, and my family's, contentment with what we have? There is a good possibility universal coverage (or even the pending healthcare bill that won't include the public option) will cost me more.

While I haven't done the numbers, nor talked to someone who has, it's my assumption that one argument supporting universal coverage is based on economics. Huh? Next time you go to the doctor, look at your statement. On mine, it shows what the procedure costs, and then what my insurance paid for it. What your insurance pays is significantly less than retail. This is because the insurance providers work out "deals" with the doctors. Kind of like how my Apple Valley contemporaries and I get a discount at the local golf course. We're part of a group (in this case, we live in the same city) and one of the group's amenities is a discount on golf. Such a privilege.

My guess is that if you don't have insurance and need a medical procedure, you end up being charged retail. And my second guess is, if you don't have insurance, there is a good chance you can't afford retail. If you could, you would have purchased insurance. Who pays your bill when you can't? Either the tax payers, or more likely, those of us who have insurance.

The economics argument then has to be based on the assumption (and I consider this an assumption) that if we were all forced into "groups," the groups will collectively negotiate discounts and get us less expensive service. I'm not sure if this passes economic mustered, but I can't think of another reason why the proponents of universal care argue that covering everyone will lower costs.

But let's say that economics don't matter. Let's argue, for a moment, that healthcare is a obligation of the state. If you know me, you might be surprised that I feel everyone has the right to medical care when in need. I say surprised because I typically lean towards putting responsibility, including the responsibility to get yourself health insurance, on the person rather than the state.

As a youngster I went through three, very costly, medical procedures (not life threatening). Not just doctor appointments, but surgeries with lengthy hospital stays. Fortunately my parents were insured and were able to afford this. But what if they weren't? It is here where I'm of the belief that kids, and adults who can't afford it, should be treated. But how do we pay for this?

I don't know how to pay for healthcare. I don't know if working for a big company should allow you the right to buy affordable insurance. If I ever start my own company (or become a moderately successful writer), I don't know if I should be able to avoid coverage. The complexities and variables are too arcane for me to understand.

So where do I stand? As for the economic argument that universal coverage will lower overall costs, I'm not buying it. As for insurance being mandatory, I'm not sure if the state should mandate you purchase full medical insurance like I have. It feels too invasive. However, I would listen to an argument for having the state mandate "major" medical insurance. By "major" I mean coverage for things like heart attacks, cancer, life threatening accidents, etc,.

But if the state mandates this, I mandate that we can buy coverage outside of state lines. In Minnesota, you can only buy insurance from a Minnesota insurance company. This is nonsense. Someone should be able to buy medical insurance from a company in Wyoming, who is offering it cheaper.

Monday, April 20, 2009

Should you patent software?

April 2009 - I’m of the belief that patents don't matter in software. Why? First of all, a patent by definition is exclusive rights to an idea or invention if, and only if, you fully explain how the idea or invention works and publicly disclose it. In software there are a million ways to solve the same problem. Why disclose something to the public and allow them to see how your idea works when they could simply take that idea and implement it in a different way?

Yes, the patent protects the idea or invention - rather than the specific implementation - however, try litigating something that looks and smells different, yet solves the same problem. That is, I think you'd have a hard time litigating parallel products, one written in Java and the other in .NET. You'd only win after five years of court and millions of dollars in court fees. And by that time, the idea or invention would be outdated. Which brings me to my second point.

Software is so dynamic, most technologies become extinct before their patent (usually 20 years) runs out. Gopher, a textual interface to the Web before the Web, started in 1991. What if it had a patent (maybe it did)? You mean to say I can't create a text based internet protocol that works well on green screens until 2011? Damn. I guess I'll have to wait until the patent runs out before I can develop a similar technology. Or, just use today's Web 2.0. Hum?

A better way to protect software is to copyright. A copyright protects you from users coping and pasting your software. You have it for 100 years (or something like that). Or, even better yet, if you have a sensitive software package, copyright it and then don't disclose it (just put the funny © symbol on it). Do what Coke does and lock the secret formula up in a vault.

Monday, February 09, 2009

What are the three phases of a new project?

February 2009 - I'm of the belief there are three phases of a new project - Vanity, Humbleness, and Crisis. Let me explain.

A project starts in the Vanity phase. During Vanity, everyone is overly confident. It's believed the project will be a massive success and will solve all problems that have caused suffering and harm in the past. A common management saying is to "Break down the barriers - we're going to do things different." "Different" is what the project team infers as "better."

Verbose project team members dominate during the Vanity phase. Everyone has a voice and those that enjoy hearing themselves, take control and provide, what they call, "leadership." Myriad documents are produced laying out how the project will work and the problems it will solve. A common output is a Return on Investment (ROI). The ROI is what management will use to secure funding from upper management.

Often during the Vanity phase, new amenities like "free food" or "free pop" are offered as tokens. Off-sites are common. They make the layperson feel important. Moreover, closeness is important during this phase. It's thought that cramming more people into meetings is a benefit. Making people sit closer is seen as a way of promoting knowledge sharing.

The Vanity phase ends when the project requirements start to be realized. You know you're into the Humbleness phase when hard questions start being asked. For example, let's say you're developing a new pop can which provides a tighter seal than the current flip tops. The idea is to have end users open the can with their Boy Scout pocket knife. Sounds great until a layperson asks management how many people carry around pocket knives? At this point, everyone knows they are in the Humbleness phase. Off-sites will diminish and the thought of doing everything different (remember "different" means "better" for new projects) becomes less vogue. In fact, it's during this phase that the term "leverage" comes into play. Management might say "we need to leverage our existing resources."

Humbleness exists until upper management asks for a finite time-line of when the project will be finished. Crisis is next. It's at Crisis, people are finally held responsible. During Vanity there is absolutely no accountability. If a verbose idiot said something erroneous, they were simply brain storming. Back to the new pop can design; "I didn't really mean that a user needed a pocket knife to open the can. I was just tossing out ideas."

Another indicator that the Crisis phase is beginning is, consultants, and/or overly verbose individuals, start leaving the project or being asked to shut up. Crisis is the fun part. You get to see the big important people squirm in their seats. The verbose people are the best. If they are still on the project, their jubilant behavior is whittled to slivers. They sit in their cube, knowing they are overwhelmed with work, and stare into their computer hoping that someone would put an end to the misery.

The Crisis phase ends in one of two ways. The project is cancel by upper management or the project completes and a mediocre product is released to customers. If the product is a modest success, upper management funds phase two, but requests a new set of management. The new management is typically aware of the near failure and avoids and changes that might further damage the product and or their career. They move the project into maintenance mode and hire below average personal to fix bugs and make minor adjustments.

Thursday, January 01, 2009

Should we have bailed out the U.S. car companies?

January 2009 - My stance on the government bailing out companies is simple. If the company is failing because their products or business practices are inferior, let creative destruction destroy them.

However, if the company is at an unfair disadvantage due to government policy, then it's the government's job to ensure said company is compensated. Here is an example to help explain.

When I was a young man my family would go to the local Ben Franklin's and gawk at toys. They seemly had everything. Guns that looked like real guns (I was a big fan of "Cap Guns"). Dangerous, plastic knives. The ever-popular Green Machine Big Wheel. We never got half of the stuff we wanted, but it was fun to look.

As I got older, the annual slobber fest moved to Pamida. Pamida - Your Home Town Store - was like Ben Frankin's on steroids. The building was huge! Their toy isle was double that of a kid's imagination. After Pamida, we went to Shopko because Shopko was better than Pamida.

Albert Lea - the large town near my small town - no longer has a Ben Franklin's or Pamida. As a side note, I see they are both still in business which was a pleasant surprise while researching this piece. Shopko is still around, but has competition from Wal-Mart and Target.

Ben Frankin's and Pamida were run out of town because Shopko, Target and Wal-Mart offered more for less. That is, they offered more value. The people are better off now than they were before.

If the local government would have "bailed out" Ben Franklin or Pamida, Wal-Mart or Target would have stayed away. The poor kids would have been left with an isle or two of antiquated toys instead of dragging their parents across entire departments at the likes of Target. Wait, now that I'm a parent, maybe that wouldn't be half bad....

I think you probably get my point. Creative destruction - letting Ben Franklin and Pamida fail - allowed new, fresh, better companies to move in. And someday Shopko, Target and Wal-Mart will be challenged by newer, fresher, better competitors. With, they already are.

Back to the car companies. I bought a Honda because I feel Honda's quality and value are better than Ford's. It's my opinion, that U.S. car companies have failed to keep up with their International competitors. Honda engineers are producing a better product, and so it's my feeling that we should let the U.S. car companies go into bankruptcy. Moreover, instead of using the money to bailout corporations, government should give it to the employees to help retrain the millions of people affected.

This is easy for me to say as first, I don't work for the car companies. I'm sure if I was an engineer for Ford, I'd have different feelings. Second, I don't have enough information on the fairness of the environment. That is, is a Hyundai cheaper because the South Korean government pays Hyundai's medical bills? If so, then I'd be more understanding of a company bailout, rather than an employee bailout.

My gut feeling is that we have a combination of environment unfairness and inferior products. That is, International companies may be getting some added benefits from their government. And U.S. cars are probably slightly inferior, as a whole, to Honda, Toyota and Hyundai. Hopefully the government brain-trusts have looked at all the factors and bailed out the car companies based on unfairness. If not, then we've just chocked off creative destruction and we'll all be worse off for it.

Thursday, November 06, 2008

How am I affected by the tax change to my ESPP?

November 2008: A few months back a respected colleague of mine asked me to comment on the pending, now implemented, tax change to our Employee Stock Purchase Plan (ESPP). Consider this my response.

First let's understand the change. My company offers, as a benefit they proclaim, company stock at a 15% discount of the stock price. For example, if the stock is trading at $25 on the market, we can buy it for $21.25 (i.e. .85 * 25). You have to pre-allocate dollars from your paycheck and can only purchase at the market close of each quarter.

When you sell the stock you must pay income on the 15% the company gave you as a benefit. Before the tax change; if the stock sold for $25, I bought at $21.25 via the ESPP, then turned around and sold it for $25, I'd have to pay income taxes on $3.75.

Moreover, if the stock sold for $25, I bought at $21.25 via the ESPP, then kept it, I wouldn't have to pay any income on the potential gain until I sold it. As a side note, this is what I've done and thus never claimed any income. I'm actually far in the hole and would be able to claim a loss of income if I sold the &%$#@ shares today, Yes, I'm a bit miffed over the ordeal.

This approach is simple and straightforward. However, we all know that it's in our best interest to make taxes complicated and thus, the company ESPP has changed its policy on when income is realized.

After the tax change, income is realized whether you sell or keep the stock. Using the $25 example again; if the stock sold for $25, I bought at $21.25 via the ESPP, then turned around and sold it for $25 OR kept it, I pay income tax on $3.75.

My thoughts on this are twofold. First of all, it complicates your tax situation. You could buy at $21.25, pay income on $3.75 in year 1, then sell for $20 in year 2 and deduct $3.75 in income losses and $1.25 in capital gain losses (if the government differentiates the two) from year 2's taxes. I hope my broker keeps track of this for me, as I won't be smart enough to.

My second though is, you're losing the time value of money. You're paying taxes on $3.75 today, however $3.75 in year one is only worth $3.68 in year 2 (assuming 2% inflation). That sucks.

Overall, the change complicates your taxes and screws you on the time value of money. One should only expect that from big companies and government.

Thursday, October 02, 2008

How did we get in this financial disaster?

October 2008 - A number of you have asked me to opine on the pending financial disaster we're going through. So far my only response has been to not worry about it and just make sure you continue buying stocks. Today as I sit here writing this blog entry, I continue to feel that most of us should buy stock and continue on with our lives. We're in it for the long hall and eventually things will turn around.

I thought it would be good this month to take a look and try to explain, in simple terms, how we got in this mess. I won't try to explain it all as to be honest, I don't really understand all of it. However, I think I understand the basics. Here it goes.

Let's say both Person A and Person B take out $100 mortgages, respectively, to finance a new home. The bank's appraisal agrees that both homes are worth $100 and gives Person A and Person B each a loan. At this point the bank basically owns both houses and expects monthly payments.

The first year goes well for both the home owners and bank. After one year, Person A and Person B have paid off $5 and only owe the bank $95. However, the second year the real-estate market takes a turn for the worse, and both homes drop in value by 10%. That is, now both homes are worth only $90 each. Yet, Person A and Person B owe $95.

This creates a situation where the bank needs $95 in payments for an asset that is worth $90. To complicate matters, both Person A and Person B lose their jobs and are unable to pay their mortgage. Now the bank owns the assets. They paid $100, got $5 in payments, but own houses worth $90 each. Economically, this is considered bad. Unfortunately it only gets worse.

When a bank sells a mortgage (NOTE: I'm using the term bank as an all inclusive term for the mortgage industry) they toss them together and divide up trillions of dollars in mortgages and sell the pieces as securities to investors. Who buys these securities? Those of us looking for a "low risk" investment (e.g. money market funds).

What we have now is banks trying to sell a security, banked by bad mortgages, which nobody knows who much the security is worth. In the example above, is the security worth $200? No, the asset dropped by 10%. Is it worth $180 then? Who knows, the real-estate market could be down another 10% next year and %10 the year after. This uncertainty causes banks to seize up. Investors won't buy securities as they don't know what they're worth. Moreover, banks don't want to lend to other banks as they don't know what the other banks hold in assets. And vice versa.

The mortgage disaster has created fear and thus created a liquidity crisis. People are fearful and money exchange has come to a halt. And when people get fearful and money stops exchanging, bad, bad things happen.