It's not just about longer or shorter sentences. Oregon must radically rethink and recreate who sentences, how, and why.
Oregon is in a prison of its own making.
George Orwell said that the most difficult things to see are the ones right in front of one’s nose.
In Oregon, where are we now spend more on prisons run by the Department of Corrections than on public four-year universities, what is right in front of our noses is that the way we decide how long criminals should spend in prison is not only bankrupting us in the present moment, it is sowing the seeds of economic inequality and social weakness for generations to come, because excessive spending on incarceration deprives us of public goods that promote prosperity. We are trapped in an arms race against crime where bad policies cause more of the ills we are trying to cure, which results in we the public providing the funding for both sides of the arms race.
The recent notorious case of the affluent, white Stanford University student-athlete who raped a unconscious woman on campus but who, upon conviction, got a jail sentence of just six months in jail -- by a judge who had himself been a student-athlete at Stanford University -- has raised the profile of judicial sentencing discretion in the worst possible way. In this, it echoes the effect of the first wave of mandatory minimum sentencing guidelines, which first gained favor as a way to address sentencing disparities that reflected race and class privilege.
Sadly, those reforms backfired. The power system did not start treating the poor or people of color as gently as it treated offending young males from affluent suburbs. Instead, the mandatory minimums and Nixon’s “War on Drugs” created, in Michelle Alexander’s memorable phrase, The New Jim Crow, while the affluent whites continued to be let out of the system, now by prosecutorial discretion in charging rather than by judicial discretion in sentencing.
Now, in Oregon, as the Great Recession becomes the status quo of permanent contraction foretold by the ”The Limits to Growth” and as post-industrial capitalism causes well-meaning efforts to reduce inequality to backfire and produce even wider inequality, it is time to go back and rethink criminal sentencing from the ground up. Not just in light of the well-documented class and race bias but also in light of what we have learned about organizational behavior, incentives, and the perverse outcomes that result when system incentives cause people in key roles – the system superstars – to get rewards for behavior that is counterproductive to their organization as a whole.
Like CEOs who mortgage a company’s future for a short-term boost in share value, our judges and prosecutors have unique incentives that make sense to them and cause them to perform in predictable ways that are detrimental to Oregon as a whole.
As we have seen with healthcare costs, which eat up an ever larger share of Oregon’s budget, when certain key actors have incentives that work counter to the overall system goal, the system goal is hopelessly unattainable. When doctors and drug companies are paid according to the process – the service provided or the drugs prescribed – they act to maximize those rewards. If health improves as a result, so much the better, but if not, well, there’s always more that can be done and more drugs that can be prescribed.
But healthcare is not the only industry where the United States is a global outlier in terms of high spending producing poor results. We also rank as the undisputed world champion in imprisonment, and in the catastrophically long sentences we mete out.
The root of the problem is that the criminal justice system in Oregon, as in the rest of United States, runs on pretty much the exact same model as it did at the time of statehood, which is the frontier model – the judge ran the trials and selected the sentences. There was no one else to do it.
But the practices appropriate for a time when government was sparse and crimes were few are not the practices that are appropriate today.
Today, we have a vast criminal justice system. The Department of Corrections alone – just a part of the system – plans to spend $1.6 billion in the next two years. And yet the critical decisions that drive all that spending are still made, one by one, in isolation and with no consideration of the overall context. Before sentencing guidelines and mandatory minimums, at least those decisions were made by judges. Now they are made by district attorneys (prosecutors).
Both these offices, judges and prosecutors, are filled by local elections. Thus, the two key actors, the people who have the most power to who determine what the state will spend on incarceration for decades to comes, are people who not only have no special skill, training, or background in criminal sentencing, they also have zero accountability for the results of their decisions, except in the sense of being subject to popular hostility for a sentence that is seen as excessively lenient.
Thus, under the rules for the game as currently organized, the most important players (prosecutors) and the second-most important players (judges) have neither the opportunity or incentive to consider anything but the case before them, which leads predictably to our present budgetary disaster.
There is nothing wrong with our judges or prosecutors. This is not about them as human beings or as honest public servants. We should not seek nor expect to find a better class of prosecutors or judges. Nor should we expect that there is any way to exhort them or educate them or persuade them to be more thoughtful, better informed, and to have a broader perspective. The title of a famous business magazine article says it best: “On the folly of rewarding A while hoping for B.”
No, the solution isn’t to think that there is some better class of people who would not seek to maximize their own career success by racking up the convictions and doing whatever necessary to avoid the fatal “soft on crime” label. The solution is to move sentencing away from judges entirely, after scrapping entirely the ill-fated project of mandatory minimums that have put so much power in the hands of prosecutors who have no accountability for the costs that they impose on the rest of us.
That is, what Oregon needs to do is make the criminal justice system into a true system by unifying all the pieces of the process that we loosely call the “criminal justice” under one budget, and then putting felony sentencing into the hands of a state sentencing panel. That panel would be the body responsible for assessing all the felony inmates as a whole and setting sentences so that the overall state goals of imprisonment are pursued in view of all the sentences to be determined within Oregon. The state sentencing panel would replace the current random process in which self-interested actors make sentencing decisions one-by-one while having no ability to see anything except the case before them.
The unified global state criminal justice budget would include all the current prison and prison alternatives, from drug treatment and alcoholism programs, community corrections, and reentry programs for those emerging from prison.
The existing system of prosecutors and judges would remain, but they would not decide felony sentences. Rather, when an offender is convicted of a felony, the case would be sent to the state sentencing panel, which would be responsible for setting the terms and conditions of the sentence, in light of not just that individual’s crimes but also in light of all the other offenders to be sentenced that year, as well as the day-by-day forecasts for prison beds for the entire length of the contemplated sentences.
By definition, a felony sentence is for at least a year. Each person would begin serving their felony sentence and, within 12 months, the sentencing panel would set the final sentence. The offender could seek a hearing to argue for sentencing reductions or alternative sentencing, and the crime victims could appear and give testimony about the crimes and their effect on the victims. But the sentencing panel would itself be a third actor, and the staff would be charged with presenting a sentencing proposal that is based on both the severity of the crime in the rankings of all the sentences and an effort to specify a sentence that maximizes the chance for successful re-entry to society after the sentence is served.
The key change is that, with a state sentencing panel, all of the actors in the system – the prisons and the prison alternative programs -- would be drawing from the same global budget pot, and thus they would be rewarded for sentencing that works in terms of lower crime over time, rather than in career rewards for individuals.
Just as the Pentagon does not give every Second Lieutenant a credit card and tell them to go out and buy what they think are the best weapons, it’s time to stop giving prosecutors a platinum credit card that lets them, with the threat of mandatory minimums, force judges to ring up huge bills that neither of them will ever see or have to pay.
Rather than allowing prosecutors and judges to write checks the echo through the decades and must be covered by future taxpayers, we need to return judges and prosecutors to their jobs. For judges, that means conducting efficient, fair trials that protect the rights of the accused so that wrongful convictions are minimized and can be detected and reversed when they occur. For prosecutors, it means advocating for justice, not just for convictions.
The state sentencing panel would have a job of putting all the convictions into order of severity and then determining the optimal sentence, based on objective science, that would ensure that the most serious crimes are considered ahead of less serious crimes, and that the sentences for the most serious crimes are determined first, so that the critical, expensive resource – prison beds — are used to obtain the greatest overall effect against crime, no matter where they are committed and no matter who the prosecutor or judge was.
The reason sentencing guidelines and mandatory minimums fail is that they are a half-measure, a doomed attempt to apply statewide uniformity to a process that we’ve made inherently blind to anything but the one sentence to be decided. And we’ve put that decision in the hands of individual actors who, no matter how smart, fair, and capable, have no stake in minimizing the overall system cost.
We are in a prison of our own making. Each biennium, more and more of our resources go into prisons, leaving less and less available for the kinds of goods that make us better off. We need a prison system, but we don't need a system that metastasizes and consumes us. It's time to rethink not just how long our sentences are, but how we sentence, so that when we send someone to prison, they aren't taking our future with them.
(Edited to remove typographic errors 13 July 2016)
One of Oregon's major spending priorities is factory-scale facilities for storing prisoners; only 4% of budget devoted to rehabilitative programs
Compare: Department of Corrections biennial $1.616 billion exceeds the 2015-17 Legislatively Adopted Budget for State Support for Public Universities (4-year) at $1.568 Billion
Overview The Department of Corrections (DOC) has two primary functions – the operation of prisons and the state responsibility for the community corrections system. The Department operates 14 institutions for the incarceration of adult and certain juvenile felons sentenced to prison for more than twelve months by the courts. The budget is based on the April 2015 prison forecast and other changes made by the Legislature during the 2015 session that affect the prison population. The community corrections system is based on SB 1145 (1995) which transferred management of offenders sentenced or sanctioned to incarceration of 12 months or less, and all felony offenders under community supervision, to the counties. Funds are provided to counties for the costs of supervising these offenders.
Budget Environment In 2011 and 2012, the Governor established a Commission on Public Safety for “analyzing Oregon’s sentencing and corrections data, auditing existing policies, and submitting recommendations that will protect public safety while containing corrections costs and holding offenders accountable.” The Commission’s work culminated in the passage of HB 3194 (2013). The measure made changes to felony marijuana offenses, felony driving while suspended or revoked, and the Measure 57 crimes of robbery in the third degree and identity theft. Additionally, the measure increased the transitional leave period from 30 days to 90 days prior to inmate discharge and provided for dispositional downward departure for certain Measure 57 crimes where the inmate is a repeat offender.
All of these changes were anticipated to result in a reduction of offenders incarcerated in DOC facilities and to increase the amount distributed to the community corrections departments of counties for probation, post-prison supervision, and local control. The reduction in offenders would, in turn, defer the need for new prison construction for a minimum of five years. The 18-month experience during 2013-15 shows a downturn in population compared to what it would have been without the passage of HB 3194. It should be noted, however, that DOC will continue to use emergency beds to meet its capacity needs.
The following display shows the expected population without HB 3194 (green line), actual population from January 2013 to July 2015 (black line), and the expected population according to the April 2015 population forecast developed by the Oregon Office of Economic Analysis (orange line). The top solid, red line is the population level that would require the opening of a new prison on the Junction City site. The dotted line in the center represents the population level at which remaining areas of the Deer Ridge facility would need to be prepared and used to house minimum security male offenders and at which Oregon State Penitentiary - Minimum (OSPM) would need to be activated and used for female offenders. Actual population numbers will determine if one, both, or neither facility needs to be used.
With respect to females, the current and expected populations are quite close to maximum for the Coffee Creek Correctional facility. The Legislature directed DOC to report back regularly on actual female population, especially in view of potentially activating the OSP Minimum facility.
As a potential offset, HB 3503 diverts certain offenders from prison, if they are in custody [sic - "have custody"] of their children at the time of their offense and if the offense qualifies for diversion. The subject offenders are to remain in their communities and be provided with enriched services – parenting training, addiction and mental health treatment, vocational training, education, and life skills as appropriate – such that the offenders can maintain a bond with their children and that the intergenerational cycle of criminality can be interrupted. The bill is a pilot program in five counties and expectations are that up to 120 offenders would be diverted from prison. [Emphasis added.]
DOC has depended on “emergency beds” to meet its capacity needs for many years. These beds are generally additional beds in dormitory-like settings in minimum security facilities or additional beds in what had been single bed cells. In a few cases, a new unit has been added in space originally designed for another purpose.
DOC states that it has generally reached the limit for double occupancy cells in its system. There still remain the special unit beds where double occupancy cells are not always feasible and some single cells exist for those with special needs. All facilities, except the Oregon State Penitentiary, will have almost all available cells at double occupancy. Structural load issues prevent the double occupancy use of the remaining single occupancy cells at the Oregon State Penitentiary. Under the current population management plan, which the agency uses to determine what units should be used and when they should open, it is anticipated that all 964 emergency beds will be used during the 2015-17 biennium. Short-term work camp beds may also be added as forest related work needs arise.
The estimated cost per day calculation based on the 2015-17 legislatively adopted budget is $94.55, or a 3.9% increase from the 2013-15 biennium’s $90.97, which was calculated based on appropriations through February 2014. It should be noted that the cost per day varies from institution to institution due to a number of factors including the age of facility, seniority of staff, size and characteristics of the population, programming at each facility, and the security level. The cost per day is a “snapshot” and will change depending on the number of inmates and change in the budget during the biennium. The cost per day is an outcome of the given budget; it is not an input used to develop a budget. The total costs included in the calculation are $1.066 billion total funds.
The components of the cost-per-day are reflected in the following display. What this chart does not include is the community corrections budget; debt service for the agency’s facilities; department-wide costs of administering the agency, including the overall management; state government service charges; financial and personnel staff; and information systems costs. The total cost excluded from the calculation is $550.2 million total funds. [Emphasis added]
For context, the following display shows average cost per inmate per day from 1997-99 to the 2015-17 legislatively adopted budget.
Up 54%; Portland-Salem Consumer Price Index 1998 = 167, 2015 = 244 (up 46%)
Based on the April 2015 corrections forecast, DOC anticipates the felony probation and parole/post- prison supervision caseload to total 33,055 by the end of the 2015-17 biennium, resulting in a community corrections mandated caseload increase of $26 million over the 2013-15 legislatively approved budget.
The Prison Rape Elimination Act (PREA) was authorized in 2003, but the U.S. Department of Justice did not release implementing rules until 2012. The Act applies to public and private institutions that house adult or juvenile offenders. Both DOC and the Oregon Youth Authority (OYA) have developed plans to address requirements for safety, facility oversight, training, and audits. Using existing resources, DOC has achieved the following, since the 2012 rules were issued:
•PREA training for all staff, contractors, andvolunteers.
•Education for the inmate population on their rights to be free from sexual abuse and harassment, and how to report.
•Improvements in handling vulnerable or aggressive inmates with respect to housing, jobs, and program assignments, to ensure theirseparation.
•Monitoring for retaliation against inmates whoreport.
•Development of an advocacyprogram. As of September 2015, eight facilities have passed their PREA audits. Six facilities will be audited in 2016. Of a total $14 million in authorized Article XI-Q bond issuance for deferred maintenance and security needs, $1.6 million will be directed to upgrading or replacing security cameras in support of PREA requirements.
There is no specifically identified funding for PREA implementation, nor dedicated staff. Existing resources are currently used. The risks to the agency is potential failure to pass audits, which would reduce any U.S. Department of Justice funding by 5%, or DOC’s being liable for an actual PREA incident occurring, which would subject DOC to damage recovery costs.
Legislatively Adopted Budget The following display is the total funds budget by division for the Department.
The 2015-17 legislatively adopted budget of $1.616 billion total funds is 4.8%, or $74.2 million, greater than the 2013-15 legislatively approved budget. The budget includes the following:
•Support for the Department’s staff wellness initiative that adds 33 positions in the Operations Division to reduce the use ofovertime.
•General Fund to accommodate the April 2015 population forecast, which includes adjustment for the second biennium impact of 2013’s HB3194.
•Bond funding for deferred maintenanceprojects.
•Support for two information technologyprojects.
•Technical adjustments to centralize printservices.
•New positions at no additional cost due to redirecting existing Departmentresources.
•General Fund to support the pilot project in HB3503.
•General Fund reductions in recognition of statewide limited General Fund availability. The reductions are takeninOperations($13.3million),HealthServices($1.7million),andCommunityCorrections($5.2million). Operations and Health Services are expected to meet the reduction targets through holding vacancies and other personal services actions. No positions areeliminated.
These issues are discussed in more detail in subsequent sections.
Program Description The Operations Division is responsible for the security and operation of the 14 existing adult correctional institutions. Functions of this Division include institution operations, security, food service, inmate work, inmate intake, and inmate transportation.
Revenue Sources and Relationships The Other Funds revenues originate from a variety of sources including: services provided by inmate work crews, meal tickets, and canteen sales; sale of items produced by inmate work and training programs; and Inmate Welfare Fund revenues received from inmates or inmate-related sources such as coin operated telephones, canteen profits, vending machines, and copiers.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget of $730.5 million total funds is 1.2% higher than the 2013-15 legislatively approved budget. This budget includes the following:
•The addition of 33 new correctional officer positions to address staff wellness by reducing overtime and to simultaneously achieve a post-relief factor of 1.72, as recommended by a recent Association of State Corrections Administrators study. The total cost is $5.2 million GeneralFund.
•$3.1 million General Fund to accommodate an increased caseload in the April 2015 prison population forecast, compared to the April 2014forecast.
•An unspecified reduction of $13.3 million General Fund to be addressed through management actions and/or additional vacancy savings to reach a statewide budget balancingtarget. [Emphasis added.]
Program Description Health Services is organizationally part of the Operations Division, but has been designated as a separate budget unit due to its size. It includes the health services employees that provide services at all of the DOC prisons. The level of service varies significantly with a much more extensive set of services at larger facilities like the Oregon State Penitentiary and Snake River. While most of the health services are provided by DOC employees and contractors inside the prisons, some services are provided by community hospitals and providers. The agency estimates that 95% of the services are provided at a DOC facility; but the costs of the remaining 5% of services, which are provided outside of DOC facilities, is roughly 33% of the total Medical unit’s spending. This budget unit also includes the mental or behavioral health program which provides a range of services addressing problems dealing with mental illness, developmental disability, and co-occurring disorders (mental illness and substance abuse).
As shown in the following display, healthcare costs have risen significantly due to increasing population, aging population, and a population that arrives at DOC largely having had very poor health care. In addition, a disproportionately large segment of offenders are infected with Hepatitis C. Recently a new drug has become available that is a significant improvement over previous therapies; it will not cure Hepatitis C, but it features improved symptom management over previously available remedies, with significantly reduced negative side effects. Its cost is upwards of $70,000 per treatment for eligible inmates, who are in the latter stages of the disease. The 2015-17 current service level budget funds both the costlier drug and higher usage by inmates. [Emphasis added.]
Revenue Sources and Relationships Other Funds revenue is generated from charges to inmates to offset the cost of dentures and some vision-related services. Federal Funds are from the federal State Criminal Alien Assistance Program (SCAAP) to offset General Fund needs for incarceration of illegal aliens. This SCAAP grant, however, funds a very small percent of the total costs of incarcerating illegal aliens.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget of $238.5 million total funds is 8.6% greater than the 2013-15 legislatively approved budget. This budget includes the following:
•$3 million to accommodate the increased caseload identified in the April 2015 population forecast, as compared to the April 2014forecast.
•$500,000 General Fund to begin conversion of inmate health records to electronicformat.
•Four additional positions to help meet increasing mental healthdemands.
•Thecurrentservicelevelbudgetprovidedextraordinaryinflationforallmedicalcosts,includingsignificantly more expensive treatment for HepatitisC.
•An unspecified reduction of $1.7 million General Fund to be addressed through management actions and/or additional vacancy savings to reach a statewide budget balancingtarget.
Program Description This budget provides funding to counties for administering the community corrections program. DOC has taken over this responsibility for two counties – Douglas and Linn. Under SB 1145 (1995), the community corrections program was restructured to establish state/local partnerships, and shift resources and control for community corrections to the counties. The Grant-in-Aid is based on the number and risk levels of offenders to be managed. Three groups are funded through this program:
•Felony Probation – Those individuals sentenced for a felony to probationary supervision instead of incarceration in a local or state correctionalfacility.
•Parole and Post-Prison Supervision – Those individuals that were incarcerated in a state correctional facility, but have been released, and are now supervised in the community corrections system. Individuals who committed their crime prior to November 1989 are placed on parole; post-prison supervision applies to individuals that were sentenced under the sentencingguidelines.
•Local Control – Offenders that are: (1) convicted of a felony and sentenced to incarceration of 12 months or less; (2) revoked from felony community supervision and sentenced to 12 months or less incarceration; or (3) sanctioned to under 30 days for violating the terms of communitysupervision.
Also included in this budget unit is the funding for reimbursing counties for the jail costs associated with the pre-trial and post-trial incarceration costs for Ballot Measure 73 offenders. In addition, beginning with the 2011-13 biennium, revenue from court fees and fines are distributed to counties for correction programs, facilities, and alcohol and drug programs. In 2015-17, the total from court fees and fines is $4.4 million.
Revenue Sources and Relationships For the 2015-17 biennium, 81% of the General Fund resources for grant-in-aid to counties will be distributed based on the need for felony probation, post-prison supervision, and parole supervision. The remaining 19% will be distributed for the 2.1% of the population classified as local control. Counties also contribute varying amounts to the community corrections system.
The primary source of Other Funds revenue in the Community Corrections budget is the Criminal Fine Account ($4.4 million) to support distributions to counties for correction programs, facilities, and alcohol and drug programs. This Division also receives supervision fees and other revenues collected by the Linn and Douglas county programs totaling $1.6 million, as well as Inmate Welfare Funds.
Federal Funds revenue is from the U.S. Department of Justice, Bureau of Justice Assistance SMART probation grant to develop more effective and evidence-based probation programs. This revenue was inadvertently included; the Department, however, did not receive the grant for 2015-17. The limitation will be unscheduled during the 2016 legislative session.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget of $276.6 million total funds is a 12.9% increase over the 2013-15 legislatively approved budget. This budget includes an increase of approximately $26 million for mandated caseload growth compared to the April 2014 forecast, and a reduction of $5.1 million in jail support payments. To implement HB 3503, $1.9 million General Fund is added to fund grants for the five participating counties – Deschutes, Jackson, Marion, Multnomah, and Washington. The grants are to provide services to assist eligible offenders in their efforts to not reoffend. There is also funding to support administration of the grant program; 1 position is added to evaluate programs, services, systems, and program effectiveness with respect to evidence- based standards, among other duties.
Community Corrections Spending Breakdown
Program Description The Offender Management and Rehabilitation Services Division seeks to reduce the risk of future criminal conduct by offenders under the supervision of DOC and counties. Through programs including workforce development (e.g., education and cognitive/life skills) and substance abuse treatment, DOC works toward preparing the incarcerated offender for a transition back into the community when released, and to reduce recidivism. This Division is also responsible for administering jail inspections, religious services, sentence computation, inmate classification, victim services, and offender records.
Offender Management and Rehabilitation Breakdown
Revenue Sources and Relationships Other Funds revenue consists of inmate welfare funds to support alcohol and drug programs; charges for the inmate work; and resources transferred in for education programs from the Department of Education and the Higher Education Coordinating Commission.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget of $77 million total funds is 7.5% higher than the 2013-15 legislatively approved budget. This budget includes increased General Fund for the April 2015 prison population forecast increase and 2 new education positions. In addition, SB 5507 appropriated $400,000 General Fund to the Department of Administrative Services for the Greater Portland YWCA to implement an enhanced visitation and bonding program for children of incarcerated parents. A related budget note directs the Department to cooperate with the YWCA by providing space and personnel to support the program.
Program Description This section includes three organizational units within the Department of Corrections:
•Central Administration – Includes the Office of the Director, the Office of the Inspector General, the Internal Audits Office, the Government Efficiencies and Communications Unit, Research and Projects, and the Planning and Budget Office. All state government service charges are budgeted in thisunit.
•General Services – Includes fiscal Services which provides accounting and contract-related services; information Systems and Services including operations and user support, application development, and systemmaintenance;distributionServiceswhichprovidesgoodsandservicestooperatefacilitiesacrossthe state including food and canteen supplies; and facilities Services which is responsible for the repair and maintenance program, management of leased facilities, and energy conservation.
•Human Resources staff – Provides agency wide services including labor management, recruitment, employee development, training, employee safety, and riskmanagement. Revenue Sources and Relationships Other Funds revenues are primarily generated through commissary sales; General Services’ miscellaneous sales, rentals, and surplus equipment; and debt financed cost of issuance. Federal Funds revenue in the 2015-17 biennium is from a grant related to the Prison Rape Elimination Act.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget of $147.7 million total funds is a 6.7% increase from the 2013-15 legislatively approved budget. This budget includes funding for lifecycle replacement of the thin client intranet equipment that accesses educational and law library materials, for increased caseload as calculated in the April 2015 prison population forecast, reductions related to changes in the Attorney General hourly rates and DAS assessments, and technical adjustments to centralize print services costs.
Program Description Debt service is the obligation to repay the principle [sic] and interest costs of certificates of participation (COPs) and Article XI-Q bonds issued to finance the costs of construction and improvement of correctional facilities. Beginning with the construction of the Snake River Correctional Facility in Ontario in the early 1990s, DOC has used COPs to finance the major expansion of the prison system. The proceeds from COPs are also used for the construction of local jail capacity related to the SB 1145 population, purchase of property, design costs, siting costs, major improvements or upgrades of existing facilities, and the staff costs associated with the construction and improvement of facilities. For the 2013-15 biennium forward, debt financing will utilize Article XI-Q bonds.
Revenue Sources and Relationships Other Funds are unused balances in various capital financing accounts that were used to offset General Fund debt service. The Nonlimited Other Funds was used to accommodate refinancing of existing COPs, while the Nonlimited Federal Funds limitation allows for the use of “Build America” bonds where the federal government provides a subsidy for taxable bonds for eligibleprojects.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget for debt service of $128.8 million total funds is 6.3% less than the 2013- 15 legislatively approved budget. This budget reflects updated debt service requirements from refinancing completed in the 2013-15 biennium. Newly authorized deferred maintenance capital construction bond issuance is scheduled in 2017, such that no additional debt expenditures are incurred in the 2015-17 biennium. The 2015- 17 debt service is 8% of the Department’s total General Fund budget.
Program Description This budget unit captures maintenance and asset protection expenditures for the agency’s 14 institutions and approximately 4.6 million square feet of building space. Qualified projects must be less than $1 million; if projects exceed $1 million, they are categorized as capital construction.
Revenue Sources and Relationships This budget unit is supported by General Fund. Legislatively Adopted Budget The 2015-17 legislatively adopted budget of $2.7 million General Fund is 3% higher than the 2013-15 legislatively approved budget. The only adjustment was standard inflation provided in developing the current service level budget.
Program Description This budget unit includes expenditure authority for acquisition or construction of any structure or group of structures; all land acquisitions; assessments; and improvements or additions to an existing structure, with an aggregate cost of $1 million or more. The expenditure limitation for each project is in effect for six years. These projects are typically debt financed, which is reflected in a preceding budget unit. The agency inventory of deferred maintenance need is in excess of $68 million.
Legislatively Adopted Budget The 2015-17 legislatively adopted budget includes a $14.2 million authorization for 25 Priority 1 statewide deferred maintenance projects from the $68 million list including: road and erosion stabilization; camera upgrades and replacements; roof replacements for prisons; boiler and HVAC upgrades; kitchen floor replacement; publicaddressandotherelectroniccontrolupgrades;coolerrepairs;andlightingupgrades.
Project work will begin later in the biennium when bonds are sold, such that additional debt expenditures are not incurred until the 2017-19 biennium, when the debt service will be $3.7 million General Fund.
Mandatory minimums and Measure 11 gave prosecutors a limitless platinum credit card but no accountability for the costs they impose on Oregon
INTRODUCTION Nationally, very few studies have examined how mandatory minimum sentencing laws have been applied from indictment through conviction. Even fewer studies have looked specifically at how Oregon’s Measure 11 (M11) changed the disposition of cases. Prior Criminal Justice Commission (CJC) research studied how mandatory minimum sentences have been imposed after conviction, but no data has been available to track the impacts of M11 on affected-cases from indictment through conviction, until recently.
Previous CJC research has examined crime rates, criminal justice spending and incarceration rates. FN1
The purpose of this report is to analyze M11 and how it has been applied over the past 15 years. This analysis provides a comprehensive examination of the differences between Oregon counties, crime types and other factors in the dispositions of M11 indicted cases. The report also attempts to quantify the discretion used in M11 application, and how discretion has changed hands over time. The analyses of these dynamics show that M11 did not eliminate tough individual sentencing choices, rather it continued the transfer of discretion from judges to prosecutors which started when Sentencing Guidelines were passed by the legislature and went into effect on November 1, 1989. M11 went into effect in 1995 and required mandatory minimum sentences that were longer than Guideline sentences and furthered the power and discretion of prosecutors to control sentences through charging practices and plea bargaining process. This sentencing discretion is now controlled, to a large degree, by how the various prosecutors in the state choose to apply M11. This discretion “flip” by Sentencing Guidelines and M11 has had a substantial impact on sentencing inOregon. [Emphasis added]
HISTORY In the early 1900s the state of Oregon utilized a parole system of sentencing. Offenders sentenced under this system received a maximum term of imprisonment. The parole board had discretion to allow offenders to serve out a great portion of their sentences in the community rather than in prison. This “discretionary” parole system did not provide a release date for individual offenders, victims or other involved parties.
In a move to create equity among inmates who were serving similar crimes, a matrix sentencing system was adopted in 1977. Under this system, inmates received their sentences from judges, and then prior to entering prison were given an estimated release date by the parole board.
In the late 1970s and 1980s, violent crime increased substantially in Oregon. From 1960 to 1979 Oregon’s violent crime rate increased by 680 percent. Prison overcrowding led to inmate litigation against the state, attempted legislative intervention, failed ballot measures to fund prison construction, and the initiation of the Oregon Prison Overcrowding Project, which sought to deal with Oregon’s overcrowded prisons. (For perspective, the inmate population was just under 2,800 inmates in 1980, and just under 3,800 in 1986; by July 1989 the inmate population had grown to 5,300.) The pressure of increased crime combined with the inability or failure to build more prison beds caused great pressure on the parole process, so that paroles increased during this period of time.
As a part of the Oregon Prison Overcrowding Project, the Oregon Criminal Justice Council was created to plan and coordinate Oregon’s sentencing and corrections systems so parole would no longer be an issue. In 1987, the legislature directed the Criminal Justice Council and the Oregon Sentencing Guidelines Board to create a set of sentencing guidelines for Oregon. In 1989, the Oregon Sentencing Guidelines were adopted by the legislature, to apply to all felonies committed on or after November 1, 1989. The guidelines brought “truth in sentencing” to Oregon by making sentencing more predictable, proportional, and fair, and by ensuring offenders would serve the bulk of their sentences without eligibility for early parole. The guidelines also took into account the amount of prison capacity Oregon had at the time they were developed.
The guidelines, a matrix of grid blocks, based sanctions (probation or prison) and sentence lengths on crime-severity and the individual offender’s criminal history. Crime severity and criminal history scores together determined the presumptive sentence for each offender. Under sentencing guidelines the judge’s discretion to sentence felons up to the maximum allowed by law was significantly restricted. Before the guidelines, judges could sentence Class A felons up to 20 years of prison, Class B felons up to 10 years of prison and Class C felons up to five years of prison. The judges considered many factors in imposing sentence but ultimately they could sentence offenders with no prior record to the maximum sentence if they so decided. Sentencing guidelines limited this discretion and required the judge to impose the “presumptive sentence” unless there were substantial and compelling reasons to depart upward or downward. Sentencing guidelines also eliminated parole, thus offenders served their entire sentences, less earned time of up to 20 percent.
BALLOT MEASURE 11 In 1994, voters passed Ballot Measure 11 (M11), which created mandatory minimum prison sentences for 16 violent or sexual offenses and created a mandatory waiver for juveniles who were 15 years of age or older who committed those 16 crimes. Since 1994, the original M11 has been amended by the legislature, so that six additional crimes carry mandatory minimum sentences. The legislature has also increased certain sentences in the original initiative, and since 1997 has also allowed certain offenders convicted of “second degree” or less serious offenses to be eligible for an “opt out” of M11 if they meet certain criteria. These laws, and the original M11, are now found in Oregon Revised Statute at ORS 137.700, ORS 137.707, and ORS 137.712. For purposes of this report, the term “M11” includes all the crimes that carry mandatory minimum sentences in these statutes where the original 16 crimes were codified, where the additional crimes were added by the legislature, and where the “opt out” provisions are found.
The chief petitioner, who placed M11 on the ballot, justified the measure’s mandatory minimum sentences, which were substantially longer than the sentences for most offenders under the guidelines, based upon both “justice” grounds and “utilitarian” grounds.
The chief petitioner’s justice argument in favor of M11, in the 1994 Voters Pamphlet was straightforward: “The mandatory minimum sentences for the violent crimes listed in this measure are the minimum required for justice to society and the victim.”
Our analysis makes it clear that more than 70 percent of offenders indicted by a grand jury for committing one of the crimes in M11 and the 6 crimes added to the original crimes by the legislative process, were not convicted of the most serious offense in the indictment. Most of these offenders resolved their case by pleading guilty to a lesser charge in a bargain offered by the prosecution, and the sentences in those cases range from probation to prison. If one assumes that the State only indicted cases where there was evidence the M11 crime was committed, and we do, either justice was not served in the 70 percent of cases that were disposed of with a conviction for a lesser crime carrying a lesser sentence, or the proscribed mandatory sentences was not necessary for “justice to the society and the victim” in those cases.
The chief petitioner fleshed out his utilitarian argument for M11 in the 1994 voter’s pamphlet as follows:
“Requiring solid, minimum prison time for violent crimes will result in:
-Incapacitation. The criminal cannot commit other crimes while in prison. This will reduce actual crime in society.
-Deterrence. Career criminals will learn that crime does not pay in Oregon. Some of them will leave, or change their ways.
- Predictability of Sentences. Right now, the range of sentences is so broad, and the reasons for increasing or reducing sentences so broad, that it is hard to predict what actual sentence will be imposed. With these mandatory minimums, everyone will know the exact minimum sentence which must be served for the crime.
-Comparable Sentences. All judges in Oregon, no matter how soft, must impose the minimum sentence for a violent crime when a jury has found the criminal guilty. Sentences can be higher if the circumstances call for it, but they cannot be lower.”
Whether mandatory minimum sentences have provided the four outcomes promised by the chief petitioner will be considered in depth in this report. How it has fulfilled these promises is the bulk of this report, but can be summarized as follows:
•Incapacitation. Measure 11 did increase the use of incarceration to incapacitate offenders by requiring Oregon to grow its prison system to hold offenders for longer terms of prison. The increased need for prison beds was mitigated by the way the prosecution has applied the measure and mandatory minimumsentencing ingeneral.
•Deterrence. The effectiveness of the measure as a crime deterrent is indeterminate, but it is clear that many of those indicted and convicted for these offenses were not “career criminals” in that they had little or no prior felony record.
•Predictability of Sentences. The measure did provide predictability for the minority of cases where the state sought a conviction for crimes that carried the sentence proscribed by the chief petitioner. It created this predictability by eliminating judicial discretion if the prosecution obtained a conviction for that crime. This report focuses on the application of mandatory sentencing in Oregon in thousands of cases over more than a decade, and makes clear the predictable sentence is only arrived at in the minority of cases where a prosecutor, not a judge, decided it was appropriate and necessary. This report delves into the factors that increase the likelihood a prosecutor will seek a conviction that calls for a mandatory minimum sentence and examines the broad disparity in sentences for the 70 percent of cases where the prosecutor uses the “leverage” of the mandatory sentence to obtain a plea bargain to a lessercharge.
•Comparable Sentences. The chief petitioner focused on requiring “soft” judges to impose the minimum sentence if a jury found the offender guilty. This report shows that juries only hear about 15 percent of the cases involving mandatory minimum sentences, and in the other 85 percent of the cases there is broad disparity in the sentences arrived at by the plea negotiation process in Oregon’s 36counties.
DATA COLLECTION METHODOLOGY AND ANALYSIS
The Oregon Judicial Information Network (OJIN) contains information on all charges in Oregon, the dispositions and sentences on those charges, as well as demographic information of offenders. Use of OJIN data allows analysts to identify the initial charges in the formal accusatory instrument, charges returned as indicted by the grand jury, how often individual offenders are convicted of those charges and the sentences imposed based on those convictions.
For this analysis we rely on the language of ORS 132.390, concerning the grand jury, to provide the best information about what crime actually occurred and what the state would seek to prove at trial if an offender asserts the right to a jury trial. Our analysis then considered the movement from indictment to conviction as the point in the system where application of prosecutorial discretion impacts the actual sentence for the crime. Using this methodology, we were able to track changes in convictions before and after M11’s passage. We also used well accepted statistical models to examine factors that influence if an offender is convicted of a M11 offense or if an offender is sentenced to prison.
FINDINGS •The typical M11 offender is white (74 percent), male (91 percent), adult (89 percent)andhasnoadultfelonyconvictions.Only30percenthavebeenpreviously convicted of a felony, 15 percent have been convicted of a person felony and 15 percent have been previously incarcerated at an Oregonprison.
•In 2009, offenders who were charged by a grand jury with at least one M11crime, and were convicted of that crime or a lesser felony made up 34 percent of prison intakes, and 64 percent of all prison monthsimposed.
•Statewide, 29 percent of offenders charged by a grand jury with committing at least one M11 offense were convicted of the most serious crime in the grand jury indictment. Sixty-two percent of offenders indicted for at least one M11 crimewere sentenced to prison.
•M11 is applied differently across counties. In the five most populous counties, Multnomah County convicts the lowest percentage of M11 indicted offenders for a M11 crime at 36 percent, while Marion County convicts 63 percent. Counties apply M11 differently, and those differences are statistically significant even after controlling for other factors such as age, gender, race, and criminal history. Offenders indicted for a M11 in one of the five most populous counties are 79 percent more likely to be convicted of a M11 and twice as likely to receive a prison sentence as offenders in the other 31 counties. (This is counter to the prevailing myth that officials in counties in Eastern Oregon, away from Oregon’s four largest cities, would be more likely to convict of the most serious offense carrying the longestsentence.)
•M11 is applied differently across demographics. Juveniles and females indicted for a M11 are both less likely to receive a M11 conviction. These differences are statistically significant with juveniles and females both being about 20 percent less likely to be convicted of a M11. M11 conviction rates also differ by ethnicity. Blacks who are indicted for a M11 are about 15 percent less likely to be sentenced to prison than whites, and Hispanics are about 40 percent more likely to be sentenced to prison thanwhites.
•M11 indicted offenders who go to trial are nearly four times more likely to be convicted of aM11.
•M11 indicted offenders who have a private attorney are about 25 percent less likely to be convicted of aM11.
•A M11 indicted offender’s criminal history is important in determining whether they are convicted of a M11. A M11 indicted offender with three or more prior person felonies is nearly twice as likely to be convicted of aM11.
•Upon the passage of M11, fewer M11 indicted offenders were convicted of their most serious offense. During the 1990s, offenders who were subject to M11 were 34 percent less likely to be convicted of their most serious offense than thosewho committed crimes before the passage ofM11.
•Upon the passage of M11, M11 indicted offenders were much more likely to go to prison and more likely to receive a longer prison sentence. Offenders who were subject to M11 were 36 percent more likely to go to prison and their median length of stay in prison was 81 percentlonger.
•If Oregon voters had not passed M11, Oregon would require an estimated 2,900 fewer prison beds, about one third of the initial officialestimate.
Senate Bill 1049 (1997), which allowed guidelines sentences for some M11 offenses, had little or no impact on the prison population. The prison months imposed for indicted offenders changed very little after passage of thelaw.
OregonPEN is endlessly inspired by Sam Smith, a relentless journalist and seer of things as they really are rather than as they are presented to be for over 50 years. After a long career in Washington, D.C., Smith returned to his roots in Maine where he continues to publish "Undernews" -- "The News While There's Still Time to Do Something About It" -- the online version of his "Progressive Review" publication.
Regularly ahead of the curve, the Review has opposed federal drug policy for over 40 years, was a lonely media voice against the massive freeways planned for Washington, was an early advocate of bikeways and light rail, and helped spur the creation of the DC Statehood Party and the national Green Party,
In November 1990 it devoted an entire issue to the ecologically sound city and how to develop it. The article was republished widely.
Even before Clinton's nomination we exposed Arkansas political scandals that would later become major issues. .
We reported on NSA monitoring of U.S. phone calls in the 1990s, years before it became a major media story.
In 2003 editor Sam Smith wrote an article for Harper's comprised entirely of falsehoods about Iraq by Bush administration officials.
The Review started a web edition in 1995 when there were only 27,000 web sites worldwide. Today there are over 170 million active sites.
In 1987 we ran an article on AIDS. It was the first year that more than 1,000 men died of the disease.
In the 1980s, Thomas S Martin predicted in the Review that "Yugoslavia will eventually break up" and that "a challenge to the centralized soviet state" would occur as a result of devolutionary trends. Both happened.
In the 1970s we published a first person account of a then illegal abortion.
In 1971 we published our first article in support of single payer universal health care
In 1970, we ran a two part series on gay liberation.
in 1965 we called for the end of the draft.
In the 1960s we proposed community policing
With kind permission of the author, OregonPEN presents another essay from his "Overstocked Archives," this one especially topical as America races towards a momentous presidential election where the corruption of our politics is heightening and amplifying the public's visceral dislike of politics to such a fever pitch that we run the risk of seeing an actual proto-fascist elected, just as predicted in books like "It Can't Happen Here."
June 15, 2016 The corruption of corruption
From our overstocked archives
One of the reasons we are so disgusted with politics these days is that corruption just isn’t as good as it used to be. Once one supported a corrupt politician because you and your friends got something out of it. The politician got power but partially returned the favor to people like you. And you opposed the ones who took but didn’t give back.
With the growth of television and modern public relations, however, politicians increasingly became optical illusions with image replacing actual record, loyalty, or favors done. Instead of our national legislature voting for a bridge to nowhere, it became itself a Congress to nowhere, filled with people paid large sums to do what campaign contributors wanted. Modest pork barrel legislation was replaced by the massive effects of the Citizens United case.
It has become a time when one gets enough credit just talking about the middle class that you don’t actually have to do anything for it, especially if you’re rushing off next to a $50,000 endowed speech for a Wall Street financial firm. It’s the optics that count, not the reality.
My first experience with corrupt politics was as a 12 year old envelope stuffer in a successful campaign to end 68 years of Republican rule in Philadelphia. Joe Clark and Richardson Dilworth, running for comptroller and treasurer, won and started to clean the place up. It was there I learned that it isn’t always morality that leads to good politics so much as a wise distribution of power. The Republicans could withstand yards of bad editorials but a comptroller and treasurer with subpoena power were something else. Soon Dilworth ran for mayor and won.
You couldn’t hang around politics in Philly in those days without knowing what was going on. And nobody pretended it wasn’t. The polling guy who went into the curtained booth with my aged aunt to pull the levers for her. The FBI agents who visited my politically active father seeking help in a corruption case they were working on. The police car in the back drive being loaded with a case of champagne liberated from my sisters’ wedding reception. These weren’t just incidents, they were the culture.
Later, covering the Cambridge, Massachusetts, city council for the Harvard radio station introduced me to a new variety. That patron saint of urban corruption, Boston Mayor James Michael Curly died while I was there, and on the Cambridge council we still had people like Al Vellucci who wanted to turn Harvard Yard into a parking lot and make Harvard “a separate state like the Vatican in Rome.” Another councilmember told me he didn’t know how he was going to vote on a police and fire pay raise because he figured that each of these fellows was getting a few thousand more on the side. They didn’t tell you about that in political science class.
Then, In the sixties, I became the press guy for then DC civil rights leader Marion Barry. We hit it off and I later backed Barry for school board and his first two terms as mayor. Then I soured on him not because of any great moral revelation but for specific policies I didn’t like. Even before cocaine got to him, some of the city’s big interests were already doing the job.
Modern DC has only had elected mayors since the 1970s and Barry’s first two terms were among the best. The drug problem has overwhelmed this fact, but Barry handled the budget well and he started a summer jobs program for thousands of youths, whereas recently a DC council-member was found guilty of stealing around $300,000 from a youth program, a small metaphor for a big political change.
But it was never simple. When Barry first ran for his first reelection, two friends and I held a party for him. None of our wives would take part.
I came to call Marion “the last of the great white mayors,” in that his approach to urban politics had much more in common with Mayors Curley, Daley and LaGuardia then with the newer generations of politicians for whom far more money came in but the favors returned to its sources rather than to the average citizen. Corruption no longer required tithing to one‘s community.
One of the ways you can get a handle on these earlier mayors is to check out their homes. Some were humble, some were pretty nice, but part of the deal was you stayed close to your ‘hood. Curley built an 18 room home in 1915 in his first term and was still living their 41 years later when he sold it to for $60,000 to the Society of Oblate Fathers for Missions Among the Poor. Daley died in a modest brick bungalow just a few doors from his birthplace. Young mayor Barry lived for over a decade in a house in the poorer part of town and he still lives in the city’s poorest ward and represents it on the city council. As for Philly mayor Berrnard Samuel, Dick Dilworth once campaigned next to the mayor's home, telling his supporters: "Over there across the street is a house of prostitution and a numbers bank. And just a few doors further down this side of the street is the district police station. . . The only reason the GOP district czars permit Bernard Samuel to stay on as mayor is that he lets them do just as they please." True, but his neighborhood was definitely not the Hamptons.
And it wasn’t just a local thing. At the state level, two classic corrupt politicians – Earl Long of Louisiana and EH Crump of Tennesee did some things you won’t find in average references. Reports Historic Memphis, “Unlike most Southern Democrats of his time, Crump was not opposed to blacks voting in Memphis and they, for the most part were reliable Crump machine voters.” In fact, Memphis Blues was originally written by WC Handy as a campaign song for Crump. By the time, a young Marion Barry of Memphis came along, however, Crump had joined the segregationists.
As for Long, one of the reasons some thought he was crazy because he was registering tens of thousands of black voters. But, as Ol’ Earl once explained, when asked if ideals had a place in politics, "Hell yes. You should use ideals or any other damn thing you can get your hands on."
And at the national level, Adam Clayton Powell and Lyndon Johnson - two politicians of dubious ethics - got more good legislation passed in less time than in almost any other period of American history, yet you wouldn’t want your daughters near them.
Corruption has also been deep in American ethnic and urban progress. Speaking of immigrants, Richard Croker, a tough 19th century county boss of Tammany Hall, said his organization “looks after them for the sake of their vote, grafts them upon the Republic, makes citizens of them." Boston politician Martin Lomansey met every new immigrant ship and "helped the newcomers find lodging or guided them to relatives." James Michael Curley set up nationalization classes to prepare recent arrivals for the citizenship examination. Can you imagine any politician doing that today?
There were, of course, exceptions. Like Providence’s mayor Buddy Cianci of whom Daid Freedland wrote in the Daily Beast: “His tenure ended when Cianci, who had a reputation as one of Providence’s most active ladies’ men, summoned to his home a friend he thought was having an affair with his ex-wife. (Both denied it.) Over the course of three hours, Cianci poured liquor on the man, threw an ashtray at him, punched him repeatedly, burned him with a lit cigarette, and threatened him with a fireplace log while demanding hundreds of thousands of dollars of payoff.”
But overall, there is little doubt that the system, for all its faults, also gave the poor a boost and helped build the strength of immigrant groups like the Irish.
My first big hint that things had really changed was when I began looking into Bill Clinton’s Arkansas. I had been forewarned by my friend Sally Denton’s book, The Bluegrass Conspiracy, about next door Kentucky in which she described a drug driven corruption that ran from the police right up to the governor’s office. The book told enough truths that once a friendly retired cop brought his gun along for her safety as she gave a book talk.
I found more than a few echoes of Kentucky in Arkansas. Like the drug pilot who said he really liked the state, giving as an example the time he landed in a field and his pick up was a state trooper in a marked car. There were also new scents of old trails I had followed while writing about Reagan and Bush -- back when no one ever accused me yet of being a conspiracy theorist for just reporting things I had found. The droppings of BCCI and Iran-Contra, of S&L scandals and the CIA were in Arkansas as well.
Then there was the $50 million the Arkansas Development Financial Authority sent to a bank in the Cayman Islands, a favorite destination spot for laundered drug money. And the IRS warning other law enforcement agencies of the state's "enticing climate." According to Clinton biographer Roger Morris, drug operatives went into banks with duffel bags full of cash, which bank officers then distributed to tellers in sums under $10,000 so they didn’'t have to report the transaction.
And there was the major drug trafficker Barry Seal who, under pressure from the Louisiana cops, relocated his operations to Mena, Arkansas. Seal would later claim to have made more than $50 million out of his operations. He even had a Navy surplus minesweeper to recover drugs in case a plane went down All this was even before you got to the governor’s office.
Several things struck me about the Arkansas story. The first was that – unlike Chicago, Boston or DC - the ordinary Arkansan seemed to be getting hardly anything out of it all.
The second was that the national public and media didn’t want to hear about it. Some reporters who tried to tell the story even got taken off the case, liberals bought into the Clintons’ “vast rightwing conspiracy” theory even though, in my case at least, the first leads had come from a progressive student group at the University of Arkansas.
The third – and most important change – was that facts no longer were worth what they once were. It was all a question of who could create the best optical illusion.
What they call in Latin America a culture of impunity had descended on the country. As I described it:
In a culture of impunity, rules serve the internal logic of the system rather than whatever values typically guide a country, such as those of its constitution, church or tradition. In a culture of impunity, what replaces constitution, precedent, values, tradition, fairness, consensus, debate and all that sort of arcane stuff? Mainly greed. We find ourselves without heroism, without debate over right and wrong, with little but an endless narcissistic struggle by the powerful to get more money, more power, and more press than the next person. In the chase, anything goes and the only standard is whether you win, lose, or get caught.
If this seems too harsh consider that the American illegal drug trade is estimated to be roughly the size of the legal pharmaceutical industry. Yet, as far as one can tell, at least from conventional media, it is the only industry that never contributes to any politicians, never lobbies on Capitol Hill and never tries to influence our political agenda. In other words, based on the silence of the news accounts at least, the least corrupt industry in America.
And, as I found out with the Arkansas story, it was not something you were meant to challenge.
Now the term optics has become one of journalism’s favorite clichés. What something seems is more important than what it is. Instead of modest earmarks and pork legislation we have candidates who get $200,000 for speaking to Goldman Sachs and then go on TV to talk about their concern about “income inequality.”
The press used to love delving into corruption stories, but now, for many, it’s too risky and might hurt access to their sources - you know, those people who give them the latest talking points.
And instead of corruption being, as it once was, a form of political feudalism with a complex set of quid pro quo aspects, today our politicians give back to their contributors rather than to the voters and then tell the TV interviewer about their concern for the middle class.
In 2006, Democratic Representative Louise Slaughter put it well: I know a little something about corruption. In the late '70s, I chaired the Public Safety Committee in the Monroe County Legislature in New York. And while it may not be well-known everywhere, both Buffalo and Rochester were notorious mob cities, and we were trying to clean up the mob.
And I was taught by the district attorney and the police chief and the sheriff to take a mirror on the stick every morning before I left the garage and look under the car to make sure there were no bombs there…
But today we're suffering the consequences of what may be the worst corruption in the nation's history. . . What we're up against isn't just the shameful work of individuals like these. It's a much broader problem. . .
Over the last five years, the number of special interest lobbyists . . . I believe that when Clinton left office there were 9,500. There are more than 34,000 today. And, in fact, that's 63 lobbyists for each member of Congress.
Now along with the corporations they represent and the numerous Republican legislators that they court, they are now writing the bills that hurt every man, woman and child in this country.
They have infiltrated every aspect of the government. Their money and donations shape the opinions of corrupt lawmakers in a way that public opinion no longer does. . . For example, in 2001, our nation's energy policy was written in closed sessions by representatives of major corporations…. . .
And during the Iraq war, most egregiously, our security has been sacrificed as well as the safety of our troops repeatedly by the lawmakers who handed out defense contracts to their friends, instead of to those most qualified.
More than $9 billion in Iraq reconstruction funds has disappeared into the black hole of no-bid contracts, created by the lobbyists and corrupt politicians. . .
From tax policy to public television and radio programming to the laws that regulate the safety of our drinking water, nothing has proved too precious to avoid being sold for a price.
Public-facing IT projects are to American public agencies what Iraq and Afghanistan are to the American military
A postwar British intellectual, CP Snow, gave a famous lecture in which he castigated British schooling for elevating the humanities to such a high perch that Britain, which owed its survival in World War II to technological innovations, had become a technical backwater compared to the US and Germany. His "two cultures" phrase entered into public discourse and caused much debate among the intelligentsia in the West, including in America, where innumeracy is freely admitted among the supposedly well-educated and being able to think and reason quantitatively is something for the foreign students to worry about.
Nothing reveals the two cultures problem quite as well as when governments try to do public-facing IT projects, meaning projects that are to be accessed and used by the general public instead of just by the government workers themselves. This is because the kinds of organizations that are good at creating and delivering IT projects that attract and serve huge audiences successfully tend to exhibit, on almost every single trait of organizational personality, the exact opposite behavior that governmental organizations display. Which is why public-agency IT systems are so often quagmires, endless fountains of cost-overruns and career-ending failures, just the way land wars in Asia are the quagmires of empires.
When looking for talent, governments value connections, credentials and compatibility -- people who have spent their lives beavering away in the right schools, with the right mentors, with the right values, and who have purchased the right credentials while never causing a stir, much less a stink.
Whereas good IT shops have no time for any of that, and must instead find people who can deliver the goods. These are often unreasonable people, who are socially inept or worse, and many of them have a knack for sowing chaos in their wake.
Governments are the original hierarchies, and respect for "the office" is their holy spirit.
IT is intrinsically anti-hierarchical, because computers do not care about the title or resumé of the person writing the code, only whether the code delivers or crashes.
Government is inherently risk averse and is fanatically devoted to concealing errors. Good IT requires the high risk tolerance needed to permit rapid, public trial and error.
Government operates on a chain of command that filters and massages all the information flowing upward towards the decision-makers, who become prisoners of their advisors.
IT is inherently open to inspection to anyone with access, and anyone with a computer can decide for themselves whether the product works.
And just as the military is unwilling to admit that their flagship product -- breaking things and killing people -- might just not be the best solution to every problem, and maybe even helps small molehills of trouble turn into huge mountains of catastrophe, civilian governments seem equally incapable of swearing off the opium pipe-dream that this time it will be different and that they will avoid the pitfalls and create a great IT system on time and on budget.
No doubt the lessons of Cover Oregon will be forgotten, just as the lesson of the many empires who have attempted to conquer Afghanistan have been forgotten. But hope springs eternal, and perhaps the below excerpts from a status report from DCBS to the Legislature will help raise awareness of the costs of such amnesia.
Excerpts from Oregon Health Insurance Marketplace Report to the Joint Interim Committee on Ways and Means and Interim Senate and House Committees on Health Care -- May 2016
Introduction from the Director of the Department of Consumer and Business Services The Department of Consumer and Business Services (DCBS) developed this report to update the Joint Interim Committee on Ways and Means, Interim Senate Committee on Health Care, and Interim House Committee on Health Care about Oregon’s health insurance marketplace (Marketplace). In accordance with Section 21 of Senate Bill 1 (Chapter 003, 2015 Laws), DCBS provides these reports every time the interim committees meet. The reports for September 2015, November 2015, and January 2016, as well as the April 15, 2016 annual report for the Marketplace, can be found at www.oregonhealthcare.gov/reports-audits.html. Since the DCBS report in January 2015, open enrollment for the Marketplace has ended. More than 147,000 Oregonians signed up for health insurance through HealthCare.gov, an increase of 35,000 or 31 percent over last year. In fact, Oregon had the highest percentage of increase in enrollment over the previous year of any HealthCare.gov state. Now that open enrollment for plan year 2016 is over, DCBS is focused on providing ongoing support for Marketplace customers by answering questions, helping people enroll through special enrollment periods, and handling consumer issues. We also continue to focus on helping small businesses understand health insurance options for their employees. Since our previous report, the U.S. Department of Health and Human Services finalized its rule regarding the cost of using the federal platform, HealthCare.gov. The fee will be 3 percent of premiums. HHS has requested a waiver from the Office of Management and Budget to reduce the fee to 1.5 percent for plan year 2017.
In December 2015, DCBS released a Request for Proposals (RFP) for technology solutions for both the Small Business Health Options Program (SHOP) and the individual market to help determine if paying for HealthCare.gov is the best use of public dollars. As of the writing of this report, DCBS is reviewing the information collected through the RFP process, and we expect to present our analysis and discuss options with the legislature during the May 2016 legislative days. Thank you for your continued support and feedback about the Marketplace. We look forward to ensuring that the Marketplace is a trusted and valuable resource for Oregonians in need of health care coverage.
Patrick M. Allen, DCBS Director
I.FinancialCondition741.222(1)(a) “The financial condition of the health insurance exchange, including actual and projected revenues and expenses of the administrative operations of the exchange and commissions paid to insurance producers out of fees collected under ORS 741.105 (5)”
The financial condition of the Marketplace continues to be stable and self-sustaining for the 2015-2017 biennium. There have been many changes since the January 2016 report, including the setting of the 2017 per member per month (PMPM) assessment fee, passage of Senate Bill 5701 and House Bills 4017 and 4071, and finalizing the cost of the federal technology platform. Although not all of these actions affect the Health Insurance Exchange Fund, they are included here to provide you with a complete picture of the Marketplace. Budget Authority For reference purposes throughout this section, the DCBS 2015-2017 Legislatively Adopted Budget as of the February 2016 session is shown in the table below. 2015-2017 Legislatively Adopted Marketplace Budget
Section $ LABPositions FTE
Marketplace29,687,162 17 20.50
Shared Services 2,188,303 11 8.17
Total31,875,465 28 28.67
Several changes affected the Marketplace’s Legislatively Adopted Budget:
·SB 5701: Increase in personal services in the amount of $327,039 to adjust the limitation to reflect agreements made in the collective bargaining negotiations and changes to other payroll expense. Decrease in services and supplies budget authority in the amount of <$5,226,079>. This amount is comprised of a decrease in the amount of <$558,617> that resulted from removing 13 limited-duration and adding six permanent positions within the call center; <$6,400,000> of anticipated excess limitation; and $1,732,538 increase to the Marketplace outreachbudget.
·HB 4017: Increase in budget limitation in the amount of $415,000 for the establishment of the Basic Heath Plan (BHP), which provides health benefits coverage program for low-income residents who would otherwise be eligible to purchase coverage through the Health Insurance Marketplace. HB 4017 requiresthe Department of Consumer and Business Services (DCBS) and the Oregon Health Authority (OHA) to convene a stakeholder advisory workgroup. The bill directs the workgroup to develop a BHP blueprint and requires the workgroup to present a completed BHP blueprint to the appropriate legislative interim committees by Dec. 31, 2016.
·SB 4071: Increase in budget limitation in the amount of $3,646,000. This limitation consists of an other-fund limitation increase of $1.823 million, which is funded by a general fund appropriation of $1.823 million. Although the net increase to the limitation is $3.646 million, program costs are limited to $1.823 million. SB 4071 provides for the establishment of the Compact of Free Association (COFA) Premium Assistance Program administered by DCBS to provide financial help with health care premiums and out-of-pocket costs for Pacific Islanders legally residing inOregon under COFA. This program is funded through a general fund award through the end of the biennia and does not affect the Health Insurance Exchange Fund.
Revenue Oregon’s Marketplace is primarily funded through PMPM fee of $9.66 for medical plans and 97 cents for dental plans purchased through the Marketplace. These rates are in effect through the end of the calendar year. Beginning January 2017, DCBS proposes to set a PMPM fee for medical plans of $6.00 and 57 cents for dental plans. The revenue forecast for the Marketplace is detailed in the table below.
Each of the ongoing revenue categories is discussed in further detail below.
Marketplace PMPM assessment: As seen in the table above, the change in PMPM is reflected with an anticipated decrease in PMPM revenue beginning the first quarter of 2017, ending March 31, 2017. As of the March 2016 enrollment data, the amount of assessment revenue earned compared to the estimated PMPM revenue forecasted is greater by $1,609,840. This increase in earned revenue is a result of medical and dental enrollments being higher than the Legislatively Adopted Budget estimate by 164,540 and 21,018 or an increase of 22.5 percent and 19.1 percent, respectively. Actual enrollment through March 31, 2016, is shown below:
The actual enrollment numbers in the table above are reported by insurance carriers to DCBS. Discrepancies between these numbers and the numbers reported by the U.S. Department of Health and Human Services are attributable to the timing associated with each reporting process. About 147,000 Oregonians signed up for coverage during open enrollment; however, every year, a certain percentage of those who sign up fail to pay their first monthly premium and effectuate their coverage. Others fail to provide documentation required by HealthCare.gov and lose their coverage. The actual enrollments reported by carriers above represent net-effectuated enrollments.
Insurance carriers periodically update actual enrollments, and DCBS will adjust monthly enrollment data in future reports accordingly. These updates are usual and customary for the industry and are due to nonpayment by individuals purchasing plans or coverage events such as births and deaths. Any time updated enrollment data decreases the amount owed by insurance carriers in past periods, DCBS applies credit to future assessment billings instead of providing a refund.
The Legislatively Adopted Budget revenue forecast is based on the expected quarterly enrollment activity shown in the following table. The enrollment projection for each quarter is the sum of three months‘ worth of enrollment (e.g., 100,000 enrollees in July plus 100,000 enrollees in August plus 100,000 enrollees in September equals 300,000 enrollments for the quarter).
As the table above shows, medical enrollments are expected to continue to increase during this biennial period and the next, while dental enrollments are expected to remain stable. The increase in enrollments, with the decrease in expected expenditures, contributed to the DCBS ability to reduce the PMPM in 2017.
DCBS bills insurance carriers the month after the reporting month, and insurance carriers have approximately 30 days to submit payment, which creates a two-month lag in receipt of revenue earned.
Cover Oregon’s Balance Transfer: All funds have been transferred to DCBS. This category is not an ongoing revenue source for DCBS.
OHA Transfer: The Legislatively Adopted Budget originally projected a total transfer from OHA of $13.2 million. The DCBS current estimate is $12.6 million, $600,000 less than originally anticipated, as detailed in the chart below:
As previously shown in the Revenue Forecast as of March 2016, the OHA transfer revenue will reduce significantly during the second fiscal year and then again in the first year of the 2017-2019 biennium. The first decrease in the second year of this biennium is due to the expiration of the Oracle contracts. In 2017-2019, projections include only the ongoing cost to maintain the information that has been preserved in the 2015-2017 biennium. The difference between the Legislatively Adopted Budget estimate and the current estimate is a net result of the following changes:
Original estimates included an ongoing projection of the original Speridian contract, which was completed in March 2016 when the Oracle contracts expired. The work included in this contract is no longer necessary after March 2016 and was reduced by $3.7 million.
The current estimate includes all new Speridian services to provide for an archiving solution of Oracle data; this cost is currently $3.3 million. This work will be shared between OHA and DCBS. OHA will cover 80 percent of the costs; DCBS will cover 20 percent.
The estimate also includes a contract for Tornai Consulting. This contract was not in the original projection because the statement of work is solely for OHA. However, the contract was transferred to DCBS because it fell under the body of work that was transferred from Cover Oregon. Therefore, DCBS is obligated to pay for these services and seek reimbursement from OHA, increasing the total shared contract costs by $120,000.
In addition to the revenue transfer for shared contracts, OHA has been billed approximately $2 million for its portion of contract costs Cover Oregon paid for and had not been reimbursed for as of June 30, 2015. This amount is not included in the IT cost- allocation table above as the obligation to pay was made to Cover Oregon, not DCBS. This amount is included in the revenue received for the quarter ending December 2015 under the OHA Transfer category. Although not reflected in the “Oregon Health Insurance Marketplace Fund, Forecast Revenues, Expenses, and Fund Balance” table below, DCBS has received reimbursement for quarter ending December 2015. DCBS bills OHA in quarterly increments. However, there is often a delay in billing and, therefore, payment as a result of a delay in receiving invoices from vendors. For example, the invoice for the quarter ending Dec. 31, 2015, was presented to OHA in early March 2016 as we were awaiting the receipt of invoices from contractors. Contractors’ invoices are required documentation used to calculate the amount DCBS is to be reimbursed. This delay has not jeopardized the Marketplace’s cash flow to date.
Interest (Investment) Income: The Marketplace fund earns interest income, which contributes to the ending fund balance and is expected to be received as anticipated.
Federal Funds: No federal grant funds were transferred to DCBS when it took over management of the Marketplace on July 1, 2015. All federal grants are either closed or in the process of being closed.
Expenditures The following table details actual expenditures from July 2015 through Feb. 2, 2016, expenditure projections for the remaining biennial period, and the variance from the February 2016 Legislatively Adopted Budget.
DCBS is currently projecting expenditures approximately 2 percent above the Legislatively Adopted Budget. During the February 2016 session, a portion of our limitation was removed during two different actions.
DCBS will be requesting adjustments to the 2015-2017 Marketplace Legislatively Adopted Budget in the May 2016 Emergency Board. SB 5701 provided for a general decrease of DCBS’s unallocated limitation that was reported in the January 2016 Marketplace Interim Report. At the same time, DCBS requested and was granted a reclassification of six limited-duration staff members to permanent, full-time status and the reduction of seven limited-duration staff. This request yielded a reduction of $558,617. When the overall unallocated limitation was calculated, these seven limited-duration positions were projected to remain vacant, contributing to the total overall unallocated limitation by the cost of these positions. When both of these actions were approved, the amount related to the seven limited-duration positions was effectively removed twice. Once a determination of the May 2016 request is made, the 2 percent overage will be corrected.
Of the actual expenses paid as of Feb. 29, 2016, $1,400 has been paid to insurance agents on behalf of Cover Oregon’s obligation to pay for commissions. The Marketplace is no longer responsible for paying commissions to insurance agents now that Oregon uses the federal platform, HealthCare.gov.
I.TechnologyDevelopment 741.222(1)(b) “The development of the information technology system for the exchange” In November 2015, the U.S. Department of Health and Human Services (HHS) proposed to begin charging State-Based Exchanges on the Federal Platform (SBE-FPs) like Oregon a user fee of 3 percent of premiums for use of HealthCare.gov. In the final rule, released in February 2016, HHS stated it has sought a waiver from the Office of Management and Budget (OMB) to reduce the user fee from 3 percent to 1.5 percent of premiums for the 2017 benefityear.
Although this fee would be payable directly by insurers to the federal government and not affect the Health Insurance Exchange Fund, the state has a responsibility to explore all of the options available to make sure paying for HealthCare.gov is the best use of the policyholders’ dollars. If Oregon proceeded with an option other than the federal platform, there would be a revenue and expenditure impact on the Health Insurance Exchange Fund related to the implementation and operation of another system.
In December 2015, DCBS released an RFP to collect information about fully functional and cost- effective technology solutions for both SHOP and the individual market. Proposals were due March 4, 2016.
DCBS is using the information collected through the RFP process to compare the cost and functionality of HealthCare.gov with successful private vendor systems currently used in other states. As of the writing of this report, the results of the RFP are still under analysis. DCBS expects to have its analysis and recommendations ready for the Legislature by the May 2016 legislative days.
If the state decides to procure a system other than the federal platform, DCBS would need to seek approval from the legislature for any technology that costs more than $1 million, and DCBS would also need to receive budget authority to pay for the system. In addition, the procurement of any technology system would be subject to the state’s stage gate process.
II.Coordination with the Oregon HealthAuthority 741.222(1)(C) “Efforts made, in collaboration with the Oregon Health Authority, to coordinate eligibility determination and enrollment processes for qualified health plans and the state medical assistance program” DCBS continues to maintain a close working relationship with OHA, the agency that oversees the Oregon Health Plan (OHP), Oregon’s Medicaid program, to ensure cross-agency collaboration between marketplace and Medicaid operations. Some areas of collaboration include:
Operations and Technology:
DCBS and OHA continue to work together on the management of the state’s eligibility and enrollment systems, including coordination with HealthCare.gov and other federal systems. The coordination has ensured that there is no wrong door for applicants. Currently, Oregonians can apply for Medicaid either directly through an OHP PDF application or through HealthCare.gov. Those found ineligible for OHP can apply for a special enrollment period to sign up for a qualified health plan through HealthCare.gov.
DCBS is also coordinating with OHA on the implementation of OHA’s new Medicaid eligibility and enrollment system, OregONEligibility (ONE), which began operating Dec. 15, 2015.
Outreach and Education:
DCBS and OHA are currently coordinating their outreach and education efforts. This includes but is not limited to:
·Partnering to provide a network of community partner organizations with more than 800 enrollment assisters capable of helping and enrolling both qualified health plan and OHP eligiblepeople. ·Coordinating call center operations andinformation. ·Using OregonHealthCare.gov as the state’s website for information about boththe Marketplace and OHP so people seeking information about either have a central resourceavailable. ·Coordinating OHP and Marketplace messaging andmaterials. ·Working together on stakeholderengagement. ·Developing a blueprint for a Basic Health Program as required by House Bill 4017of 2016. ·Exploring the possibilities associated with 1332 waivers. Section 1332 of the Affordable Care Act allows states to waive specific provisions of the act in order to implement innovative state solutions to health care issues, such as establishing the Basic Health Plan.
III.ProgramIntegration 741.222(1)(d) “The progress of integrating the duties and functions transferred to the Department of Consumer and Business Services” Cover Oregon Transition The transition of duties and functions from Cover Oregon to DCBS has been completed and went smoothly. In accordance with Senate Bill 1, Cover Oregon closed June 30, 2015, and the Marketplace has been operating at DCBS since July 1, 2015.
Advisory Committee Senate Bill 1 also established a health insurance marketplace committee. The committee provides guidance and feedback on issues affecting the marketplace, such as outreach, customer feedback, and insurance plan affordability. The Oregon Senate confirmed the members of the committee in February 2016, and the committee held its first meeting April 7, 2016.
Integration with the Senior Health Insurance Benefits Assistance Program In December 2015, DCBS began a project to integrate the Marketplace unit and the Senior Health Insurance Benefits Assistance Program (SHIBA), which is also a part of DCBS. SHIBA provides Medicare education, training, counseling, and advocacy to Oregonians with Medicare withthesupportofacommunity-basedcounselingworkforcethatincludescertifiedvolunteers. The goal of the integration is to find ways to make best use of staff resources, outreach, and education efforts, and provide better service to Oregonians seeking health insurance, whether through the Marketplace or Medicare. DCBS expects to complete integration of the programs by June 30,2016.
IV.Small Business Health Options Program(SHOP) 741.222(1)(e) “The progress in planning for, developing and implementing a Small Business Health Options Program, including the key decision points, timelines and a description of how the department is engaging stakeholders in the design and decision-making process for the SHOP” Currently, Oregon uses a direct enrollment, manual SHOP process. Any small business in Oregon with one to 50 employees can purchase a certified SHOP plan directly from one of the participating insurers. Upon request, the Marketplace will determine whether the small employer meets the requirements to participate in the SHOP program and potentially be eligible for the IRS small business tax credit. DCBS will continue to use this direct enrollment, manual process until the state adopts an automated process.
For the past few months, DCBS has been collecting information about options for an automated SHOP process. DCBS has consulted with stakeholders, including small businesses, associations, insurers, and agents, to better understand their needs and interest.
DCBS has also discussed the capabilities and cost of the federal SHOP platform with the federal government; however, Oregon will not be able to use that platform. The federal platform does not support composite rating, the rating methodology the Oregon Division of Financial Regulation requires for Oregon’s small group market. Composite rating is the practice of grouping all eligible employees together and assigning a single rating, regardless of individual factors (such as age, gender, or tobacco use) that may make somebody a higher or lower insurance risk. The Oregon Division of Financial Regulation considered changing methodologies to one the federal platform supports. However, it decided to continue to use composite rating going forward, so DCBS will need to pursue other options for an automated SHOP system.
In April 2015, DCBS released a request for information (RFI) to learn about private vendor platforms. While the RFI proved helpful, it was limiting because vendors did not provide detailed cost information in their responses. DCBS has requested cost information aspart of the RFP released in December, as detailed in the technology development section of thisreport. After responses to the RFP have been reviewed, DCBS will initiate a decision-making process that includes stakeholder consultation and a cost-benefit analysis.
DCBS intends to present its analysis of automated SHOP options to the interim committees during the May 2016 legislative days. In other states, SHOP has been successfully implemented in about three to six months. DCBS expects it could be implemented in Oregon in a similar timeframe after a decision is made about which option to pursue. Until an automated SHOP system is in place, Oregon will continue to use the direct enrollment, manual process for SHOP.
V.Liabilities 741.222(1)(f) “The outstanding liabilities, if any, carried over from the Oregon Health Insurance Exchange Corporation” As a function of Senate Bill 1, DCBS took responsibility for the liabilities of Cover Oregon. Cover Oregon’s liabilities were factored into the DCBS budget approved by the legislature for the 2015-2017 biennium. As of the date of this report, DCBS has: ·Assumed or assigned all Cover Oregonleases During the time of the transition of Cover Oregon functions to DCBS from March through June 2015, Cover Oregon had lease agreements for three different properties:
a.Cherry Avenue: The Original Cover Oregon offices, located at 3414 Cherry Ave. NE in Salem, had a 60-month lease ending Nov. 1, 2016, at $14,129 per month. This property had already been sublet to a third party (Northwest Senior and Disability Services) before enactment of SB 1, and an agreement was reached with the property owner for the third party to assume the lease permanently, releasing Cover Oregon and DCBS from further liability, effective June 30,2015.
b.Spinnaker Place: The Cover Oregon call center location, at 2250 McGilchrist St. SE in Salem, had an 84-month lease ending Aug. 8, 2020, at $32,144 per month, not including unamortized tenant improvements (TI). Cover Oregon had already made arrangements to exit this lease due to a workforce reduction. The lease was terminated effective March 31, 2015, with $294,000 paid at terminationfor unamortized TI allowance (which would have been due regardless of when or how the lease was terminated), and $31,000 rent for waiver of 180-day notice for a total of $325,000 in exitcosts.
c.Durham Plaza: The Cover Oregon corporate headquarters, located at 16760 SW Upper Boones Ferry Road, #200 in Tigard, was composed of a primary lease agreement with two amendments. The primary lease was for most of the office space in suite 200, with a 90-month lease ending April 1, 2020, for $47,259 per month,notincludingunamortizedTI.Twomoresuiteswereaddedlater,eachon a separate amendment: Suite 105, on a 75-month term ending April 1, 2020,for $4,356 per month; and suite 106, on a 70-month term ending April 1, 2020, for $5,128 per month. DCBS retained this lease, and it currently houses a field office for Oregon OSHA, a division of DCBS, and the Workers’ Compensation Board, both of which were already looking for a larger space to accommodate growth. The lease was assumed in its entirety by DCBS as of July 1, 2015.
·Taken over the process of assigning, renegotiating, or terminating all contractsas appropriateandsetupaprocessforhandlingCoverOregonaccountspayable
Attachment A: Litigation Summary
In 2011, the State of Oregon hired a private contractor, Oracle America, Inc., both to modernize its social services systems and develop a health insurance exchange website through which Oregonians would shop for and obtain the insurance coverage required by the federal Affordable Care Act. In early 2013, the State of Oregon transitioned the development of the health insurance exchange website to Cover Oregon. On Oct. 1, 2013, when the website was to be fully operational for the public, it did not work and was never launched to the public. On April 25, 2014, the Cover Oregon Board voted to move to the federal website for certain services. In November 2014, Cover Oregon completed its transition to the federal exchange. In addition, the State of Oregon’s project to modernize its social services systems was also placed on hold in 2013 after Oracle failed to meet a series of testing deadlines. In 2014, the State of Oregon elected to transition off of Oracle’s products for its social services systems.
In June 2014, the Oregon Attorney General launched a false claims investigation into Oracle’s charges for both the modernization project and the Cover Oregon website. While the investigation was pending, on Aug. 8, 2014, Oracle sued Cover Oregon in federal court for the District of Oregon for breach of contract and quantum meruit, claiming it was owed an additional $23 million for its work. On Sept. 8, 2014, Oracle amended its complaint to add the State of Oregon as a defendant and added claims for copyright infringement and breach of the implied covenant of good faith and fair dealing against Cover Oregon. Since then, Oracle has dismissed all its claims in federal court, except for copyright violations. Oracle re-filed its other claims against Cover Oregon as counterclaims in the first state court proceeding. In November 2015, the federal district court addressed the constitutionality of Oracle’s copyright claims against the State of Oregon, dismissing one portion of the claim and permitting another to go forward. The State of Oregon and Oracle appealed the district court’s ruling and the appeals are pending before the United States Court of Appeals for the Ninth Circuit.
After concluding the false claims investigation, on Aug. 22, 2014, the Attorney General, the State of Oregon, and Cover Oregon filed suit for damages against Oracle, Oracle’s co-CEO, other current and former Oracle employees, and Mythics, Inc., an Oracle distributor, for fraud, breach of contract, and violations of the Oregon False Claims Act and the Oregon Racketeer Influenced and Corrupt Organizations Act. The suit was filed in Oregon State Circuit Court for Marion County (Judge Geyer). Since the lawsuit was filed, Oracle twice removed the case to the Oregon federal district court and the federal court twice remanded the case back to Marion County Circuit Court. As of April 2016, the case is pending in state court and discovery is proceeding.
The court ordered discovery to complete in early September 2016, and ordered that a 10-week trial would begin Jan. 11, 2017. The State of Oregon seeks approximately $420 million in damages, plus penalties, punitive damages, investigative fees, attorney’s fees, and costs. Oracle filed five counterclaims for approximately $23 million for alleged unpaid services allegedly provided to Cover Oregon between October 2013 and February 2014. The court dismissed three of the five counterclaims with prejudice on Feb. 22, 2016. In March 2016, Oracle filed motions for judgment on the pleadings to dismiss the entire case based on a contention that federal and state law pre-empted the State of Oregon’s litigation against Oracle. The court will hear that motion June 17, 2016. The court also indicated it may enter an order compelling the parties into mediation.
In February 2015, Oracle threatened to shut off the hosting services the State of Oregon uses to run its Medicaid enrollment system. On Feb. 13, 2015, the State of Oregon filed an additional lawsuit in Marion County Circuit Court (Judge Geyer) to enjoin Oracle from turning off service. On Feb., 27, 2015, the Marion County court issued a preliminary injunction prohibiting Oracle from ceasing to provide hosting services for one year. During that time, the State of Oregon transitioned to a Medicaid eligibility determination and enrollment system that Kentucky developed and that does not use Oracle products. The non-Oracle system was operational in January 2016, and Oregon no longer uses the Oracle system for Medicaid eligibility determinations and enrollments.
On Feb.26, 2015, Oracle filed a lawsuit in Multnomah County Circuit Court (Judge Kantor) against five consultants of former Gov. John Kitzhaber. Oracle alleged that they interfered by Oracle’s contracts with Cover Oregon. That court dismissed Oracle’s claim with prejudice in July 2015. That dismissal is on appeal.
On Nov. 13, 2015, Oracle filed an action in Marion County Circuit Court (Judge James) under Oregon’s public records law against Gov. Kate Brown. Oracle alleges that the Office of the Governor violated the public records law by not reviewing and releasing to Oracle all the emails in former Gov. Kitzhaber’s personal email accounts that were inadvertently archived on the Department of Administrative Services servers. The Office of the Governor has filed a motion to dismiss and a motion for summary judgment.
On Jan. 20, 2016, Oracle filed an action in Marion County Circuit Court (Judge Armstrong) against the State of Oregon for specific enforcement of a purported settlement of all litigation involving Oracle and the State of Oregon. Oracle alleges that in October 2015, Gov. Brown’s then Chief of Staff, Brian Shipley, agreed to settle all of the State of Oregon’s and all of the Attorney General’s claims against Oracle for a credit of approximately $25 million for Oracle goods and services. The court heard the State of Oregon’s motion to dismiss on April 14, 2016.
On March 8, 2016, Oracle filed a petition for a writ of mandamus in the federal district court for the District of Columbia against the Secretary of the U.S. Department of Health and Human Services Sylvia Burwell. Oracle petitions for a writ to compel Burwell to order Oregon to dismiss or stay all litigation against Oracle because, Oracle alleges, Oregon’s lawsuit is pre-empted by federal law. HHS has not yet responded to the petition.
There are several ongoing federal investigations, including by the Government Accountability Office, the United States Grand Jury for the District of Oregon, and committees in both the United States House of Representative and Senate. The State of Oregon is cooperating fully in those investigations.
In Oregon, as throughout America, activists quickly learn the sad truth captured in the saying that
"Laws, like sausages, cease to inspire respect in proportion as we know how they are made."
If Wikiquote is accurate, then how fitting that the observer who noted the similarities between the insides of a slaughterhouse and the legislative process was not Otto Bismarck but was instead the same American poet who turned an Indian fable of the six blind men and the elephant into a well-known poem that deftly skewers the certainty of pundits who opine with great certainty about things. John Saxe's poem ends:
And so these men of Indostan Disputed loud and long, Each in his own opinion Exceeding stiff and strong, Though each was partly in the right, And all were in the wrong!
So, oft in theologic wars The disputants, I ween, Rail on in utter ignorance Of what each other mean, And prate about an Elephant Not one of them has seen!
An heir to the spirit of Saxe, Rufus Miles, boiled this insight down to its bare bones in observing that "Where you stand depends on where you sit," which is often seen attributed to canny politicians such as President Lyndon Johnson or his mentor, House Speaker Sam Rayburn -- though, Texans both, they would probably have preferred a formulation popularized by the late and much-missed Molly Ivins, "You got to dance with them what brung you."
Which brings us to the interesting series of events -- a traveling roadshow, really -- planned for six Oregon towns in the next few weeks. Called "Dirty Energy and Dirty Money," it's an attempt by a good number of progressive groups to point out how the power of concentrated money has captured and subverted the democratic process in Oregon.
What is most interesting, however, is that, like the mysterious cause of the explosion and sinking of the Battleship Maine in Havana Harbor, the events under discussion -- the fight of the fossil fuels lobby against the so-called "Clean Fuels Bill" -- is subject to a number of different interpretations.
So if you are able to attend one of the six presentations in the upcoming weeks, it will probably be worthwhile, even though the bill being used to make the point about the corrupting role of money in Oregon politics -- the Clean Fuels Bill (CFB) -- is actually the one bill where the fossil fuel lobby had the better argument (that if you want to minimize carbon emissions, there are lots of cheaper and more effective ways to do it).
But the fossil fuels' opposition to CFB wasn't because they wanted more effective climate regulation, it was to avoid seeing the Oregon Legislature do anything based on the notion that cutting carbon emissions is essential, even if it means paying higher prices for energy products.
The fossil fuel industries are in the position that the tobacco companies were in at the end of the 20th Century -- they knew that their product was a deadly toxin that when, used as intended, kills people. So with carbon based fuels, only these don't just kill the users -- indeed, the vicious truth of fossil fuels is that the people wealthy enough to use a lot of them are the ones least exposed to the harms, at least at first. The wealthy people who cause the most carbon emissions will be the last in line to pay for the harms they cause.
But, just as the tobacco companies fought warning labels -- even though they were not effective at reducing tobacco consumption (giving cigarettes a certain air of dangerous glamor is a pretty good way to market them to adolescents) -- the fossil fuels industries are adamantly opposed to clean fuels bills as a matter of principle -- that being the principle that acknowledging that we have to get off fossil fuels as quickly as possible and leave at least 80% of the current known reserves in the ground (and 100% of any new discoveries) is fatal to their profits.
This is despite the fact that the so-called emissions "reductions" for the CFB are all hypothetical and conjectural. In reality, the Oregon "clean fuels bill" just props up the liquid fueled automobile paradigm and keeps us fixated on the wrong question (how can we all keep driving while emitting less CO2) instead of the critical one ("How fast can we reorganize our society so that we use little or no fossil fuels at all, so that the next few generations have a chance to avoid climate catastrophe and environmental collapse.")
We teamed up with environmental activists to investigate one question:
How do fossil fuel companies try to buy Oregon's democracy?
Now we want to share our findings with you.
Join us as we go in depth to show how the energy industry tries to buy our elections, influence lawmakers, and prevent Oregon from confronting the threat of climate change
We will expose:
-Which legislators accept contributions from the fossil fuel industry -How do Big Oil lobbyists to try to protect their interests in Oregon -What tactics do they use to block reform
We'll also discuss how People Power can overcome Big Money, and what we can do to rebalance our democracy.
The groups behind the "Dirty Energy & Dirty Money" exposé
SALEM Date: June 15th Time: 6:30 pm--8:00 pm (doors open at 6:00 pm) Location: AFSCME, 1400 Tandem Ave NE, Salem, 97301
Nick Abraham--Executive Director, Oil Check NW Angela Crowley-Koch--Government Relations Director, The Oregon Environmental Council Professor Edwin Dover--Chair of Political Science Department, Western Oregon University Daniel Lewkow--Political Director, Common Cause Oregon
Moderator: Lena Spadacene--Wildlife Campaign Coordinator, Oregon Wild __________________________________________________________________________________ EUGENE Date: June 21st Time: 6:30 pm--8:00 pm (doors open at 6:00 pm) Location: Unitarian Universalist Church in Eugene, 1685 W. 13th Ave, Eugene, 97402
Commissioner Pete Sorenson--Lane County Commission Lisa Arkin--Executive Director, Beyond Toxics Angela Crowley-Koch--Government Relations Director, Oregon Environmental Council Daniel Lewkow--Political Director, Common Cause Oregon
Moderator: Linda Lynch--President, League of Women Voters of Lane County __________________________________________________________________________________ BEND Date: June 22nd Time: 7:00 pm--8:30 pm (doors open at 6:30 pm) Location: Unitarian Universalist Fellowship of Central Oregon Address: 61980 Skyline Ranch Rd Bend 97703
Nikki Roemmer--Central Oregon Regional Director, Oregon League of Conservation Voters Mike Riley--Executive Director, The Environmental Center Daniel Lewkow--Political Director, Common Cause Oregon David Nelson--Communications Coordinator, Central Oregon Move to Amend
Moderator: Moe Carrick--Founder and Principal, Moementum Inc. __________________________________________________________________________________ ASHLAND Date: June 23rd Time: 7:00 pm--8:30 pm (doors open at 6:30 pm) Location: Rogue Valley Unitarian Universalist Fellowship, 87 4th St, Ashland, 97520
Representative Peter Buckley--Oregon House District 5 David Hyde--Lead Organizer, Move to Amend Lee Lull--Southern Oregon Climate Action Now Daniel Lewkow--Political Director, Common Cause Oregon
Moderator: Jeff Golden--Host, Immense Possibilities on Southern Oregon Public Television __________________________________________________________________________________ PORTLAND Date: June 27th Time: 7:00 pm--8:30 pm (doors open at 6:30 pm) Location: First Unitarian Church, Buchan Building, 1226 SW Salmon St, Portland, OR 97205
Nick Abraham--Executive Director, Oil Check NW Angela Crowley-Koch--Government Relations Director, The Oregon Environmental Council Nikki Fisher--Executive Director, The Bus Project Daniel Lewkow--Political Director, Common Cause Oregon
Moderator: Jefferson Smith--Host, Thank You Democracy on XRAY.fm __________________________________________________________________________________ BEAVERTON Date: June 29th Time: 7:00 pm-8:30 pm (doors open at 6:30 pm) Location: St. Andrew’s Lutheran Church, 12405 SW Butner Rd, Beaverton, 97005
Nick Abraham--Executive Director, Oil Check NW Angela Crowley-Koch--Government Relations Director, The Oregon Environmental Council David Delk--President, Alliance for Democracy Daniel Lewkow--Political Director, Common Cause Oregon
Moderator: Amira Streeter--Chair, The Columbia Network of the Sierra Club __________________________________________________________________________________
Transcript of the empowering documentary film - Parts I
Of all the hidden costs of the US-USSR "Cold War," perhaps the most costly is that the demonization of our former ally against Hitler's Germany caused us to adopt a bizarre, reflexively hostile view of programs where Americans would band together to provide themselves with public programs when markets fail.
The post-World War II hostility to public progress is not only catastrophically stupid; it is also radically ahistorical and even un-American: the entire nation was founded on the idea that "We the People" -- common people -- had the inalienable right to band together to promote the common welfare, against the wishes of the rich and powerful and well-born, who have always preferred that the masses be dependent on the wealthy as benefactors.
Because the tools of mass propaganda were more and better developed in the United States than anywhere else, the wealthy were able to use the US-USSR hostility as a mental frame to persuade Americans that giving themselves assured access to health care was "socialism" rather than the most natural next step for a democracy, as happened throughout Europe and in Britain.
The campaign by the medical-industrial complex is really a remarkable feat in the annals of disinformation and deception. To this day, tens of millions of Americans unthinkingly accept, simultaneously, the notion that we should all be taxed to defend ourselves against vanishingly small threats emanating from foreign nations, but that taxes to defend ourselves against the certainties of disease, aging, and injuries are morally vile and would lead to ruin.
Thankfully, as WWII recedes in memory, more and more Americans, especially in Oregon, are waking up and questioning just how is it that having individuals go bankrupt if they are unlucky is good for America. Just asking the question is progress.
But we're not just asking the question. Thanks to tireless work by advocates like Health Care for All Oregon, the Oregon Health Authority has commissioned the RAND corporation - one of the first Pentagon-funded "think tanks" formed to help the US contain the Soviets - to study alternative health care models, including the so-called "Single Payer" plan.
And more and more committed, successful capitalists are waking up to the realization that stupidity in the name of anti-communism is still just stupidity, and that burdening entrepreneurs with providing health care coverage is the worst thing we can do in a global economy.
One CEO, Richard Master, got so fed up with our skyrocketing costs and poor results that he has become an evangelist for reform. He made an excellent documentary, "FIX IT," which details what could be called "The business case for Single Payer." (Master's started a company to produce the film, aptly named "Unfinished Business LLC.)
The entire movie is available to view, free, here. But Master also kindly gave OregonPEN permission to publish a transcript of the film. Thus, this week's OregonPEN is given over to a partial transcript from this outstanding, invaluable project. Interspersed with the transcript are pages from a brochure available at the FIXITHEALTHCARE.com website.
"Why I Made This Movie" - Richard Master
Of all the eye-‐popping numbers I came across while researching why the United States has the most expensive health care system in the world—and why my company, MCS Industries, Inc. has faced double-‐digit health insurance rate increases year after year—that’s the one that shocked me the most. Every physician in this country now has to spend $84,000, on average, just to interact with private health insurance companies. $84,000! By comparison, doctors in Canada spend a little more than one-‐fourth of that interacting with that country’s single-‐payer system.
My company now has to pay $1.5 million a year to provide access to health care for our workers and their dependents. When I investigated where all that money goes, I was shocked. I found that the first three cents of every premium dollar goes to the insurance agent who helps MCS select an insurance plan and negotiate rates with our insurer.
The next 20 cents goes to the insurance company to help pay for its sales and marketing and other administrative functions, which includes the work of a huge staff that does nothing more than approve or deny care.
Another 10 cents (at least) goes to cover what it costs doctors and hospitals to handle the massive amount of paper work and phone time made necessary by my insurance company’s pre-approval demands, denials and other payment issues.
That’s 33 cents of every premium dollar, 33 cents that has nothing to do with the delivery of health care.
As if that weren’t bad enough, I learned that private insurance companies have not been doing nearly as good a job negotiating with health care providers as they’ve led employers like me to believe. The truth is that private insurers end up paying 20 percent more for health care services than Medicare, which, keep in mind, is our government‐run program for people much older than the average privately insured American.
These and other startling findings of my research so outraged me that I felt an obligation to share it with other Americans, especially other American CEOs. That’s why I reached out to award‐winning filmmakers to produce Fix It: Healthcare at the Tipping Point, which makes a compelling case for scrapping our complex and needlessly expensive multi-payer system for a single-payer.
I learned as we conducted interviews with some of the nation’s leading health policy experts—like Dr. Don Berwick, former administrator of the Center for Medicare and Medicaid Services, and Dr. Theodore Marmor, Professor Emeritus, Public Policy at Yale University—as well as doctors and nurses, other business and government executives and ordinary, hard-working people, that the insurance industry has been selling us a bill of goods for years.
I’ve come to realize that insurers comprise a completely unnecessary middleman that not only adds little if any value to our health care system, it adds enormous costs to it. Costs that are passed on to Americans and their employers.
As a consequence of all this waste and inefficiency, our total spending on health care recently soared above $3 trillion in 2014, the growth in cost continues. We spend more on health care than any other country, and we have far less to show for it. More than 17 percent of our national GDP is now eaten up by health care costs, far more than any other country. Canadians, by contrast, spend less than 11 percent of their GDP on health care and they have better health outcomes and live longer on average than Americans. And Taiwan, which switched to a single-payer system in 1995, spends just 1.6 percent of its total operating health care budget on administration.
I learned that it’s a myth that under a single‐payer system, the government takes over the delivery of health care. Not only are hospitals operated privately and doctors are in private practice in Canada and Taiwan, patients in those countries have complete freedom of choice of providers. By contrast, more and more Americans find themselves in health plans that severely restrict their access to providers. If they see a provider “out of network,” they may have to pay the full cost out of their own pockets.
We spent a lot of time in Canada interviewing doctors and nurses and even conservative business executives who were completely baffled that Americans tolerate such an inefficient, costly and inequitable system. “I’m a member of the Conservative party of Canada, and we stand for removing waste, being more efficient and finding ways to grow our businesses, said Dann Konkin, president of a Canadian industrial screen printing company in British Columbia. “And one of the greatest ways that we can grow our business is to reduce costs, and that’s why we embrace the Canadian healthcare system. What I don’t understand is why my fellow conservatives in the United States tend to fight this.”
Konkin told us that he decided against opening facility in the U.S. after finding out how much he would have to pay to provide health insurance for his American workforce. “The more we looked at it, the amount of costs that we would have incurred by having our company relocate into the United Sates just through the insurance coverage costs alone made it a nonstarter,” Konkin told us. “If I had to increase my costs by over a million dollars in my company because of insurance coverage costs, that along would probably drive me to bankruptcy.”
Several years ago, Michael Grimaldi, then president of General Motors of Canada put it this way: “Canada’s public healthcare system significantly reduces total labor costs for automobile manufacturing firms.”
A fellow Pennsylvania business owner—David Steil, who served as a Republican member of the legislature for 16 years—told us this: “Conservatives should be supportive of single-payer because it costs less. When they look at the single‐payer model they will come quickly to the conclusion that it is the least expensive, the most supportive of a free market, and will have the most direct effect on the costs of their operation.”
I’m confident that after watching Fix It and reviewing the accompanying materials, you will come to the same conclusion. It is time we realize we don’t have to tolerate a system—a $3 trillion system—in which one of three dollars is wasted. A system in which just a few sick employees can take down a company. A system that starves the rest of our economy to the point that we don’t have enough money for our schools and roads.
Please join me and many others in the fight for a simplified, single-payer health care system. A single-‐system in which one entity that pays the bills. A single-system, in fact, like our original Medicare, but for all ages.
We can’t afford to wait any longer.
Richard Master, CEO MCS Industries, Inc.
FIX IT: Healthcare at the Tipping Point
Richard Master: [00:06] Over this period of 35 years, the company grew from zero to hundred and seventy million in sales and became the leading company in both the picture frame industry and mirrors. From 1980 into the '90s we were doubling our size every two and a half to three years.
As a result of foreign competition, our gross profit margins deteriorated. We had to watch every penny of overhead.
We had gone to our customers with a price increase. They reject it, so in order for us to maintain profitability and margins, we've got to figure out how to do things more efficiently.
Here we are, we're mobilizing our resources very carefully. We're controlling costs and the one area that was so confounding was health care costs. We saw the passage of the Affordable Care Act.
President Barack Obama: [01:15] We are done.
Richard Master: [01:16] The cost to our company and our workers continued to rise dramatically. We would be faced with double digit, sometimes high double digit increases.
Debbie Figueroa-Seigel: [01:28] The premiums in total for health care costs has actually doubled over the last 10 years. That's an exorbitant increase. That's more than any other expense has increased over that same 10-year period.
Richard Master: [01:43] Pity the company that's more labor intensive than us. They are going to suffer dramatically. If they are having bad years, if they are on the verge of collapse, this is going to push them over.
Debbie Figueroa-Seigel [01:58] Picture frames aren't an expensive product. Even a few cents on picture frames makes a big difference in how we sell that product. We're looking at every penny, every half penny on this product. It makes a big difference in how we can sell this product and how profitable we are.
Richard Master: [02:21] After years and years of incurring these significant cost increases, I started to look into health care. The one great thing about MCS is if there is a problem, we deal with it straight ahead, we investigate, we resolve, we fix.
Mark Dudzic: [02:42] A worker making minimum wage could work full‑time for an entire year, not earn enough to pay for a health care benefit.
Uwe Reinhardt: [02:59] For an average family of four, this year's number is $23,000. That's what the typical American family insured that way costs.
Wendell Potter: [03:10] They have this false sense of security, that they're in a plan that provides them protection, but regrettably, all too often, people find out when it's too late, after they've been sick, after they've been hospitalized or injured and requiring expensive treatment, that their coverage was not nearly what they thought it was.
Mark Dudzic: [03:30] The shock only comes when you have to use your insurance. You feel like you have healthcare insurance, and that entitles you to healthcare, but it doesn't.
Walter Tsou: [03:41] You might as well say, it's not really an insurance plan. That's how outrageously priced our healthcare plans are today, and how unaffordable they are.
Wendell Potter: [03:51] Insurance companies are able to charge elder people three times as much as younger people for the exact same policy.
Patrick Noonan: [03:57] Their potential employer sees them as a risk.
Michael Gusmano: [04:02] The age 50 to 64 age bracket includes very high rates of uninsurance within the US market, and it's because these are very expensive employees.
Walter Tsou: [04:11] It makes it less likely that employers will even consider hiring someone in their 50s, for example, or early 60s.
Jim Stanford: [04:19] There's all kinds of costs and unintended consequences that come with having your healthcare depend on your job. It may be that you want to move to a different job, or it may be that you got laid off because of a recession or a downturn in the business.
Wendell Potter: [04:35] I've talked to people who've told me they've not gotten a raise in five years because the money they would otherwise have gotten in raises has gone to insurance companies.
Michael Gusmano: [04:46] We've created a very fragmented system in which coverage is tied to employment in ways it isn't in most other countries in the world.
Jim Stanford: [04:55] If you and your family lose their whole health insurance because of a change in your employment status, that's an incredible insecurity, an incredible burden for families to have to bear.
Wendell Potter: [05:05] The whole idea of having insurance that protects us from financial ruin, it just doesn't exist anymore for most people.
Man 1: [05:14] This is why, of a million bankruptcies in the United States, over 60 percent are associated with medical conditions, and the great majority of those are people who have health insurance.
Donna Smith: [05:28] We went through years of working hard only to lose everything, lose our home, go bankrupt. What a shameful thing to do to people.
Mark Dudzic: [05:36] You see these numbers of people who don't have insurance and families who are driven to bankruptcy...
Donna Smith: [05:41] If you talk to most families, they can identify at least one person in their family who has really struggled with healthcare issues and how to finance those issues.
Mark Dudzic: [05:52] 40,000 unnecessary deaths every year because there is no health insurance, and these are real people who are dying.
Faith Wildrick: [06:00] Of course, I had health insurance, but I never actually thought a whole lot about it. I paid the premiums. I wasn't using anything that much. My out of pocket expenses were pretty much nil, but then Bill got sick, and he was hospitalized. All of a sudden, these bills started rolling in, and my insurance wasn't covering everything.
Richard Master: [06:38] In 2014 a family that was paying 4 to 5 thousand as a premium share and MCS was paying 13 to 14 thousand as their share of the coverage, that family could pay another 6 or 12 thousand dollars if one or two people got sick.
Debbie Figueroa-Seigel [07:02] It's really devastating to a lot of people when they can't afford healthcare, and when it's impacting their family life. You're already afraid because there is a family member who is sick. Now your expenses have increased while your income has decreased.
Faith Wildrick: [07:19] We're up around $10,000 in expenses. What would happen if I would get sick? Our expenses would be probably up around $16,000 a year. That's unbelievable. If anything happens to me, we're done.
Richard Master: [07:46] Let's look at an employee who makes between $18 and $19 an hour, makes $1,500 every two weeks, has a take‑home pay of $935. That employee, if someone gets seriously ill in the family, will essentially be wiped out.
Faith Wildrick: [08:12] All those years that I worked and that Bill has worked, it's going to be for nothing. We're going to lose everything that we have. All you feel is hopelessness. You don't feel like there's any way that you can get out of this, that you're stuck. This isn't fair. This should not be happening in the United States.
Richard Master: [08:43] The thought that my employees, members of my work family, are susceptible to this challenge from medical cost is not acceptable to me. It should not be acceptable to any employer in the United States.
John Callahan: [09:03] My father, late in his life, was an over the road truck driver. He had some modest success and went from one truck that he drove himself, to buying a second and third truck, ultimately having a couple of employees that drove for him.
He had achieved in some very modest and small way, late in his life, the success that I think he always had dreamed of.
Unfortunately, he suffered a really catastrophic truck accident, where his truck actually flipped over a guardrail and landed on the highway beneath him. I will never forget being there when he woke up in the ICU, and his immediate reaction was to try to rip the lines out of him and get out of there. I said, "Dad, it's OK, you're in the hospital, and you're in the ICU. It's going to be all right."
He said to me, "No, you don't understand." He said, "I can't afford this. I got to get out of here." It bankrupted his company. The two folks he had working for him didn't have a job anymore. Doing all the right things, playing by the rules.
Working hard was all eliminated like that, with one accident. I'll never forget what it did to him. It broke his spirit, quite honestly. He was never really the same man after that.
Patrick Noonan: [10:37] Every employer I know, and I'm talking about small to medium guys mostly, they dread the next hike in their insurance rates. We've got people who fear they're going to be put out of business if they have one employee or one spouse or one child that has some kind of a huge healthcare event.
Frank Mondillo: [10:55] Hemophilia is one of the most expensive diseases to have. Right now my medication is upward to around $50,000 a month. There is no cure for hemophilia, so at least $50,000 a month for the rest of my life. Shouldn't happen where you're hired for a job and then to find out that they're going broke because they're trying to afford healthcare for me.
Dave Steil: [11:18] The current costs of the system are becoming intolerable, and as they become intolerable, their business naturally is going to look for other solutions.
Chuck Pennacchio: [11:28] It distracts businesses from doing their primary function, precludes them being able to budget for hiring, for investment, for expanding their enterprise.
Gerald Friedman: [11:39] Why are we creating an extra hurdle for business? It's tough enough out there. Why are we making it harder for people to provide goods and services to the American public, while employing people and providing tax revenues?
Michael Lighty: [11:53] I often ask folks that I work with who own businesses, tell me one thing in your business that you spend, the kind of money that you spend on health insurance, that adds no value to your business.
There's a middleman, an insurance company, that isn't improving your employee's health, that isn't saving you money, and that is not doing what's in the best interest of our economy.
Richard Master: [12:18] Healthcare costs are going up two to two and a half percent above the projected growth of gross domestic product. It is running away from us. Healthcare costs have gone up to $3 trillion.
Man 2: [12:31] We've gone from 7 percent of the economy back in 1971 being healthcare, to 18 percent today.
Man 3: [12:37] When the rest of the world is spending less than 10 percent of their economies and getting healthcare to all of their citizens.
Man 4: [12:46] There's been a reduction in consumer purchasing power that can be directly associated to the increase in medical costs in the country.
Chuck Pennacchio: [12:58] If you now have a $1,000, $2,000 deductible, that is money that is not available for you to get a new car.
Sean Flaherty: [13:08] More disposable income to spend translates into more demand for the goods and services that employers are in business to produce and sell.
Chuck Pennacchio: [13:19] In the city of Philadelphia where school teachers are being laid off by the thousands and where classroom sizes are escalating above 40 students per teacher, and you don't have proper security in schools, children are being taught on the fourth and fifth floors of buildings that don't have air conditioning or proper heating.
We are undermining our capacity to function, let alone compete, as a society because of the rising costs of healthcare.
Walter Tsou: [13:54] People don't realize that huge federal deficit that we have in this country is related to the fact that we have this enormous healthcare cost bill.
Chuck Pennacchio: [14:05] Part of the indirect costs of healthcare that most people are not aware of is that their taxes will continue to go up to pay for this broken healthcare system.
John: [14:16] We are here at the Bethlehem Wastewater Treatment Plant here in Bethlehem, Pennsylvania. This piece of equipment behind me is a 40 year old piece of equipment that's been basically taken out of service. We've got a rental unit that we now pay $17,000 a month to lease that piece of equipment. That $17,000 of additional cost, monthly expense, is going to get passed on to the sewer customers in the form of rate increases.
This plant in general is just one small example of what the true impacts are of the spiraling costs of healthcare and our inability, whether it be here in the city or as a country, to address the infrastructure needs that we have throughout this country. Essentially, what we had to do is starve other departments and other areas of the city in order to continue to accommodate those increases in healthcare costs.
If an ICU stay costs $30,000 a day, we're shelling out, as an employer by virtue of being self‑insured, $30,000 a day. That's half a police officer for a year. Depending on the amount of long‑term or significant illnesses you have in any given year, can mean swings of millions of dollars on an annual basis.
An average tax bill in the city of Bethlehem might be $2,500. If you figure that for every dollar, it's about 33 cents on the dollar, that's about a $750 dollar bill every year that the taxpayers of the city of Bethlehem are paying to provide healthcare for our employees.
How are we going to make the ends meet, provide the city services that our residents deserve, and do it without having to raise taxes? Senior citizens are struggling to stay in their home as it is. You can literally tax people out of the home that they've had all their lives.
Man 5: [16:03] I remember 35 years ago when healthcare was affordable. MCS had great insurance, full coverage with minimal deductibles. US employers across the country provided well for their employees. No worries. That's all been eroded by a relentless increase in healthcare costs.
Today, there's a dark cloud of anxiety in the country, a dark cloud over our employees. They're one diagnosis, one accident away from financial disaster. A few sick employees can take down a company. The dark cloud hangs over our cities. No money for infrastructure. No money for schools, high taxes. That dark cloud hangs over our whole economy, causing flat wages and no money to spend to fuel real growth. It's a problem that we have to solve.
Gerald Friedman: [17:15] In 1969, Blue Cross/Blue Shield had community ratings. Everybody paid the same rates. It was a truly non‑profit and in every state Blue Cross/Blue Shields were regulated to serve the public interest. That's what we gave up on.
Wendell Potter: [17:32] Some executives at life insurance companies saw an opportunity come into this area, come into this space, and make some money. They came in and started offering cut rate policies, but only to those who were younger and healthier.
Gerald Friedman: [17:48] The group of people subscribing to Blue Cross/Blue Shield became less and less healthy, more and more expensive, forcing the Blues to raise their rates more and more and by the late '70s, early '80s, in every state in the union. The old Blue Cross/Blue Shield model was dying. These companies were going bankrupt. Non‑profit companies couldn't make it.
Wendell Potter: [18:14] For‑profit insurance companies over the years became so dominant that they actually came to control the healthcare system. They bought a lot of the Blue Cross plans. A lot of the Blue Cross plans now are for for‑profit companies.
Michael Lighty: [18:25] The US has one of the shortest lengths of stays in hospitals of any country, and we're told we have to shorten it. We go to the doctor about 4.2 times a year. The Japanese go 13 times. We're told that we use too much healthcare, and we have to restrict access to save money when, in fact, we're below average when it comes to comparable countries.
Gerald Friedman: [18:46] The whole system is set up to discourage people from using healthcare.
Donald Light: [18:52] The insurance companies are specialists at figuring out ways of covering less or paying less, the sicker you are.
Man 6: [19:00] Not only are people having to pay more money out of their own pockets for care in these plans, they're finding that the choice of providers has been narrowed.
Donald Moore: [19:10] As a primary care physician, I have selected the specialists that I'm most comfortable working with. As it stands right now I've got to say to my staff, "Check if Dr. Brown is a member of this patient's insurance." Referrals are so much more limited in the current system.
Kevin Outterson: [19:30] People have precious little choice today. Frequently people will look at their plan and realize that their doctor is not on any of their plans.
Donald Moore: [19:38] The choice we need is not choice between insurance companies. As a matter of fact, we don't choose our insurance companies in general. It's your employer, if you're getting your insurance through an employer, that chooses the insurance company and that's really not based on the quality of the insurance most of the time. Most of the time, it's based on the cost of the employer.
Wendell Potter: [19:57] One of the reasons I left the industry was because I was expected to be a cheerleader for consumer driven plans, or plans which have high deductibles and to persuade the American public, employers in particular, that everyone needed to have more skin in the game.
What the companies were doing to meet Wall Street's financial expectations, was to make it less likely that people could get care that they needed, that they could afford insurance.
That's when I decided I had to find some other way to earn a living. I was being paid, in my view, to mislead people, and I couldn't in good conscience keep doing that.
Michael Gusmano: [20:36] Medicare, and they talk about how it's broken, that it's unaffordable, that the costs are escalating. This is an enormous distortion of the reality of Medicare. In fact, Medicare has been a run‑away success.
Walter Tsou: [20:52] Well, Medicare can take care of the sickest and the oldest in our society, and they can do it actually at far less cost than the private insurance companies could do.
Wendell Potter: [21:04] They don't have the same kind of cost that the private insurance companies have. They don't spend enormous amounts of money on themselves and marketing teams, and on advertising.
They don't need to have an infrastructure in which they're going back and forth with healthcare providers on a daily basis to try to determine whether or not something is a covered benefit, which is also something that eats up an enormous amount of their premium revenue.
Donald Berwick: [21:30] I was the administrator of the Centers for Medicare and Medicaid services that runs both of those programs, and the Children's Health Insurance program.
We had 5,500 employees in that system to cover the whole country. Our budget, the amount of money going out to the healthcare system, was about $820 billion a year, nearly a trillion dollars.
Total overhead budget, that is the administrative budget that I had, was about $8 billion, one percent of the total. That probably undercounts, so let's make it three percent, four percent of the total budget.
Right now, by policy in this country under the Affordable Care Act, we are trying to argue insurance companies down to 15 percent overhead.
Walter Tsou: [22:11] The American taxpayers are saddled with the poorest in our society and the oldest, and those with chronic disabilities, those on dialysis.
We're putting them in the government programs and saying, "All you healthy people from 18 to 64, we're going to hand it over to private insurance companies." Still, even with doing that, Medicare manages to actually control healthcare costs better than the private insurance companies can.
Victor Rodwin: [22:40] If you suffer from end stage renal disease in the United States, irrespective of your age, you are covered by Medicare. If you are blind, you also are covered by Medicare, even if your child was blind.
[22:56] We've established the precedent already in this country, of having one payer pay for all the care needed for two organs. By just adding the heart and the liver, that would have gotten us a long way towards universal coverage.
Michael Gusmano: [23:11] Medicare isn't the problem. It's a wonderful example of the kind of solution that actually works and is consistent with the international standards in healthcare.
Sean Flaherty: [23:21] It's the system as a whole that creates the inefficiency. The fact that there are so many different payers and so many different plans and so many different ways in which bills have to be made and collected.
Hisham Abu-nabba: [23:35] Having multiple insurances, and having multiple ways of even billing for that patient is adding to the inefficiencies of the patients. You look at quality and variability, they're opposite of one another.
The more variability that you have, the more entities, provider, payer, insurance, manufacturers and so on, the more chances of error, the more inefficiencies, the more cost.
Wendell Potter: [23:59] One of the reasons why hospital bills are so high, why we are charged so much by doctors, is because they have to spend a lot of resources. They have to hire staff who do nothing more than engage in a nitpicking war with insurance companies on a daily basis to make sure that they are getting paid appropriately.
Martha Kuhl: [24:19] It makes me angry to see so much waste in healthcare, that there are nurses who are pulled away from actually providing hands‑on patient care and they're pulled into administrative duties.
They're pulled into those duties because we have an incredibly complex billing system. We have many different payers in our billing system. We have people who can't pay, people who have this insurance, people who have that insurance. There are nurses whose full time job is to help get authorization so that a patient can get the care they need, and that's ridiculous.
I would really love to be a nurse without having to think about whether or not a patient can get the care they need, whether or not a patient is sent home from the hospital without the proper medications because they can't afford it.
Whether or not a patient is going to be able to get a treatment that a doctor recommends, because their insurance company won't pay for it and they can't afford it. I'll go into a patient room on a day of discharge and I'll find a patient who tells me they're not ready yet to go home. They say, "I'm fearful. I still have pain." The doctors and the nurses share these frustrations, that an insurance company would make a decision to send a patient home too soon. I have seen parents make decisions that would put them into bankruptcy to get their children care.
They love their children and they want to do everything possible. They didn't understand their actual health insurance. Health insurance is a really complex system.
Families will sit in rooms and cry over, whether or not they're going to be able to face this, whether or not they're going to be able to afford it, whether or not they're going to be able to keep their job, whether or not they're going to keep their insurance, what's going to happen to their house, etc. Nurses see this on a day‑to‑day basis, and it does break your heart.
(Time Counter Restarts)
Dr. Dwight Michael: [00:26] We, as a small practice of five doctors and one provider, deal with about 20 different insurance companies at this point. We have a middle office that has three people in it and an office manager, that deal with, essentially insurance issues and payment issues all the time.
If I write a prescription, and they want more information, my nurse has to call up that company, wait for their telephone system to come up with a live voice, give them the particulars of the patient and the medication. It's not uncommon that they spend 30 minutes with one appeal.
We're trying to figure out the game so that we spend the least amount of time doing that kind of baloney. Every physician spends $84,000 a year just to interact with the private health insurance industry.
Dr. Yasin Khan: [01:27] To care for my patient in a proper fashion, on a day‑to‑day basis, I need, at least, two people to take care of all of the denials. I have a patient who specifically, for example, needs an epidural because they have a herniation of disc. They have a proven MRI, they have a physical exam. They have all the documentation. I still get denied.
Jennifer Ambrose: [01:53] Doctor wanted an MRI ordered. Patient was in excruciating pain, unable to walk. We attempted the MRI and we were told, "No. Patient had to have six weeks of physical therapy."
He endured six weeks of physical therapy. His symptoms got worse. In the meantime, he had five office visits, two ER visits, an admission, a transfer to another hospital, and finally a rehab hospital. It just blew my mind that we could not get the MRI approved without six weeks of therapy when we had a person that could not walk.
We deal with insurance companies all day long. We document every conversation we have, who we spoke with, when we spoke with them, because depending on who you get on the phone, you will get a different answer every time you call in. If we did not have the staff that we did, we would not be questioning half of the claims that we do. It's very time consuming and it's extremely frustrating.
Michael Lighty: [02:44] Insurance companies increasingly are the force in the room, unseen but powerful. When you're in the hospital room, that's who is really driving a lot of the decisions that are made. How long you're going to be in the hospital? What drugs you're going to be given? What access to providers or tests that you have? Those things are increasingly driven by the insurance company reimbursement.
Dr. Donald Moore: [03:07] Multiple insurance companies telling me to bill less and do less for the patient. Based on their reimbursement have given me 10 minutes to see a complex patient. That is not possible.
We concluded the only way we could continue to do what I was trained to do, what I thought was the right thing to do was to get rid of these insurance companies. We made a decision to move to a single‑payer. We started taking Medicare, Medicaid and other government insurances. That's how we moved to a single‑payer. We had to give up almost 70 percent of our practice, which were commercial insurance. I certainly have a lot less patients than I had before.
Richard Master: [03:56] MCS pays $1.5 million a year for its health insurance, and where does it go? Three cents of every dollar goes to an insurance agent that represents MCS in selecting an insurance plan and negotiating price.
The next 20 cents of our premium dollar goes to the insurance company for its sales and marketing expense, and for its staff to pre‑approve and deny care, and its administrative expense.
Then you have at the provider level 10 to 15 cents that goes to hospitals and doctors to interface with my insurance company. They face massive amounts of paperwork and phone time, dealing with preapprovals and denials, and payment issues. None of it is related to care.
That's 33 cents of our dollar before the actual cost of care is paid for. My insurance company is supposed to negotiate better prices from the providers, but on average they end up paying 20 percent more than Medicare does. They pass that extra cost onto my company. I don't see what private insurance brings to the table.
Wendell Potter: [05:15] What keeps insurance company CEOs up at night is the worry that other CEOs will eventually come to realize that they add more cost than value to our healthcare system, and that more and more employers, corporate executives, are beginning to understand that.
Since I have been known as an outspoken critic of the industry and an advocate for change, I've gotten calls from a lot of people I used to work with who've said, "Thank you for doing what you're doing. You're telling the truth."
Dr. Donald Berwick: [05:54] I cannot read my insurance policy. I don't understand it. I can't figure it out. With all due respect, if I can't figure it out, most people probably can't. That is waste added. It's not transparency. It's confusion. When you have a publicly accountable system as we could have with single‑payer, you can have less confusion.
Richard Master: [06:12] Over and over again we're hearing the same plea. The system is too confusing. We need to have simplification to control cost and to improve quality.
What about single‑payer health insurance? What does it mean? One entity that pays the bills! We get rid of the hundreds of complicated insurance plans, and we have one comprehensive plan that covers everybody. It's simple and efficient. You go to any doctor or any hospital you want, present a card, and you're covered. There are no deductibles, no out‑of‑pocket expenses, and no contentious preapproval before a treatment.
Everybody is covered. Nobody is left out. Single‑payer is not a government takeover of healthcare. The doctors and hospitals remain totally independent, just like they are with Medicare.
Michael: [07:15] If I told you that every one of your employees could get the healthcare they need, guaranteed, that your costs would go down, everyone would pay less and get more, you might be skeptical. The truth is, most every country in the world does that.
Tsung-Mei Cheng: [07:30] The benefits in Taiwan's single‑payer system are comprehensive. You have inpatient care, hospitalizations, visits to doctors, drugs, dental care, free child delivery, dialysis. All of that is paid for. Patients have complete freedom of choice of providers.
[08:01] Taiwan spends 1.6 percent of its total operating budget on administration. That is a tiny fraction of what we spend in this country. It's the peace of mind that it gives people, which Americans don't have. Yet, I hope every American has that, someday.
Dr. Michael Gusmano: [08:24] One of the myths about universal healthcare systems is that they engage in rationing. That in order to cover everyone and operate within a budget, they have to severely limit access to specialty care and surgical care. Our research has shown that, that's just not the case.
Chuck Pannacchio: [08:43] Our current broken healthcare system is the most rationed healthcare system in the world. That's why a third of Americans don't get the healthcare they need.
Uwe Reinhardt: [08:53] The idea that you can have high deductible policies, and that you're not rationing healthcare by income class, I would say, "Where were you educated?" That isn't even requiring a PhD, that's just common sense. Think of a waitress, making 30,000, and you ask her to cough up 10,000 out‑of‑pocket.
Gerald Friedman: [09:15] One of the biggest differences between the United States and the rest of the world, studies by the Commonwealth Fund and others find Americans are much, much more likely than people in other countries to defer medical care because of cost.
Victor Rodwin: [09:27] We have a large number of people dying from causes that should be preventable. When one takes all these causes of death, which one should not die from, given access to appropriate and effective medical care, the US comes out as number 19, compared to France, which, in fact, is number one, or Australia which is number two.
No question on my mind that our low ranking on avoidable mortality is due to the fact that we still have financial access barriers to the most basic kinds of services in the United States of America.
Richard Master: [10:26] The data shows very compelling information about single‑payer systems. It was imperative that we visit a single‑payer system and experience what life was like on the ground. Fortunately, we've got a single‑payer system operating to our north in Canada.
Dr. Bruce Flemming: [10:51] This is our high-resolution CT scanner. It's a very important part of the equipment that we use to make a prompt diagnosis for our folks with a variety of disorders, medical conditions, and trauma. This is a Dr. O'Connell. He is currently speaking to a group of residents in a room with, as you can see, the flat-screen technology.
Dr. Timothy O'Connell: Since around October of 2013 we've had on‑site 24‑hour‑day staff, radiologist coverage here, our subspecialty staff with emergency trauma radiologist fulltime. We're the first site in the world to offer 24‑hour‑day cardiac CT scanning.
Dr. Khati Hendry: [11:30] Short time after I moved here and I had a house, looking out over the lake and I just had this strange feeling. I'm trying to put my finger on it. This is a peaceful feeling. In the absence of stress, I found that I was really quite unencumbered when it came to seeing the patients that I can concentrate on doing medicine and not worry about other things. That was quite a change from what my experience had been.
Then I worked in community health centers in Oakland, California for many years. I was the Medical Director there and the Medical Director also of a consortium of community health centers, also in the East Bay Area. I left there in 2004 and moved to Canada. Sometimes when I'm driving around, I think, "Oh my gosh, you know, [indecipherable] or something."
First family practice department meeting that I attended, here in Canada, was quite an experience. People actually seemed happy. No one was talking about the latest outrage that had occurred from some insurance company. No one was complaining that they couldn't see their patients anymore.
Dr. Danielle Martin: [12:42] As a Canadian physician I laugh when I hear people talking about governments, telling me what to do, you're a government run healthcare. That's certainly not been my experience working in the Canadian Health Care System. I have an enormous degree of clinical autonomy.
Dr. Hendry: [12:58] People seem to think that because there's a single‑payer that you are working for the government. You're an employee. They tell you what to do. Nothing could be further from the truth.
I'm in practice. I'm a small business person. They are not running my business for me. They don't come in and review me and tell me, "You're not doing this right. You're not doing that right." They're the ones that pay me for the work that I do.
Laura Smith: [13:28] This is what I do to bill for one patient. I bring up the patient. I click on new, type in the codes, billing item and a diagnosis code. The date is already filled in for me. I create billing- it's done.
Dr. Hendry: [13:46] It is very simple. Basically you come in. I see you. I send off a bill. Two weeks later there's money in the bank. The patient doesn't have to pay. I once had to deal with an American insurance company in trying to collect $600 or $700. It took me probably six months, probably six faxes, six phone calls, and then we received a portion of the payment.
Bonnie Kiddell: [14:20] We are billing on behalf of the University Health Network for four hospitals, for diagnostic tests to the Ministry Of Health. We don't see any situations where the ministry is second‑guessing the doctor's clinical decision on the test. We bill weekly, electronically and there are approximately 10,000 claims on those weekly billings and those are handled by approximately 10 people within the department.
Dr. Martin: [14:48] This myth about Canadians dying on waiting list is simply that. It's a myth. When people have something really urgent that needs to be dealt with, in the Canadian Healthcare System, it gets dealt with. The notion that having a single‑payer somehow causes wait‑times is not actually borne out by the international evidence on healthcare system design.
We see healthcare systems internationally where it's a single‑payer system and there's virtually no wait time at all-Taiwan being the good example of that. We see systems that have multi‑payers where wait times have been a big problem.
Dr. Jim Stanford: [15:30] There's a lot of mythology out there that, somehow there's a big tax burden or big costs that comes along with the Canadian publicly‑funded model.
Carol Sadler: [15:39] In my 25 years as a cross‑border tax consultant, I'd say I've prepared at least 5,000 US returns and about the same amount 5,000 Canadian returns. The surprising thing is that, even though on an income of $50,000, the tax rates in Canada and the US are about the same. In Canada, that tax covers primary health care. In the US there'd be additional cost to that person either it's they're own insurance or employer insurance.
Gerald Friedman: [16:06] Canada now spends half as much per person as we do in the United States, yet their life expectancy has increased faster than ours.
Theodore Marmor: [16:16] It's a story of this Universal Health Insurance that very few Canadians would ever imagine reversing, and it's a story of Canadians looking south of the border and noticing we have both spectacular centers of excellence and spectacularly expensive, complicated, and hard to adjust by distribution of medical care.
Dann Konkin: [16:48] I am Dann Konkin and I'm the President of Ampco Manufacturers, a family-owned business, and been in business for over 47 years. I'm a member of the Conservative Party of Canada and we stand for removing waste being more efficient and finding ways to grow our own businesses.
One of the greatest ways that we can grow our business is to reduce cost and that's why we embrace the Canadian Health Care System. What I don't understand is why my fellow conservatives in the United States tend to fight this.
Terry Alexander: [17:21] My name is Terry Alexander and I work for Ampco Manufacturers and I've been an employer here for 17 years. From what I've experienced the Canadian Health Care System is amazing. I felt very well taken care off. I didn't feel there is any treatment that was available that they weren't providing for me. My appointments were very quick.
While I was going through my treatment of my surgery and the chemotherapy and the radiation therapy it was absolutely exhausting and very stressful and lots of anxiety. If I had, had the added burden of coming up without thousand of dollars for my healthcare coverage to fight this disease, it would have been devastating, it would've been horrible.
When I hear that people say our Canadians system isn't good, it makes a bit angry because I'm quite proud of our Canadian system.
Dr. Stanford: [18:10] There is a huge amount of mythology and propaganda that I know was promoted in the United States- all kinds of lies about the supposedly poor quality of our healthcare, the supposedly huge cost of our healthcare system.
Wendell Potter: [18:23] There was concern within the industry that more and more Americans could believe and buy on to the idea, why do we need insurance companies anyway? Why don't we just have a Canadian‑style system? Our costs would be lower. We'd have access to good quality care. It's very, very important to discredit the Canadian system in particular. Try to find someone willing to tell some sad story.
Man 1: [18:46] Under the Canadian single‑payer health plan, he was told it would take another eight months, than would likely become another...
Wendell Potter: [18:53] You look for the one or two that seem to be compelling that you can use and to get people to think that, that is common. That's the way it is. When there are obviously far, far, far more stories in the US about people who are not being able to get the care that they need than you'll ever find in Canada.
Theodore Marmor: [19:09] Canadian hospitals and Canadian doctors have more bed‑days per thousand and more visits per capita than in the United States. Wendell Potter: [19:18] I knew that what I was doing was really at odds with the way the system was really run. Also, with the fact that Canadians are far happier with our healthcare system, than American citizens are with our system, and I regret what I did.
There's no doubt I mislead people and it's a shame that I did that because people have an opinion of the Canadian system partly because the work that I did, that was just completely wrong. I feel terrible about that. I often say that what I'm doing now is, in many ways, trying to make amends for misleading people. Dann Konkin: [19:51] We looked at opening up a US operation. We wanted to be closer to our customer base. We wanted to be closer to our supply base. The more we looked at it, the amount of cost that we would have incurred, by having our company relocate into the United States, just through the insurance coverage costs alone, just made it a non‑starter.
If I had to increase my cost by over a million dollars in my company, because of insurance coverage costs, that alone would probably drive me to bankruptcy. Dr. Stanford: [20:21] In fact, up here in Canada, the major American auto companies, Ford, General Motors, and Chrysler, actually made a public declaration, a public statement that, "the publicly funded healthcare system in Canada was an important competitive advantage for their operations in Canada." Theodore Marmor: [20:40] What we have now, by comparison with Canada, are the consequences of complexity, of not knowing what you're entitled to, of excessive preoccupation with choice of insurance plan, of facing high deductibles in coinsurance- which the Canadians don't- and of living with a situation which, even if you're insured, the fearfulness of things falling outside the insurance package worry Americans. Dr. Stanford: [21:09] How could you prefer a system where the employer has all the hassle of providing private health insurance- the huge cost of it, and the risk and uncertainty of it? Man 2: [21:21] The other thing that we have to address is the issue of concession bargaining. Again... Dave Steil: [21:25] Labor negotiations are always a very contentious thing. We hear about them today particularly in the public sector, in state government, municipal government, school districts, very contentious labor negotiations. Almost always one of those contentious issues is healthcare. If healthcare is no longer part of the bargaining process because it's now covered under a single‑payer healthcare system, that issue is off the table. Richard Master: [21:53] If you look at corporate interests, those usually associated with the right side of politics, the conservative side. Their interests are enormously tied to reform of healthcare. Dave Steil: [22:06] As a business owner, and also as a former republican legislator, I've said that conservatives should be supportive of single‑payer because it costs less. Dr. Berwick: [22:17] Talking with corporate executives, a lot of them, I think get this. They know what waste is. They wouldn't be running successful companies if they tolerated waste in their production system. They can see the waste on the healthcare side. This crazy transactional system is costing them money without value. Dave Steil: [22:34] Business, when they look at the single‑payer model, will come quickly to the conclusion that it is the least expensive, the most supportive of a free market. Then we'll have the most direct affect on their cost of operation. Richard Master: [22:48] The cost to my company, and its employees, goes down with single‑payer. Instead of high insurance premiums, with high deductibles, there's a simple payroll fee, like we pay for social security, my company gets out of the healthcare business. Dr. Berwick: [23:06] I did a study myself, which estimated 34 percent waste in American healthcare. The National Academy of Sciences did a study that came between 30 and 40 percent. The Rand Corporation has a study about 35 percent, I think it is.
One out of $3 wasted. One out of $3 trillion is $1 trillion of non‑value‑added activity and care. It's hard to get that out with a multi‑payer system. Kevin Outterson: [23:35] In every city, every day, there's people who pay 10,000, 20,000, and 40,000 for the same procedure. The doctor doesn't change their quality based on how much they are being paid. In Massachusetts, the Attorney General issued subpoenas to get this information.
What we found, even for people who that are health policy experts and thought they understood this area, the variation in what hospitals were getting paid was more dramatic than we thought. Dr. Berwick: [24:06] How are the prices set? I'll wager you have no idea, and I don't think anybody does. Man 3: [24:12] This is a situation where nobody really knows what it costs, and nobody really knows what's being billed, because it varies all over the map. What healthcare systems have learned is that they can charge whatever they want. Pretty soon you've got the MRI that cost $12,000 when in fact it may cost them $300 to provide. Dr. Berwick: [24:34] You see, there's no accountability. The buck doesn't stop anywhere. The system is not in control. With a single‑payer there is more clout, there's more chance to push back, and to push back on prices to say, "No" to price increases, and forms of pricing that just make no sense. Gerald Friedman: [24:53] The reason traditional Medicare has controlled prices better than the rest of the healthcare sector is because they've controlled hospital prices and physician rates. They don't pay just what people want. They pay according to a more reasonable schedule that's more equitable.
The only place in the United States where you get drugs at Canadian prices, the Veteran's Administration. The VA, using competitive bidding, and a formulary list, gets lower prices, and they pay 41 percent less on average than does the rest of the United States.
Are the drug companies losing money selling to the VA? No. They wouldn't do it if they were losing money. It's just they're making a lot more money off the rest of us. Dr. Stephanie Woolhandler: [25:38] There's actually excellent data showing that when you have excess number of hospital beds, and excess number of specialists, and particularly excess number of facilities like MRI scanners and operating suites, you get much higher healthcare costs, due to much higher rates of intervention, but there's no improvement in population health. From a population point of view, that money for the excess is wasted. Dr. Berwick: [26:12] I don't mean to be critical of the motivation, intent, or goodwill of the providers. They care a lot about what they do. Hospitals believe in what they do. It would be easier if they were bad guys. They're not. They're good guys, but they need somebody on the other side of the table with the authority and the resources to speak up for the people, for the public. (To be continued.)
Movie Footnotes SOURCE LIST
“MCS faced with double digit increases every year in health care cost increases” and “The premiums in total for health care cost has actually doubled over the past 10 years” -From MCS Files – Employee share in 2004 was $75.66 for Aetna in 2014 it is now $413.01 for Highmark Blue Shield. In 2004 the monthly premium for Aetna was $710 and is now $1,529.66 for Highmark Blue Shield as of 2014.
“A Worker making minimum wage for an entire year is not making enough to pay for a health care benefit” “10 Dollars an hour for every hour they work” -Health insurance equals $18K cost for medical insurance is $9 per hour --- 2,000/18K = $9 *
“Of 1 million bankruptcies in the U.S over 60 percent are because of medical related issues, and the majority amount of those people have health insurance”-In 2013 1.7 Americans lived in households experiencing bankruptcies due to health care. 64 million Americans struggled to pay medical bills in 2014 - commonwealth fund of those 64 million Americans 59 percent were insured for the entire year - 36 percent or 66 million Americans reported delayed care due to costs http://www.commonwealthfund.org/publications/Issue-Briefs/2015/Jan/Biennial-Health-Insurance-Survey A study by the American journal of medicine in 2007 62.1 percent of all bankruptcies have medical cause. Most medical debtors are well educated and middle class citizens and ¾ of them had health insurance. The share of bankruptcies attributable to medical problems rose by 50 percent between 2001 and 2007 http://www.pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf
1,973 American households file for bankruptcy every day - - 62% of bankruptices are medical related. There are 1.2 million total bankruptcies a year. Debt.org - in 2005 1 out of 55 households filed for bankruptcies – Debt.org - Businesses are 3 percent of bankruptcies – Debt.org - in 2011 1,400,000 bankruptcies - in 2005 medical bills were 46% of bankruptcies – debt.org - in 2014 937k bankruptcy fillings and less than 3% were from businesses – U.S Bankruptcy Court- “Business and Non Business Cases Commenced Case Load Stats U.S Bankruptcy”
Richard conversation about Premium Shares, and how an employee could end up paying an additional 6,000+ if one or two family members got sick. - Additional information from Kasier Employer Health Benefit Survey for data on Premiums
- In 2014 the average contributions for employees are $1,081 for single and $4,823 for family. - Family contribution has increased 81% since 2004 - PPO is the most common health plan 54% of insured people had it in 2014 - In 2009 the average deductible was $829 in 2014 it was $1,217 - 73% of workers have co-pays for primary care physicians and 72% for specialty care - Average co-pay for in-network is $24 for primary and $36 for specialty - Average Coinsurance = 18% for primary and 19% for specialty - 62% of covered works are in drug prescription plans with 3 or more tiers - 15% of plans pay fill cost of prescriptions once the deductible is met - 17% are in plans with the same cost sharing for all prescription drugs. - The Typical American family is not prepared for a major financial shock) only has 21 days of income readily accessible – CNN Financial report * (we both have this on file) from the same report *Middle Class income families make between $36-60K the lowest income households earn less than $20,300. 60% of Americans have the same amount of wealth as they did in 1989. From the PEW Research center 46 percent of Americans are considered Middle Class (http://www.pewresearch.org/fact-tank/2014/12/17/wealth-gap-upper-middle-income/#comments)
“health care costs are going up 2 percent above the inflation rate and 2 to 2 ½ percent the projected growth of the GDP” Inflation - http://www.forbes.com/sites/castlight/2015/01/08/behind-the-numbers-are-healthcare-costs-really-getting-better/ Healthcare cost growth refers to the rate at which the national spending is increasing. In 2013, this was 3.6 percent. That’s the lowest rate of increase since 1960 when the government started keeping track of these things – but it’s still more than double the 1.5 percent rate of inflation that we saw in the broader US economy in 2013.
change teachers to school staff - June 7, 2013 -- The Philadelphia School District announced Friday is it laying off 3,783 people across entire range of district employees, from senior administrators to support staff.Class Size growth - School officials previously said they might have to lay off 1,300 employees, swell class sizes to 40 or more, ax school police officers, and further cut services to students.At least one of those doomsday scenarios would not come to pass, the superintendent said Wednesday."I'm saying definitively, I'm not going to put 40 children in a class," he told reporters, "because they're not going to be safe."
“If an ICU stay costs 30K a day, we are shelling out 30K a day, that’s half a police officer a day” - ICU - Mean intensive care unit cost and length of stay were 31,574 +/- 42,570 dollars and 14.4 days +/- 15.8 for patients requiring mechanical ventilation and 12,931 +/- 20,569 dollars and 8.5 days +/- 10.5 for those not requiring mechanical ventilation http://www.ncbi.nlm.nih.gov/pubmed/15942342
Nurse discussion about billing and complexity file:///C:/Users/HP%20ENVY%2015/Downloads/FinalPaperworkReport.pdf
US physicians spend 84k a year just to interact with the private health insurance industry http://content.healthaffairs.org/content/30/8/1443.full?keytype=ref&siteid=healthaff&ijkey=mQS3t4CreN%2F1Y - We estimated physician practices in Ontario spent $22,205 per physician per year interacting with Canada’s single-payer agency—just 27 percent of the $82,975 per physician per year spent in the United States. US nursing staff, including medical assistants, spent 20.6 hours per physician per week interacting with health plans—nearly ten times that of their Ontario counterparts. If US physicians had administrative costs similar to those of Ontario physicians, the total savings would be approximately $27.6 billion per year.
Data from the CDC Summary Health Statistics for the U.S Population: National Health Interview Survey, 2012 - About 25.9 million persons (8%) delayed seeking medical care in the last year due to cost and 19.2 million (6%) did not receive needed care due to the cost of care - Adults aged 18-44 and 45-64 were more likely than older adults and not children to delay seeking or not receive medical care due to cost. - Persons in the lowest income group were about 10 times as likely as person in the highest income group to not receive needed medical care due to cost and more than 6 times as likely to delay seeking medical care. - Persons under age 65 who were uninsured were about 3x as likely as persons who had Medicaid and other insurance to delay seeking or not receive needed medical care due to cost. - Persons who were in fair or poor health were about three or four times as likely as persons who were in excellent or very good health to delay seeking or not receive needed medical care due to cost - Among persons under age 65, those with Medicaid (9%) were more likely than those who had private insurance (4%) and those who were uninsured (4%) to have stayed overnight in the hospital once in the past year.
“MRI’s cost $12,000 when in fact it could really cost them $300 to provide” - Charges for a single MRI scan vary widely across the country for reasons beyond startup costs. According to the recently released Medicare data, MRIs charges are as little as $474 or as high as $13,259, depending on where you go. (Another recent study of medical claims by Change Healthcare found that in-network prices for certain MRIs can run from $511 to $2,815.) http://time.com/money/2995166/why-does-mri-cost-so-much/ Article also notes the national average is $2,600
For provider savings we added all providers together and looked at the Himmelstein study which showed that 26 percent of total expenditures was wasted in excess administration, which is the highest In comparison to other countries hospitals.
Analysis of hospital administrative costs across eight nations: Canada, England, Scotland, Wales, France, Germany, the Netherlands, and the United States. We found that administrative costs accounted for 25.3 percent of total US hospital expenditures—a percentage that is increasing. Next highest were the Netherlands (19.8 percent) and England (15.5 percent), both of which are transitioning to market-oriented payment systems. Scotland and Canada, whose single-payer systems pay hospitals global operating budgets, with separate grants for capital, had the lowest administrative costs. Costs were intermediate in France and Germany (which bill per patient but pay separately for capital projects) and in Wales. Reducing US per capita spending for hospital administration to Scottish or Canadian levels would have saved more than $150 billion in 2011.
Bureaucracy consumes one-quarter of US hospitals’ budgets, twice as much as in other nations: Health Affairs study http://www.pnhp.org/news/2014/september/bureaucracy-consumes-one-quarter-of-us-hospitals%E2%80%99-budgets-twice-as-much-as-in-ot A study of hospital administrative costs in eight nations published today in the September issue of Health Affairs finds that hospital bureaucracy consumed 25.3 percent of hospital budgets in the U.S. in 2011, far more than in other nations. Hospital administrative spending totaled $667 per capita in the U.S., vs. $158 in Canada, $164 in Scotland, $211 in Wales, $225 in England and $325 in the Netherlands. Administrative costs were lowest (about 12 percent) in Scotland and Canada, whose single-payer systems fund hospitals through global, lump-sum budgets, much as a fire department is funded in the U.S. The article attributes the high administrative costs in the U.S. to two factors: (1) the complexity of billing a multiplicity of insurers with varying payment rates, rules and documentation requirements; and (2) the entrepreneurial imperative for hospitals to amass profits (or, for nonprofit hospitals, surpluses) in order to fund the modernization and upgrades essential to survival. “We’re squandering $150 billion each year on hospital bureaucracy,” said lead author Dr. David Himmelstein, a professor at the CUNY/Hunter College School of Public Health and lecturer at Harvard Medical School. “And $300 billion more is wasted each year on insurance companies’ overhead and the paperwork they inflict on doctors.” He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Instead, we’re layering on more bureaucracy in insurance exchanges and ‘accountable care organizations” He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Instead, we’re layering on more bureaucracy in insurance exchanges and ‘accountable care organizations.’ Dr. Steffie Woolhandler, senior author of the study, said: “For three decades our policy makers have pushed market-oriented strategies that have turned health care into a business. As a result, Americans now have the world’s costliest health care, and our life expectancy is years shorter than in most other wealthy nations. It’s time to admit that, when it comes to caring for sick people, markets don’t work.”
Physician practices in the U.S. spend significant amounts of time and labor interacting with multiple health plans on claims and billing, obtaining prior authorization for patient services, and dealing with pharmaceutical formularies. The physician and staff time spent on these interactions is estimated to cost at least $82,975 per physician annually in the U.S., compared with $22,205 in Ontario, Canada, according to a study published in the July issue of Health Affairs. The study was partially supported by The Commonwealth Fund
The amount spent on these activities by practices in the U.S was nearly four times that spent by their counterparts in Ontario interacting with Canada's single-payer system, according to estimates by lead author Dante Morra of the Department of Medicine at the University of Toronto and colleagues, based on surveys of physicians and administrators. If U.S. physician practices had administrative costs similar to those in Ontario, the total savings for U.S. health spending would be about $27.6 billion per year.
The authors note that per capita health spending in the U.S. is 87 percent higher than in Canada—$7,290 vs. $3,895 annually—saying that "many factors contribute to the high cost of health care in the United States, but there is broad consensus that administrative costs are high and could be reduced
Additional findings from the study, "U.S. Physician Practices Spend Nearly Four Times as Much Money Interacting with Health Plans and Payers than Do Their Canadian Counterparts": U.S. physicians spend 3.4 hours per week interacting with health plans, significantly more than the 2.2 hours per week Ontario physicians spend interacting with the Canadian single payer plan. Most of the difference comes from one hour per week that U.S. physicians spend obtaining prior authorizations. Nurses and medical assistants spend 20.6 hours per physician per week on administrative tasks related to health plans, nearly 10 times the time spent by Canadian practices. More than 13 of these hours per week are spent obtaining prior authorization for medical services that physicians believe are needed by patients. U.S. clerical staff spend 53.1 hours per physician per week on administrative tasks related to insurance, compared to 15.9 hours in Ontario. Most of the difference comes from the time U.S. clerical staff spend on billing (45.5 hours) and obtaining prior authorizations (6.3 hours) Senior administrators of physician practices in the U.S. spend much more time per physician than their Canadian counterparts on overseeing claims and billing tasks: 163.2 hours a year in the U.S. compared to 24.6 hours a year in Ontario. Physician practices spent very little time submitting quality data to health plans in either the United States or Ontario.
From Bloomberg business: http://www.bloomberg.com/news/articles/2015-04-14/u-s-drug-spending-increases-most-in-13-years-to-373-9-billion“U.S Drug Spending Increases most in 13 years to 373.9 Billion”“Last year’s $43 billion growth in spending on medicines was the highest ever,” said Murray Aitken, executive director the IMS Institute for Healthcare Informatics, which issued the report. The institute is part of IMS Health Holdings Inc., a data company that tracks prescription drug use.Much of the increase came from treatments for hepatitis C, cancer, diabetes and multiple sclerosis after U.S. regulators approved more new drugs than any year since 2001. In total, spending on prescription drugs rose 13.1 percent in 2014, according to the report. 11.7 million Americans gained health coverage under the Patient Protection and Affordable Care Act, they weren’t a major driver of the spending growth, Aitken said. The main contributors were new and expensive specialty treatments, which include medicine for viral diseases, cancer and auto-immune disorders such as rheumatoid arthritis. Drugmakers introduced four new products for hepatitis C, a liver virus that’s infected about 3 million people in the U.S. The drugs are among the most expensive treatments ever, with Gilead Sciences Inc.’s Harvoni listing at more than $1,000 a pill. In total, the U.S. spent $12.3 billion on the treatments, according to the report.
Prescription drug spending jumps 13% to record $374 billion in 2014From LA Times: http://www.latimes.com/business/la-fi-drug-costs-20150414-story.htmlThe influx of millions of people newly insured under the Affordable Care Act was less of a factor than expected — about $1 billion of the spending growth, it said. The bulk of that was from people seeking breakthrough treatments for hepatitis C — a cure that came with a wallop at the cash register. A 12-week treatment of Gilead Sciences Inc.'s breakthrough hepatitis C drug Sovaldi could cost more than $80,000 per patient.
Gilead's drugs Sovaldi and Harvoni drove nearly 10 times as many people to start treatment for hepatitis C last year than in 2013, the report said. Sovaldi, in its first full year on the market, became the top-selling drug in the United States, the report said.
Why do Americans spend so much on pharmaceuticals?
http://www.pbs.org/newshour/updates/americans-spend-much-pharmaceuticals/The United States spends almost $1,000 per person per year on pharmaceuticals. That’s around 40 percent more than the next highest spender, Canada, and more than twice as much as than countries like France and Germany spend.Prices in the U.S. for brand-name patented drugs are 50 to 60 percent higher than in France and twice as high as in the United Kingdom or Australia.
A prescription for Nexium, a popular remedy for acid reflux disease and other stomach ailments, costs $215 on average in the U.S., which is more than 3.5 times the cost in Switzerland, the second-most-expensive nation for Nexium prescriptions, and almost 10 times more than what Dutch people pay.
Sales of Sovaldi, New Gilead Hepatitis C Drug, Soar to $10.3 Billion
Gilead Sciences sold $10.3 billion of it’s new hepatitis C drug Sovaldi in 2014.
Its success with hepatitis C more than doubled Gilead’s overall revenues to $24.9 billion in 2014, compared to $11.2 billion a year earlier. Net income after certain adjustments was $13.3 billion, or $8.09 per diluted share, compared to $3.5 billion, or $2.04 per diluted share for 2013.
In the fourth quarter alone, revenue was $7.3 billion, compared to $3.1 billion for the fourth quarter of 2013. Net income, after adjustments, was $3.9 billion, or $2.43 per diluted share, compared to $930 million, or 55 cents per diluted share, a year earlier.