Friday Follies for February 24, 2012

Gas Prices: A refinery fire in Washington state is the trigger, so says news sources, for the recent spike in retail gas prices. A fire last Friday at the BP Cherry Point site at Blaine, WA, is the trigger for the increases.  Gasbuddy.Com, a website that tracks gas prices across the country, says the fire halted production at the site.  The BP Cherry Point refinery produces 90% of the transport fuel for the west coast.

This weekend a major fire that started Friday at the BP Cherry Point Refinery in Blaine, Washington has left the refinery unable to take in its daily intake capacity (230,000 barrels per day), much of which arrives from Alaska. Approximately 90 percent of the crude oil refined there emerges as transport fuels making it the largest marketer of gasoline and jet fuel on the West Coast.

The refinery is on a massive sprawl of 3,300 acres and was built in 1971, making it one of the newer refineries in the U.S. Until this weekend, it was producing 3.5 million gallons of gasoline; 2.5 million gallons of jet fuel; and 2.2 million gallons of diesel per day. —

The suddenly cut in production was felt across the country.  West Virginia saw a $0.20-0.30 per gallon jump reports the West Virginia Gazette.

CHARLESTON, W.Va. — Gas prices in Charleston rose between 20 and 30 cents per gallon on Wednesday.

According to, a company that tracks gas prices at more than 140,000 gas stations in the United States and Canada, gas prices at most stores in the area were between $3.49 and $3.58 early in the day and had risen to $3.79 and above by late afternoon.
Jan Vineyard, president of the West Virginia Oil Marketers and Grocers Association, said the cost from one of the area’s major suppliers went up 15 cents for gas stations, causing the higher prices. — WVGazette.

The West Virginia report also blames the crises with Iran and the transition to summer blends contributing to the increased prices.

Locally, here near KC, we could expect another ten to twenty cent increase in our gas prices before the weekend according to GassBuddy.  The price here has already risen twenty to thirty cents just this week.


My wife and I hit 65 this year.  Like it or not, we’re being forced to sign up for Medicare.  My former employer only provided health insurance until we reach 65. At that point we’re dropped and expected to join the Medicare crowd.  Frankly, I couldn’t afford to stay with my employer’s health plan, it was costing me $1400/mth.  Up to this point, the cost was covered by a savings fund created when I was working.  Contributions to that fund ended years ago with the merger of Sprint and Nextel.  Sprint had a pension plan, Nextel didn’t.  After the merger, Sprint didn’t have a pension plan either.

The survival and efficiency of Medicare is an interest for us. A vital interest you might say.  There have been several Medicare reform plans submitted recently.  One, the abomination called Obamacare, is now the law of the land if it isn’t repealed.  Obamacare will replace Medicare.  Oh, the name Medicare will continue but the fact is with Obamacare Medicare will cease as it currently exists.

Paul Ryan submitted a plan last year.  The left went into a frenzy over it.  It was a good plan but some better ones have emerged since.

Burr-Coburn: The Best Medicare Reform Proposal Yet

Many politicians (and many voters) duck the hard choices when it comes to Medicare reform. But what’s remarkable about the past year is that, in some ways, momentum appears to be building for real improvements to the program’s quality and sustainability. Based on a new proposal from Sens. Richard Burr (R., N.C.) and Tom Coburn (R., Okla.), the impossible seems within reach: the triumph of sound policy over interest-group politics.
If Wyden-Ryan and Lieberman-Coburn got together to do what many people did on Valentine’s Day, Burr-Coburn would be the result.
I’d previously called Wyden-Ryan a “game changer” for its utilization of two key reform principles, premium support and competitive bidding. Lieberman-Coburn hits the other key principles of reform, including cost-sharing and fraud prevention. As I wrote last June,

I have a lengthy essay in the Summer 2011 issue of National Affairs on Medicare reform, entitled “Saving Medicare from Itself.” In it, I discuss six core concepts for real Medicare reform: (1) preserving benefits for people aged 55 and older; (2) making sure that retirees share more of the costs of their care, and thereby a stake in prudent consumption; (3) means-testing; (4) indexing the Medicare retirement age to life expectancy; (5) aggressive fraud prevention; (6) allowing seniors to shop for value in insurance plans. The Lieberman-Coburn bill hits on many of these points in a way that well complements Paul Ryan’s premium support proposal.

Wyden-Ryan hits (1) and (6), while Lieberman-Coburn hits (2) through (5). Together, they comprise the most complete Medicare reform proposal, using bipartisan policy principles, that has yet been put together.
The plan includes these elements.
Premium support and competitive bidding
Burr-Coburn incorporates something quite similar to the Wyden-Ryan system of competitive bidding and premium support, in which retirees would be able to choose among private plans and a “public option” of traditional Medicare.
One key difference between Burr-Coburn and Wyden-Ryan in this regard is that Burr-Coburn implements competitive bidding and premium support in 2016, not in 2022. On the plus side, this six-year difference has a huge impact on the long-term cost savings of Burr-Coburn.
Increasing the retirement age
As with Lieberman-Coburn, Burr-Coburn gradually increases the Medicare eligibility age from 65 today to 67 in 2027. This will allow Medicare’s eligibility age to match that of Social Security.
Improving the Medicare benefit
One thing that most people don’t realize is that Medicare, designed in 1965, has significant gaps and flaws in the design of its insurance benefit. Medicare doesn’t cover catastrophic costs, forcing many seniors to buy supplemental Medigap plans for their own protection, and giving providers perverse incentives to favor expensive hospitalizations over more efficient outpatient care.
Burr-Coburn would combine Medicare Part A (hospitalization) and Part B (outpatient physician services) into a single deductible, with a unified deductible of $550, co-insurance of 20 percent of costs until a retiree had spent $5,500, co-insurance of 5 percent until he had spent $7,500, and full coverage above $7,500.
Burr-Coburn requires greater cost-sharing for people with higher incomes: a far superior solution to raising taxes to subsidize these individuals. Those with incomes above $85,000 as individuals or $170,000 as married couples would be subject to a higher cap on out-of-pocket costs: $12,500 instead of $7,500.  For those with incomes above $107,000 individual or $214,000 family, the cap would be higher ($17,500) and even higher ($22,500) with those making $160,000 as individuals or $320,000 as married couples.
In addition, the plan would charge lower Medicare premiums to lower-income seniors, and higher premiums to higher-income retirees.
Cost-sharing reform

One of the worst aspects of Medicare is the way it is almost intentionally designed to waste money. Medigap plans are a big part of this, by providing private-sector supplemental coverage that undermines Medicare’s ability to incentivize seniors to be mindful of wasteful medical spending.

Flattening the “doc fix”
One of the worst and most persistent problems with federal budgeting has been the Medicare Sustainable Growth Rate, a global cap on the growth of Medicare payments to doctors and hospitals.
Because the global cap doesn’t keep up with the rise in the cost of health care, and provides no incentive for doctors and hospitals to be more efficient in the way they provide care, Congress has had to routinely step in with “doc fix” legislation that jacks up Medicare spending.
Repeal IPAB, Obamacare’s Medicare rationing board
Obamacare’s vision of government-rationed health care was on full display with the enactment of its Medicare Independent Payment Advisory Board, a new bureaucracy that seeks ultimately to control which treatments seniors can receive, based on the board’s view of their cost-effectiveness.
There are several problems with this approach, despite its enduring appeal to central planners. First is that rationing has done nothing to control the growth of health spending, as Britain has shown. In addition, “cost-effectiveness” is subjective, and imposes a one-size-fits-all formula on a diverse country of 300 million people, who respond differently to different treatments. (For more on this topic, see my report on my appearance before Congress at an hearing on IPAB.)
Burr-Coburn repeals IPAB and replaces it with a system that allows seniors to voluntarily chose the benefits and plans that best suit their needs.
Is Burr-Coburn the best solution? No. It is significantly better than what we have and more so with what we’ll get with Obamacare.  What it is, is a good start.  I’ve heard many conservatives complain about the Bush Prescription Drug plan. What those conservatives fail to see is that it works.  In fact it is the only Medicare segment that uses market forces to control costs. It works.
My wife and I are in a gap at the moment. My retiree heath insurance ended in December. My Medicare won’t start until March, May for Mrs. Crucis. At the moment we’re paying our own insurance.  I’ve found that catastrophic insurance isn’t too bad, about $150 for the two of us each month. Our prescription drugs aren’t too high either due to the price pressure from the Bush Subscription plan. It does make us watch our medical expenses and plan what should be done, what must be done, and what we can skip.
All-in-all, that’s a good thing.  It makes me wonder how much medical costs would drop if we repealed Medicare all together?  It’s an idea to consider.

1 thought on “Friday Follies for February 24, 2012

Comments are closed.