The Impact of ACA on Business Costs

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Presidential Thread locked, and as Certis asked, time to fray the crazy off into crazy baby threads. Starting at about here on the bit about employee benefits, jobs, health insurance costs, and all that good time.

NormanTheIntern wrote:
Bloo Driver wrote:

It shouldn't be surprising, perhaps, but that doesn't mean he could NOT have just said, "This hurts my profits, but our company is built on family and small business values, and I am happy to be part of helping my employees have coverage. Now, buy some of my feel-good, wonderfully morally superior pizza!"

I'm not sure you have enough information to definitively declare that a viable option.

No, but I suppose we don't have enough information to discount it, as it's been shown several times already the proposed cost increase mentioned by John Schnatter is, in fact, bunk. And it's not like I'm suggesting something companies haven't done and seen good returns on several times over. The option itself may not be as simple as I state, but the point was not that I need to teach the guy about business, just illustrate that there were in fact other potential options.

I think the maddening thing about this is that, as someone pointed out in the previous thread, if it was just labeled as a business decision like laying off workers who had been replaced by online systems, this would be a lamentable but run-of-the-mill thing. Instead, Schnatter is trying to pin this on Obama as if his hands were tied to do anything else, even though many companies give their employees benefits on a part time basis and seem to do well. It kills me because it's the same manner of mindset that got us to the bailouts - "I'm the CEO and thus have to make the tough/smart decisions, and thus am worth my salary... except when things go to crap and I can't do anything about it at all and it doesn't matter if I'm at the helm or not because I have only one/no choice. Please give me money."

I think that, in general, we placed too much emphasis on Papa John himself in the other thread. Yeah, he's kind of coming off as a dick. But the dilemma he describes is real.

You can ask "why not just raise prices" - a good question. Maybe that's the right answer for a lot of businesses, and maybe even the right decision for PJ's (once Papa shuts his mouth and puts rubber to the road). But at the end of the day, this is a government imposed cost that businesses must pay in some way.

Employers can partially work around it by reducing employee hours. They can stop taking new FTEs. They can lay people off. They can cut wages. They can pass costs on to customers. They can (and, ultimately, I expect most business with large numbers of unskilled workers probably will) do some combination of those things.

Instead, Schnatter is trying to pin this on Obama as if his hands were tied to do anything else, even though many companies give their employees benefits on a part time basis and seem to do well.

Many? I certainly do not think a large percentage of employers of unskilled labor like PJ's provide this. This represents a major expense that could put a company at a competitive disadvantage.

I have a question about the ACA. My father is claiming that the Medicare supplement he gets as part of his military pension (Tricare?) is going away as a result of the ACA. This was in the middle of a "get the government out of my Medicare" style rant so I have reason to doubt the veracity of this. Anyone heard of such a thing?

I'd be curious to see the ratio of health insurance availability pre-obamacare for those making 10.00 / under. Anecdotally, it's been made available but cost prohibitive.

There's absolutely nothing I've heard or seen that would support that, Demyx. Here are the changes regarding Medicare that took effect this year, and those which have not yet taken effect:

2012 (already in effect)

Medicare payments begin to new "accountable care organizations" will be established to experiment with various cost-reduction measures.

Reduction of Medicare reimbursements to hospitals with high rates of patient re-admissions that are deemed "preventable."

2013

Medicare payroll tax increased on couples earning more than $250,000 year and on individuals making more than $200,000. The tax rate on wages above those thresholds would rise to 2.35 percent from the current 1.45 percent.

Employers sponsoring insurance plans receiving Medicare Part D subsidy will no longer be able to deduct the subsidy from their taxes.

2020

"Doughnut hole" Medicare prescription drug benefit gap is ended. Seniors continue to pay the standard 25 percent of drug costs until they reach the threshold for Medicare catastrophic coverage, when their copayments drop to 5 percent.

(Note that the 2020 change is the last change in closing the "doughnut hole", not removal of coverage for it.)

Here's the summary that I took those from, which seems reasonably comprehensive.

And here's an FAQ from TRICARE regarding the ACA.

gore wrote:

You can ask "why not just raise prices" - a good question. Maybe that's the right answer for a lot of businesses, and maybe even the right decision for PJ's (once Papa shuts his mouth and puts rubber to the road). But at the end of the day, this is a government imposed cost that businesses must pay in some way.

That's certainly true - if a business chooses to change nothing, this just represents an increase in operating costs to them. I don't think anyone is arguing that point. I think it's just interesting to see where the a business' culpability for its choices ends and where too much government interference begins. So I am perfectly understood here - I am not a fan of ACA at all. But I'm also not a fan of people making choices of their own free will and trying to hide behind something else when the backlash comes. Or using people's jobs to score political points.

gore wrote:
Instead, Schnatter is trying to pin this on Obama as if his hands were tied to do anything else, even though many companies give their employees benefits on a part time basis and seem to do well.

Many? I certainly do not think a large percentage of employers of unskilled labor like PJ's provide this. This represents a major expense that could put a company at a competitive disadvantage.

Just to be clear, when I say "many" I don't mean a majority or anything like that. I fully understand that the choice was, at its base, a reasonable one that the majority of companies make. I just believe that there are definitely enough examples of companies that go the other way to show that it's a viable path.

It would be funny if this resulted in an uptick in the the employment rate.

CEO speech: "We needed to roll everyone back to part-time, so instead of three 40-hour workers, we now have four 30-hour workers."

Headline next month: Economy adds jobs to boost employment 33% in wake of Obama election

What should happen when some other cost-item? Say, would Papa John FIRE people if the raise in costs of energy or raw materials cause his pizzas to become a whopping $0.14 more expensive?

Seth wrote:

I'd be curious to see the ratio of health insurance availability pre-obamacare for those making 10.00 / under. Anecdotally, it's been made available but cost prohibitive.

Without the government subsidies Obamacare brings with it, it's hard to imagine many people making under $10/hour could ever have afforded health care on their own. Children of low income people were (and will continue to be, IIRC) covered under Medicaid though.

I think it will be interesting to see what happens when the subsidies kick in and the health care exchanges go live. There's a sliding scale that determines how much subsidy you get, and that's tied to how close you are to the poverty line. If they set the amounts of those subsidies incorrectly, a lot of people who are poor but above the poverty line might still not be able to afford insurance.

Material and energy costs are mandatory and presumably relatively fixed over a given industry though.

This is essentialy a voluntary charge.

Thanks, Hypatian. He has a tendency to blame every setback on Obama these days so I'm not surprised that this is more of the same

People are still polarizing about the least controversial legislation of the past 2 decades. The Patriot Act was not made such a campaign issue, and that is f*cked up. It is also f*cked up that pundits and candidates had to lie about what was in the letter in order to make waves.

The overwhelming majority of what was in that bill were needed reforms, inevitable expansions, and the meat was mostly Republican sponsored proposals from the past 15 years or so.

It took the audacity to ween Medicare off of billions of dollars.

The focus of the ACA is on the American economy. Within that economy health costs are growing at double, triple GDP growth. The single most expensive thing most people encounter is a medical emergency. The language of the ACA is a step to fix that. The economy does not give a crap about Papa Johns, about Rush Limbaugh, or about Sarah Palin, or Farmer Filburn (look him up). But the ACA is not enough to stop the behemoth that has become American healthcare costs.

EDIT: I did mean to add, the economy is growing, jobs are going up in net. Giving credence to a few complainers only states that their false argument holds water. Regulation and pro worker laws do not kill jobs. Minimum wage laws kill jobs, gay marriage kills jobs, mandatory birth control coverage kills jobs. Be nice if people needed logic and facts to back up this crap.

CheezePavilion wrote:

It would be funny if this resulted in an uptick in the the employment rate.

CEO speech: "We needed to roll everyone back to part-time, so instead of three 40-hour workers, we now have four 30-hour workers."

Headline next month: Economy adds jobs to boost employment 33% in wake of Obama election

And as it stands now, it is easier for people working part time or 2 part time jobs to get affordable but quality healthcare. Those were the people hit hardest under the old system, the working poor.

NormanTheIntern wrote:

Material and energy costs are mandatory and presumably relatively fixed over a given industry though.

This is essentialy a voluntary charge.

Material costs aren't fixed, though. When I was managing a bakery, wholesale prices of wheat flour went up over 200% between 2008-2010, and they've stayed higher than they were prior to the spike. We had to raise prices and change operating procedures to compensate, like any business that wants to stay solvent.

So what are the logical arguments against single payer? Apart from "omg socialism". It seems to be working pretty well everywhere else. Is it cost? Is it fear of a decline of quality of care, which seems misplaced given that most places with single payer seem to have equal or better quality?

Because logically, it seems like Mr. Papa John should be supporting single payer, which would solve his problem. Assuming I take him at his word that his problem is actually "can't afford to pay for employees' health care" and not something else.

clover wrote:
NormanTheIntern wrote:

Material and energy costs are mandatory and presumably relatively fixed over a given industry though.

This is essentialy a voluntary charge.

Material costs aren't fixed, though. When I was managing a bakery, wholesale prices of wheat flour went up over 200% between 2008-2010, and they've stayed higher than they were prior to the spike. We had to raise prices and change operating procedures to compensate, like any business that wants to stay solvent.

And it was the same for fuel costs under Bush. Everyone from airliners to manufacturers to pizza companies got caught flat footed by the massive increase in gas prices and they all responded by either adding a fuel surcharge or raising their prices.

I thing it might even be safe to say that for a pizza company the massive increase the price for wheat flour and increase in fuel costs will impact their business financially more than the ACA.

Demyx wrote:

So what are the logical arguments against single payer? Apart from "omg socialism". It seems to be working pretty well everywhere else. Is it cost? Is it fear of a decline of quality of care, which seems misplaced given that most places with single payer seem to have equal or better quality?

Because logically, it seems like Mr. Papa John should be supporting single payer, which would solve his problem. Assuming I take him at his word that his problem is actually "can't afford to pay for employees' health care" and not something else.

I am interested in an answer to this as well because I have have never seen one. Opposition seems to be rooted in a feeling of Americanism - i.e. independence, self reliance, etc. rather than on lower costs, better care, etc.

clover wrote:
NormanTheIntern wrote:

Material and energy costs are mandatory and presumably relatively fixed over a given industry though.

This is essentialy a voluntary charge.

Material costs aren't fixed, though. When I was managing a bakery, wholesale prices of wheat flour went up over 200% between 2008-2010, and they've stayed higher than they were prior to the spike. We had to raise prices and change operating procedures to compensate, like any business that wants to stay solvent.

By "fixed over a given industry" I mean all or most competitors face the same change - so you aren't disadvantaged within the pizza industry (generally speaking) if the price of cheese goes up - everyone raises prices accordingly and you don't lose market share.

OG_slinger wrote:
clover wrote:
NormanTheIntern wrote:

Material and energy costs are mandatory and presumably relatively fixed over a given industry though.

This is essentialy a voluntary charge.

Material costs aren't fixed, though. When I was managing a bakery, wholesale prices of wheat flour went up over 200% between 2008-2010, and they've stayed higher than they were prior to the spike. We had to raise prices and change operating procedures to compensate, like any business that wants to stay solvent.

And it was the same for fuel costs under Bush. Everyone from airliners to manufacturers to pizza companies got caught flat footed by the massive increase in gas prices and they all responded by either adding a fuel surcharge or raising their prices.

I thing it might even be safe to say that for a pizza company the massive increase the price for wheat flour and increase in fuel costs will impact their business financially more than the ACA.

The ACA did not give us the drought that will cause the price of feed to sky-rocket due to our low corn and soy harvest this year which means meat and dairy will be going up even more. Independent of the drought, costs on grain, dairy, meat has been ticking up for the past decade.

And as I linked in the other thread. Papa Johns instituted a new program by which new franchisees not only will pay no fees for as much as 2 years, they will also be given free equipment from the corporation. This is predatory franchising practices. They will get away with it because they are such a small player in the market (4,000 or so franchises compared to 10,000 from Dominos, and 14,000 for Pizza Hut).

Demyx wrote:

So what are the logical arguments against single payer? Apart from "omg socialism".

No, that's pretty much it. Unless there's rampant destitution and businesses aren't viable across the rest of the modernized nations of the world. Let's check.

National prosperity rankings for 2012 (legatum index, which of course is questionable since it's one of many measures, but is the first I found), US is rated 12th behind a bunch of socialist nations. Economic competitiveness, we are fifth (three are Euro-socialist nations that are ahead of us on prosperity too). Standards of living, US ranked 4th on the human development index (technically, tied for third). 1st place was that damnable Norway, who's bested us in every category so far.

Well, dammit, at least our health care system is, as Boehner said, the best in the world!

Oh, wait, that's not right either. According to the Commonwealth Fund, in the most recent comprehensive examination of the health care systems in seven modernized nations, the US ranked last. Beaten by -- surprise! -- socialist nations.

So yeah. The only substantial argument is "OMG SOCIALISM!" which, quite frankly, should be an argument in favor of it from what I'm seeing, not against it.

Without tort reform, would a single payer system be able to address health care costs to a great enough degree to be viable? That's the only logical argument that I can think of at the moment.

LouZiffer wrote:

Without tort reform, would a single payer system be able to address health care costs to a great enough degree to be viable? That's the only logical argument that I can think of at the moment.

Don't forget, Texas instituted tort reform, and it had no positive impact on health care expenses. That's right: none.

But the insurance companies love to blow the tort reform vuvuzela for some reason...

vuvuzela

That sounds dirty! =)

To Piggy on Farscry. Texas and Florida and Michigan instituted some of the strictest civil reforms for medical malpractice, and it has had no effect on costs for care or doctor's costs on malpractice insurance.

It is not reform. It actually inflates the overall costs of litigation by removing many of the incentives for larger industry to settle. It put many med mal law offices out of business, there is 1 in Michigan currently that specializes; and precious few firms will ever touch a med mal suit now.

There are REAL reforms that work, but award caps are not it. Pre-trial mediation works also known as a settlement hearing. The existing American Rule on costs works (are you paying attention England?).

Farscry wrote:
LouZiffer wrote:

Without tort reform, would a single payer system be able to address health care costs to a great enough degree to be viable? That's the only logical argument that I can think of at the moment.

Don't forget, Texas instituted tort reform, and it had no positive impact on health care expenses. That's right: none.

But the insurance companies love to blow the tort reform vuvuzela for some reason...

Very true, and I'm reading that the insurance companies have pocketed the ~$600m in additional profits in Texas instead of lowering premiums. I don't know what the impact would be if it were implemented at a national level where there would be pressure over the entire market. Like I said, it's the only logical argument I can think of at the moment.

If the states are America's test bed for legal reform as Holmes said Lou, I do not see any logic in thinking scaling failed state law will somehow be different. I cannot think of a historical example where that was the result.

Demyx wrote:

So what are the logical arguments against single payer? Apart from "omg socialism". It seems to be working pretty well everywhere else. Is it cost? Is it fear of a decline of quality of care, which seems misplaced given that most places with single payer seem to have equal or better quality?

Because logically, it seems like Mr. Papa John should be supporting single payer, which would solve his problem. Assuming I take him at his word that his problem is actually "can't afford to pay for employees' health care" and not something else.

Single payer is pretty clearly superior to what we have now, unless it was somehow completely bungled. As far as I'm concerned, there is no valid argument in favor of the current system.

There are, however, some ways in which single payer might be inferior to a good market driven system. If individuals 1) selected any health insurance plan they wanted from a market place (and had good data about the options), 2) had to pay for all their health care themselves, rather than having costs buried in an employer-provided policy, and 3) could find good information about the relative quality and pricing of health care providers, market forces might actually work and increase efficiency beyond what single payer could.

gore wrote:

There are, however, some ways in which single payer might be inferior to a good market driven system. If individuals 1) selected any health insurance plan they wanted from a market place (and had good data about the options), 2) had to pay for all their health care themselves, rather than having costs buried in an employer-provided policy, and 3) could find good information about the relative quality and cost of care of health care providers, market forces might actually work and increase efficiency beyond what single payer could.

This is certainly true, and in such a system costs could be low enough to make medical charitable organizations quite viable. Unfortunately at this point, seeing the way markets historically drive themselves in the US in particular, I think that's far less likely to work out well than if we adopted an existing successful universal system from one of the more successful nations than us.

I don't think our government can be trusted to come up with their own original universal coverage system, because we don't have a particularly strong history of crafting efficient and effective government-regulated systems of that complexity and longevity.

That imagined market system would also still have major problems.

If insurance wasn't mandatory, but emergency medical care was still provided to the uninsured who cannot pay, you'd have free riders. If insurance wasn't mandatory, but emergency medical care was not provided to the uninsured who cannot pay, you'd have an ethical problem. If you try to divide between those who could be insured or pay but choose not to and those who cannot, you'd add bureaucracy, the chance of being wrong, moral hazard, etc.

And even if you can divide between those two groups, the poor would still be in a situation of receiving only emergency medical care and never having routine health checkups to avoid emergencies, which causes some serious problems. (Which is something that the PPACA is expressly designed to fix—that's why insurance won't be able to charge any sort of fee or copay for tests or checkups any more.)

Cough...insurance companies...cough..negotiated rates...cough....

Who's making the most money in healthcare folks? Follow the money train and you'll find the problem.

Single payer will work well if there is leverage to negotiate pricing. I've seen estimates that pharmaceutical pricing would fall by 50% or more if the U. S. government was allowed to negotiate pricing. The answers have already been found if we're willing to look around the world.

Tort reform hasn't been able to effectively address the biggest expense, defensive medicine.

KingGorilla wrote:

If the states are America's test bed for legal reform as Holmes said Lou, I do not see any logic in thinking scaling failed state law will somehow be different. I cannot think of a historical example where that was the result.

I think that real tort reform and an associated reduction of insurance risk at a national level would spur a reduction of insurance rates for medical practitioners. Insurance companies may collude to maintain rates at the same level, but I think that would be less likely to be a long term strategy in a larger competitive environment.

The question behind this logical argument is: Can single payer reduce costs enough on its own to succeed?

Other measures haven't been necessary in other countries, but no country in the world has medical costs which are inflated to the level of the United States. The reason boils down to greed on behalf of all parties involved, and changes may be necessary in multiple areas in order for a single payer system to be viable.

I'm not prepared to argue this point of view, and honestly I want single payer for many reasons which impact my family directly. However, I still consider it a valid argument.

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