Friday, December 31, 2010

I hate Retrospective Week

For the record, I hate this week between Christmas and New Year’s Eve.

You cannot escape the hundreds of “year in review” programs. Every channel, television and radio (and newspapers and magazines, for that matter), regurgitates the stories of the year.

I enjoy reminiscing as much as anyone else—just not about things that happened last week.

On the news channels, we relive those fond though hazy memories of the election, way back from… last month. Of course, the Scott Brown victory speech clip in January of him announcing the availability of one of his daughters warms the cockles of our hearts. After all, that is all but ancient history.

Flip to the entertainment channels and you’ll be walked through the story of the year, the world shaking event where Prince William proposed to Maid Marian, or something like that. I even saw a commercial last night where you can purchase a silver plated, cut glass replica of the ring Billy gave to Katy. Not for $119. Not for $69. Only $19 if you call within the next 40 seconds. Otherwise you’ll have to pay $19.

On to ESPN with their retrospective of the World Series, a distant memory from October. Actually, this was a useful recap for me. I couldn’t have named the two teams who played in the World Series this year to save my life. Can you?

So I am thrilled that this week is almost over and we can all return to normalcy this weekend, watching parades, pro football, and news stories with tips for beating that New Year’s Eve hangover.

Copyright 2010 Randy Hunt

Wednesday, December 29, 2010

Pay-as-you-throw

The Sandwich board of selectmen has been mulling over the idea of pay-as-you-throw (PAYT) for a year now. A decision may be coming soon; or maybe not. It’s hard to tell. (Vote on PAYT at the right.)

What is it?

PAYT is a system where recycling is free, but non-recycled items are “metered” via an imposed per bag fee. Pick a price, say $2 for a 30-gallon bag. You would purchased these bags in the grocery or hardware store. In this example, a sleeve of ten bags would cost $20. To prevent counterfeiting, the bags would have the town’s logo printed on them and they would be some color that is not generally available, purple for example.

Mary and I go through a couple of 30-gallon bags a week now, but when pushed to recycled all of our paper, glass, corrugated, plastic, Styrofoam, etc., we could easily knock that down to one bag per week.

We should be doing that now, right? “Yes,” I say with an embarrassed tone, but there’s nothing like paying by the bag that will catch people’s attention. In fact, one of the PAYT bag vendors says that communities increase their recycling rates by nearly double when this program is put in place.

In addition to the bag fee, which is generally used to offset the variable costs of disposing of the trash, a sticker fee is imposed to cover the fixed costs of the operation.

Why consider it?

All of our Cape Cod towns are facing a huge increase in “tipping fees” when our current contracts expire. In Sandwich, that would be 2015. We expect to start paying more than double (some say close to triple) the current tipping fee. So the first reason for considering PAYT is to save money (and the environment) by recycling more, thus reducing the tonnage going to SEMASS in Rochester or the Bourne dump.

There is also an equity factor here. An 80-year-old woman who generates a 30-gallon bag of trash over a two-week period might live next door to a family of six, which generates five 30-gallon bags of trash per week. She and that family of six both pay the exact same $110 to use the Sandwich transfer station each year.

Using my numbers and assuming a $50 sticker fee, the 80-year-old woman would pay $50 plus 26 times $2/bag, or $102 per year. The family of six would pay $50 plus 52 times 5 times $2/bag, or $570 per year. I would bet that the family of six would work especially hard to double their recycling efforts and save half of that $520 bag cost. Of course, if they don’t, that’s their choice, but they’ll pay a fair amount for the disposal of their trash.

What did Mashpee do?

The select board in Mashpee decided to put a referendum question on their May 2011 ballot. Bad idea, in my opinion. I predict that people will vote against it. If you pose the question to someone without spending five minutes explaining the whys and hows, chances are they’ll react negatively to PAYT, especially in the privacy of the voting booth.

What will Sandwich do?

If the select board makes a decision soon, say by March, a PAYT system can be in place by July 1st. Our town manager has suggested that our $110 transfer station sticker would then be valid all the way out to June 30, 2012. A new price would then be set for an annual sticker that runs from July 1st to June 30th. This is necessary because the transfer station fees and expenses will be put into an enterprise account that must run on a fiscal year ending June 30th.

The $800,000 question becomes: How much of the cost of running the transfer station will be picked up by the new sticker and bag fees? Currently, about half of the cost is recovered by sticker fees. That leaves somewhere between $700,000 and $800,000 covered by the general tax revenue.

If the board of selectmen chose to cover all of the transfer station costs with the PAYT system revenues, some would argue that it would be a “backdoor override,” meaning that a vote to override Proposition 2½ would not be necessary because the increase would fall in the category of fees, not property taxes.

What would you do?

Given the choice of PAYT, a private trash service, or the prospect of closing the transfer station if an override in 2014 for FY2015 doesn’t pass, what would you choose? Or perhaps there are other options?

Saturday, December 18, 2010

Who gets paid to drive to work?

State legislators: I do! I do!

Let me give you a CPA’s perspective on the periodic controversy of travel payments received by state legislators for driving to the State House.

Most taxpayers are aware that commuting expenses are not deductible on their federal income tax returns. In Massachusetts, on a side note, there is a small deduction available for people who ride the “T” or buy an “E-Z Pass,” but this pales in comparison to the benefit enjoyed by state legislators.

The definition of “commuting” comes from the Internal Revenue Code (IRC) concept of “tax home.” Simply put, traveling to your tax home is called commuting and is not deductible. For most of us, our tax home is where we work and earn our pay; not where we live. If you live in Barnstable and work in Boston, you are traveling to your tax home (Boston). No deduction is allowed for that travel.

State legislators (in all states, by the way, not just in Massachusetts) are subject to IRC Section 162(h), which allows state legislators who live more than 50 miles from the capitol to declare their residence in the legislative district to be their tax home.

This flips the situation from “commuting to work” to “traveling away from home.” Travel away from home is tax deductible and essentially eliminates federal income tax on the per diem travel payments received by legislators.

At least one newly elected state representative announced that he will not take the travel stipend. That is an option, but there’s a better one.

During a debate that was videotaped by Cape Cod Community Media Center, Matt Pitta, WXTK news director, asked Lance Lambros and me if we would be willing to donate the travel stipend to charity. We both agreed.

The idea of refusing the travel payments, thereby leaving that money in the coffers of the state under the spending direction of the state legislature and administration, leaves me a bit cold. My confidence that this money will be wisely spent is low.

Matt’s idea of donating the money to charities of our choice is a terrific alternative. I will meet with Matt over the next couple of weeks and choose one charity for each month. My only stipulation will be that the organization either reside in the 5th Barnstable District or serve people in the district.

If all of our Cape Cod legislators joined in this effort, the combined contributions to our charitable organizations would amount to about $60,000 to $75,000 over the coming year.

What do you say, Cape Cod legislators?

Monday, December 13, 2010

You can't fool human nature

Health care mandate disrespects law of supply and demand

Runaway health insurance premiums have put Massachusetts back in the spotlight and our Beacon Hill innovators are poised to take on the cost of this unique-in-the-nation health insurance mandate.

Because it’s the blueprint for the national health insurance law, which is gearing up for its debut in 2014, politicians are beginning to panic over the uncontrolled spiral of health insurance premiums. The IRS pegged Massachusetts’ small group family plans as leading all 50 states, coming in at more than $14,000 per year.

One has to marvel at the surprised looks on our legislators’ faces when confronted with this news. After all, the Massachusetts health insurance mandate passed in 2006, similar to the national health insurance mandate passed earlier this year, contained no cost cutting measures, other than the hope that if everyone has health insurance the cost of it would go down.

That flies in the face of Economics 101.

Supply versus demand

The first concept I learned in Econ 101 was supply versus demand. In this fundamental economic model, price remains steady as long as supply for a product or service equals demand for the same product or service.

If supply begins to exceed demand, the price of that product or service starts to decline in a Mother Nature-like adjustment to bring the system back to equilibrium. The reverse applies when demand outstrips supply, with price inflating until supply and demand once again return to homeostasis.

Has anyone new to Cape Cod tried to find a primary physician lately?

Why is there such a scarcity of general practitioners these days?

At a time when the ranks of general practitioners is stable or in some areas shrinking, Massachusetts mandated that everyone purchase health insurance. Since most of the previously uninsured folks are unable to afford an insurance plan that allows one to go directly to specialists for treatment, they are forced to seek out a primary physician.

Demand: Increasing

Supply: Not increasing

Price: Inflating

Two more issues significantly increase demand on our health care system.

Out of sight, out of mind

I’m old enough to remember the classic indemnity health insurance plans. In the 80’s, our plan had a $250 individual deductible and a $500 family deductible. After paying the first $250 of health care expenses for one of our kids, for example, that child would then be on 80/20 coinsurance. Spend another $100 on the same rugrat and $80 would be refunded. The same coinsurance would be in place for everyone in the family once we forked over a total of $500 for the family unit.

I hated this system because we fronted all of the money and had to fill out reimbursement forms to recover our 80%. Invariably, the insurance company would delay repayment by asking for further information or pay less than 80% claiming that the doctor’s charges exceeded the “customary fee” for the area.

But I can tell you one thing. I knew exactly how much our health care cost. We didn’t rush to the doctor every time someone sneezed. A lot of people didn’t rush to the doctor when suffering symptoms of a serious disease either. That scenario gave birth to health maintenance organizations (HMOs).

The theory that catching a malady early is cheaper than treating it after it becomes acute or chronic does hold water. To encourage people to be proactive about their health care, HMOs created the concept of a primary physician, essentially an agent that triaged a patient’s situation, treating minor cases, and referring more serious ones to specialists.

A good idea that has a fatal flaw: The hook to encourage people to join these HMOs, knowing that they’d give up a great deal of freedom by being forced to funnel their health care through a primary physician, was the concept of a co-pay.

The first HMO we subscribed to offered a $10 office visit co-pay and no individual or family deductible. Wow, we thought. Now we can go to the doctor every time a kid sneezes.

In spite of the fact that we received an accounting of the actual cost of our office visits, it didn’t matter. That we paid $10 to see a doctor was the only thing that mattered. Those printouts were quickly filed without having been scrutinized.

In a way, the pendulum started to swing too far. After awhile, we stopped getting the detailed accounting of actual costs and we became blind to the real costs of health care. It plays to human nature to ride a roller coaster over and over until you vomit if you have an all-you-can-ride pass; something that would never happen if you paid by the ride.

High costs beget even higher costs

The other side effect of Massachusetts’ mandated health insurance law stems from the so-called minimum creditable coverage (MCC) clause. It’s not enough to subscribe to a health insurance plan in Massachusetts. The plan must comply with the minimum standard of covered items as determined by the state legislature. If a plan falls short of offering every bell and whistle listed in the MCC, it does not meet the mandate and the policyholder is punishable by a fine of more than $1,000 ($2,000 if married).

The premise of forcing everyone onto a blue ribbon health insurance plan is pure socialism. And I don’t mean this in a disparaging way. By making a 25-year old male pay for a policy that includes coverage for in vitro fertilization, couples who actually need the service will pay less for it. You can make up your own mind about this attempt to spread the wealth.

Here’s where this idea of MCC drives demand. Prior to the Massachusetts health care mandate, people bought affordable insurance from a number of sources for far less than the $14,000 per year that I mentioned earlier. No, the plans weren’t rich, for sure, but at $400 or $500 per month, they provided a fallback in case of a catastrophe.

At that price, and because of the deductibles these plans place on their policyholders, people watched their health care spending and thought of the insurance similarly to how they thought of automobile insurance. You don’t decide to crash into another car just because you’re insured.

Now that these low cost policies are unavailable in Massachusetts, we are all paying over $1,000 a month for a family plan (before your employer’s subsidy, if you have one). Some of my clients are paying $2,000 a month.

You can’t fool human nature. At $400 or $500 per month, a health insurance plan was a necessary cost of living most people could deal with. When paying upwards of $2,000 a month, you’re damn well going to use it. This generates more demand on our health care system. In effect, the high cost of premiums is directly responsible for premiums going up even higher. Where does it stop?

Conclusion

I offer these observations to the people who write laws in this state and to their advisors. In all of the articles about how to control the ever increasing cost of health care, nowhere do I see simple suggestions for balancing supply versus demand, such as revamping the MCC with the recognition that not everyone can afford a Cadillac.

A recent article stated that reducing the cost of our health care delivery system is “a task of mind-boggling complexity requiring cooperation among doctors, hospitals, insurers, regulators, state lawmakers and the administration.”

I tend to disagree. Reducing the cost goes back to following the tenets of Economics 101. Implementing government control over the cost of our health care system, on the other hand, will prove to not only be mind-boggling but unwise.

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Other articles I've written about health care issues:

3-step process to single-payer health care
America's consolidation of healthcare by outlawing options (ACHOO)
Health care reform: This Edsel just might fly

Copyright 2010 Randy Hunt

Saturday, December 4, 2010

Hotel California

Every so often I catch a TV news magazine story about dirty hotel rooms. The reporter enters a room with CSI-like equipment, including a black light, sterile swabs, and ZipLock freezer bags for specimen collection. (I’ve often wondered if these bags with a label strip are right out of the box from the grocery store or if they cost $10 a piece because they’re purchased from an approved state vendor list.)

Inevitably the investigative reporter finds exotic bacteria, an assortment of bodily fluids, and live creatures—some microscopic, some not so tiny. It’s enough to convince us never to pull back the sheets again in a hotel room.

Help is only $75 away. You can travel with what amounts to a body bag, though much softer as it’s intended to be used by live people. The DreamSack will protect you from making contact with anything left behind by prior guests.


I wish I had owned several DreamSacks back in 1998 when we took the family to Los Angeles for a Disney vacation. Being as cheap as I am, my idea of a Disney vacation does not include staying at a Disney hotel. Instead, I searched out the lowest priced hotel room within a reasonable driving distance to Mickey & Minnie.

In fact, my plan was to spend Wednesday scouting out attractions around Hollywood and Vine, waiting until Thursday to hit Disneyland. I had studied the daily attendance stats for Disneyland and determined that Thursday is the best day to avoid long lines.

So it made sense to find a hotel within walking distance of the Hollywood Walk of Fame, Grauman’s Chinese Theater, and the Hollywood Wax Museum. With six kids and the need to rent two rooms, price is paramount. I found the perfect place, just half a block off Hollywood Boulevard: Motel 6.

It wasn’t until we were driving at night in our rented Lincoln Navigator—which, in spite of its size, didn’t have room for all eight of us with our luggage, so we had purchased bungy cords to lash the suitcases to the roof rack, making the vehicle look remarkably like the truck driven by the Beverly Hillbillies—that I noted an abundance of red lights close to the hotel.

And I don’t mean traffic lights. Who would have guessed how friendly these scantily-clad ladies would be when I stopped to ask directions to North Whitley Avenue?

We eventually found the Motel 6 and I became even more uneasy when I walked into the office and saw the night manager sitting behind bullet-proof glass with one of those metal speaker things. He leaned and over spoke into the speaker thing, asking if there was anything he could help me with, as if the last thing on his mind was that I might be there to rent a room.

Against my better judgment and because it was already 11pm, I rented two rooms. Not being a complete idiot, I paid for the rooms in cash, thinking that my credit card would be charged to the max before our wake up call.

We rode an elevator that barely accommodated the eight of us and found the rooms. One of the kids questioned, “Eeeew! What’s this sticky stuff on the door knob?” I have no idea to this day what it was, but I made him wash his hands until they were raw.

The rooms were visibly dirty, not like the ones on TV that appear to be clean, but aren’t. No need for a black light here. Did we pack sleeping bags?

The two girls stayed in our room and the four boys occupied the adjoining room. I told the kids to sleep with their clothes on, including shoes, and to use some of their packed clothes to make a pillow. Try not to touch anything in the bathroom, I warned. Sleep tight. See you in the morning.

I didn’t sleep too well that night, imagining all sorts of things that had never occurred to me before. I know the girls were pretty apprehensive as well, but the boys slept just fine. Boys are like that. In fact, their room at home had gotten pretty disgusting from time to time, thanks to hoarding food and who knows what else.

The next morning, nobody was dead. Good start to a fun day. First on the list of To-Do’s was to reserve two rooms at the Beverly Garland Holiday Inn. Twice the room rate but, as they say in the Mastercard commercials, “Priceless.”

Have you ever spent a harrowing night in a hotel room? I’d love to hear your tale.


Copyright 2010 Randy Hunt