Treasury's Savingsman: U.S. Should Take Own Advice

The greatest lessons about saving money hit us when we're kids, especially from nursery rhymes, like Simple Simon, who never had money.


Always spending, never saving.

Then there was the Old Lady who had to live in a shoe because she relied totally on Social Security. And of course Humpty Dumpty would have fared much better had he put aside a little cash for his long term health care.

Hey, good lessons to remember. Saving for your financial future is no fairy tale, because if you don't have a goose that lays the golden eggs, you better "Choose to Save."

While driving recently, I heard a public service announcement (PSA) from the U.S. Treasury, which seems to fit very well with what I had planned to say in this op-ed. When I went to the Internet to try to find the text, I found that it was one of the Treasury's "Choose to Save Public Service Announcements." (http://www.choosetosave.org/psaplayer/index.html)

What particularly struck me about the ad was that it was 100 percent out of phase with the insanely irresponsible deficit spending coming from Washington. It gave me at least an iota of hope that somebody in Washington understands that buying-on-time ("deficit spending") is incompatible with saving for a secure future. Indeed, the PSAs on the site sounded a lot like my father and mother.

The Great Depression taught my parents a number of lessons that they practiced for the rest of their lives, and taught their boys.

On many occasions, my dad said that the cause of the stock market crash was the "buying of stocks on margin." Before "Black Friday," a person could buy a stock by putting 10 percent "down," and owing the rest. It was a way of buying stock "on time."

People who bought on 10 percent margin, made fortunes — as long as stock prices rose, and as long as they were able to sell at the appreciated prices! But when the market precipitously dropped on Black Friday, and when margin calls went out for the other 90 percent, few people could come up with it. Those that couldn't, lost the 10 percent they had put "down," and found themselves liable for the other 90 percent.

From their Depression experiences, dad and mom formulated rules designed to allow them to survive next depression.

Rule No.1: Never buy on time.

Rule No. 2: If you can't pay cash for it, don't buy it! Wait until you can pay cash.

Rule No. 3: Never pay interest. If you have to spend money paying interest, you will have that much less money to spend on things you really want.

Dad and mom made one exception to their rule. When they bought a house after World War II, they took out a mortgage.

They made a judgment that they could, on dad's income, afford to pay that mortgage. But to protect themselves as far as possible, Dad bought mortgage insurance to insure the house would be paid for in the event of his death.

For all other purchases, including automobiles, my parents saved and paid cash.

Mom was proud to tell how she bought their first radio with pennies she had saved. Dad, being a businessman, understood that business expansions generally required borrowing. But borrowing, even for that, was never dad's first option.

He frequently said, "there are two ways to make money: earn more, or spend less.

Mom and dad both believed in "putting something away for a rainy day."

Having survived the Depression, mom and dad always operated on the theory that they wanted things to be better for their boys. They never would have asked us to pay for their home, their car or even their medical expenses.

Throughout my life, I have followed their advice. I have always found paying cash for something makes you think twice before you buy it. To this day, I always ask myself if I want it badly enough to deplete my savings. It is amazing how many "things" I haven't bought over the years because I felt that I would be better off not depleting my savings.

These are old-fashioned notions. I suppose that at least half the people in the country would reject them as antiquated. They follow a modern precept: "If you want it, buy it and pay for it later." The treasury seems to disagree:

Announcer. And now, another adventure with Savingsman!

Attractive Young Woman. (Shopping) Oh dear! I can't afford that!

Evil Credit Card Guy. Charge it! You can pay it off later

Savingsman. Not so fast Credit Card Guy.

Attractive Young Woman. Savingsman!

Savingsman. Don't let him entice you ma'am, Credit Card Guy can lead you to big trouble ... you need a savings plan!

Attractive Young Woman. You're right Savingsman!

Savingsman. Get this Ballpark Estimate worksheet at choosetosave.org. It will help you get started!

Attractive Young Woman. Gee, thanks Savingsman!


Posted Online: Sept. 13, 2011, 3:00 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

Constitution Is a Flexible, Living Document -- Within Limits!

The Constitution gives Congress explicit power to regulate commerce among the states. Every baby born in America will eventually use public transportation and the interstate highway system. Population increases require greater congressional expenditures to build and maintain those systems.

So to prevent increases in the population with the attendant costs to the public, would Vice President Joe Biden (recall his recent China trip) say that Congress has power to regulate commerce among the states to limit the number of children a family might be allowed to have to one or two? To require the use of contraception or abstinence?

When the Constitution was adopted, the governments of the several sovereign states were not abolished. But the very people who set up the states, decided that states were good at some things, and not very good at others. Those powers the states possessed, but were not very good at exercising, were taken away and vested in the new federal government.

The powers vested in Congress are generally known as "enumerated powers" because they are "enumerated" in Article I. That article has not been amended since the date it was adopted. The 18 enumerated powers include:

-- Power to lay and collect taxes ... to pay the debts and provide for the common defense and general welfare of the U.S.

-- To borrow money on the credit of the U. S.

-- To regulate commerce with foreign nations, and among the several states.

-- To establish a uniform rule of naturalization.

-- To coin money, and regulate the value thereof.

-- To establish post offices and post roads.

-- To punish piracies and felonies on the high seas.

-- To declare war.

-- To raise armies.

-- To provide and maintain a navy.

-- To make all laws which shall be necessary and proper for carrying into executing the foregoing powers.

There is no grant of power to Congress to establish a religion, regulate speech, or abolish the right to bear arms. But what if Congress, having enumerated powers, expanded them under the theory that the Constitution was a non-rigid, flexible, dynamic, living document, and under the theory that such an expansion was "necessary and proper" for carrying into execution one of its 17 other enumerated powers? What if Congress decided that pursuant to the power granted to it to "lay and collect taxes to provide for the general welfare," that it was "necessary and proper" that it should subsidize the Catholic faith over the Jewish faith?

What if Congress decided that the holy days of the disparate religions were burdening interstate commerce, and that it should establish one religion under its power to regulate commerce so as to remove the time lost by disparate holy days?

To make sure that sort of thing didn't happen, 10 Amendments, known as the Bill of Rights, were added to the Constitution in 1791.

The Bill of Rights was passed because the American people were afraid that even though Congress had only been given certain enumerated powers that, left to its own devices, it would, like every other government, seek to expand those powers in the name of necessity. The First Amendment contains an unequivocal statement that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof, or abridging freedom of speech or the press." The Second provides that "the right of the people to keep and bear Arms, shall not be infringed."

Most Americans are aware of at least some of the amendments. But few seem to be aware of the 10th.

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Nowhere is Congress given the power to say what marriage is, or what a state may prohibit as constituting, murder, burglary, or theft.

Nowhere is Congress given power to say whether a man and his wife my opt to use a contraceptive. As the states clearly had power to define marriage, and punish criminal offenses before the Constitution was enacted, and since no such power was delegated to Congress, these are powers "reserved to the states." And a married couples choice to employ or not to employ a contraceptive is similarly a question "reserved" either to the "states" or the "people." As a further guarantee, the 9th Amendment provides, "The enumeration in this Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people."

That means, the fact that Constitution expressly says that a man has a right to trial by jury does not mean that he does not also "retain" the right to share a contraceptive with his wife.

The Preamble states that a goal of the new Constitution was to "promote the general welfare." But if Congress can pass any law that it deems "promotes the general welfare," why bother to enumerate 18 specific powers? They become surplusage. And the Bill of Rights becomes a nullity.

Conservatives do not deny the Constitution is a dynamic, living document. But they believe it must be construed as the founding fathers intended it to be construed -- with the states and people exercising the "reserved powers" and with Congress exercising only those powers specifically granted to it by the Constitution -- which the people of the states decided could better be exercised by a federal government!

So, when you authorize the painter to paint your living room, is it also "necessary and proper," or for your "general welfare" for him to paint your car?


Posted Online: Sept. 07, 2011, 2:23 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

Expropriate Exploiters' Wealth? It's Been Tried Before!

Multibillionaire Warren Buffet does not feel he is paying enough federal income tax.

He suggests the government tax him more. ... what does he mean by "more?" Is he suggesting taxing billionaires out of existence?

Would you be in favor of abolishing billionaires? Millionaires? What about corporations with net incomes in excess of $1 million? If so, why? To eliminate the deficit?

Remember, if taxes on individuals with annual incomes in excess of $1 million were doubled, it would only cut our $1.5 trillion deficit by roughly 17 percent. So if making the "super-rich" pay their "fair share" is your solution to eliminating the deficit, you might wish to consider "nationalizing" their wealth, instead.

And if you favor "nationalizing their wealth," how do you define "billionaire?" "millionaire?" (Bs and Ms.)

Do we define Bs and Ms based on how much property they own? Or is a B someone with an annual adjusted gross income of a $1 billion or more?

If you classify people based on their annual income, then abolishing Bs and Ms is as easy as raising the taxes they pay. You might, for example, pass a law which says "all persons with adjusted gross incomes in excess of $1 million shall pay a tax sufficient to reduce their after-tax income to $999,999.99." Or perhaps to $100,000!

But if you define Bs and Ms based on the net value of their estates, then you will probably need to pass an excise tax, taxing the privilege of being rich or owning property in a sum sufficient to reduce the net worth of each to $999,999.99, or less. After all, that is the theory of the Obamacare's individual mandate. If not having health insurance "affects interstate commerce," surely sitting on a mountain of money which the government could better use to stimulate the economy also adversely "affects interstate commerce."

Of course, abolishing Bs, Ms and corporations has been tried before. In 1918 the USSR enacted a Constitution that abolished capital and created a Republic of Soviet workers. And for 70 years, people lived dismal, bleak incentiveless lives, until the whole system collapsed in 1990.

Here are a few excerpts from the "enlightened" 1918 Soviet Constitution:

"Article 3. Its fundamental aims being abolition of all exploitation of man by man, complete elimination of the division of society into classes, merciless suppression of the exploiters, ... and victory of socialism in all countries, the ... Congress of Soviets of Workers', Soldiers' and Peasants' Deputies further resolves:

"a. Private land ownership is hereby abolished, and all land is proclaimed the property of the entire people ... on the principles of egalitarian land tenure.

"b. All forests, mineral wealth, waters of national importance ... and agricultural enterprises are proclaimed the property of the nation.

"c. The Soviet laws ... are ... confirmed ... to guarantee the power of the working people over the exploiters, as a first step towards the complete conversion of factories, mines, railways and other means of production and transportation into the property of the Soviet Workers' and Peasants' Republic.

"d. The Congress of Soviets regards as a first blow at international banking and financial capital, the Soviet law on the annulment of loans negotiated by the governments of the tzar, the landlords and the bourgeoisie ...

"e. To ensure the sovereign power of the working people and to rule out any possibility of restoration of the power of the exploiters, ... the creation of a socialist Red Army of workers and peasants, and the complete disarming of the propertied classes are hereby decreed."

So, before you decide to nationalize the income and the assets of Bs, Ms and greedy corporations, think twice. The America of your dreams, could very well end up looking a whole lot like the workers' paradise formerly known as the USSR. And if you are too young to remember the USSR, take a trip to Cuba.

It's only 90 miles away!

So why defend Bs and Ms (those who have lawfully amassed and lawfully utilize their wealth)?

It is not because I admire them or want to be one of them. It is because I am unwilling to exchange traditional American "equality of opportunity," for Soviet-style "equality of outcome."

As long as America has its Bs and Ms, you and I retain the liberty to become Bs and Ms. I defend them because I won't engage in class warfare, and because I refuse to covet my neighbors' goods. Because if their wealth can be expropriated, so can yours and mine.

Posted Online: Aug. 24, 2011, 2:46 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

America's Problem Isn't Debt Ceiling, It's Our Deficit Spending

It is 1:54 p.m. If at this minute you were to go to U.S. Debt Clock.org, you would see the national debt is $14,554,052,607,778, and rising fast by the second.

You would also see, that this year's federal budget deficit is $1,401,818,811,257 and rising by the second.

President Obama demands the debt ceiling be raised and matter fixed so that the problem will not have to be faced again until after the 2012 election. But assuming Congress passed a clean bill which dealt only with raising the debt ceiling, would that really fix the problem? If you think so, you are delusional.

The debt ceiling is only a symptom of decades of annual deficits. The country incurs a deficit when expenses exceed revenues. It is the deficit that increases the national debt. If we have to raise the debt ceiling by $1.4 trillion it is because we have a $1.4 trillion deficit this fiscal year.

There really are only two ways to eliminate this $1.4 trillion deficit:

-- Raise taxes, or

-- Cut spending. Borrowing only kicks the can down the road, and, because it involves interest payments, it increases the deficit. So anyone who tells you that we can fix the problem simply by raising the debt ceiling is an idiot or a con man. In fact, given roughly the same spending, and the same revenues, a year from now at this time we will have another $1.5 trillion deficit, and will therefore have to raise the debt ceiling by another $1.5 trillion.

So, if you are one of those who believes we can fix the problems by raising taxes on millionaires and billionaires (hereinafter called M&Bs), here are figures published by the IRS. Read them, and then draw your own conclusions.

-- The IRS reports that in 2008, 140,436 taxpayers reported incomes greater than $1 million but less than $1.5 million.

-- 59,469 reported incomes greater than $1.5 million, but less than $2 million.

-- 86,329 reported incomes greater than $2 million, but less than $5 million.

-- 21,390 reported incomes greater than $5 million, but less than $10 million.

-- 13,480 reported incomes in excess of $10,000,000.

If you add those numbers, you will find that in 2008 there were 321,000 U. S. taxpayers who reported incomes in excess of $1 million

The same report shows that those M&Bs paid $249,019,545,000 in federal income taxes, after all credits.The total number of taxpayers in 2008 was 90 million. Income tax they paid after, all credits, was just over $1 trillion. As such, 321,000 out of 90 million paid just under 25 percent of all federal income taxes paid in 2008. That means .3 percent of the taxpayers paid 25 percent of all federal income taxes. This year, America will have a $1.5 trillion deficit. That means expenses will exceed revenue by $1.5 trillion.

So what's the solution?

The Republicans say cut $1.5 trillion from this year's budget. The president demands "shared sacrifice." He wants M&Bs to pay their fair share. So what is it? In 2008, the M&Bs paid $250 billion in taxes.Was that "fair" then?

What if we doubled their taxes this year? What if the M&Bs were required to pay $500 billion this year. That would still leave us $1.25 trillion deficit. But, if their taxes were doubled, would they then be paying their "fair share?" Would that be enough "shared sacrifice?"

What if the M&Bs 2011 income tax was quadrupled? That would generate $.75 trillion in new revenues, and would leave us with a deficit of only $750 billion. Would that be their "fair share?" Would that be sufficient "shared sacrifice?"

In 2008, taxpayers -- other than the M&Bs -- paid roughly $.75 trillion in federal income taxes. If the millionaires and billionaires are going to have their taxes quadrupled to raise $.75 trillion in new taxes, perhaps the remaining 99.7 percent of taxpayers would be willing to have their taxes doubled to generate the other $.75 trillion necessary to balance the budget. Would that be "fair?" Would you be willing to "share the sacrifice" to that extent?

Of course, 51 percent of Americans pay no federal income tax. If you would be willing to double what you pay, I am certain they would be willing to double, treble or even quadruple what they pay. I am, of course, not naive enough to think that Americans with taxable incomes of less than $1 million who actually pay taxes, really want to see their taxes doubled. So, if you actually pay taxes, and you don't want them doubled, how much more are you willing to pay to eliminate the deficit? Anything less than a 100 percent increase won't do it, even if taxes are quadrupled on the M&Bs.

And of course if you are only willing to pay an additional 10 percent, why is it "fair" that the M&Bs pay an additional 100 percent or 300 percent -- while 51 percent of the American people pay nothing? At what point does taxing the M&Bs become naked plunder?

The bottom line is this: if you quadruple the income tax the M&Bs pay, you will still have a $.75 trillion deficit. So how much more are you willing to pay to cover the balance?

By the way, as I finish this revision, the U. S. Debt Clock now reads $14,544,068,702,280. And it is 2:25 p.m.

Posted Online: Aug. 18, 2011, 7:55 am - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

The Buck Stops Here, or Does It?

President Harry S Truman had a little sign on his desk which said: "The Buck Stops Here!"

In his farewell address, he explained its meaning for anyone who didn't get it: "The President -- whoever he is -- has to decide. He can't pass the buck to anybody. No one else can do the deciding for him. That's his job:"

When I was in second grade in 1948, Sister Mary Margaret passed out a ballot.

We could vote for either Gov. Dewey or President Truman.The president got only two of 30 votes. One was mine. When President Truman won reelection, I felt a whole lot smarter than the Chicago Tribune. Its Nov. 3, 1948 banner headline, proclaimed: "Dewey Defeats Truman!"

But President Truman wasn't always right.

As a young man in 1922, he flirted with the Ku Klux Klan (although he never was initiated, and never attended a meeting). He also expressed anti-Jewish sentiments in his diary.

His 1946 proposal to draft coal miners into the army to end their strike, would cost him the labor vote today and his 1952 order to his secretary of commerce to seize control of the nation's steel mills, meant to insure a steady supply of steel to the armed forces fighting the Korean War, shocked many Americans. including a majority of the United States Supreme Court, which held that absent Congressional authorization, that the president -- though he was Commander in Chief -- lacked Constitutional power to nationalize an industry -- even in time of war.

Mr. Truman became an "accidental president" when FDR died in April of 1945.

From the day that Harry Truman took office, he came face to face with the "buck."

He had a choice.

He could either "pass the buck," or grapple with it. And whether you approve or disapprove of his decisions, he had the guts to do what he thought was right for America.

Barely four months after he took office, he was faced with the biggest decision any president had ever been forced to make. America had the atom bomb. Should he order it to be dropped on Japan? He did. On Aug. 6, 1945, 140,000 died in Hiroshima. On Aug. 9, 80,000 more were killed in Nagasaki. Japan surrendered on Aug. 14, 1945.

Mr. Truman knew the devastation the bombs would cause, but he also knew that if America tried to invade the Japanese home island that there would be as many as a million American casualties. Many have condemned President Truman for dropping the bombs. But Mr. Truman never backed down.

"I knew what I was doing when I stopped the war ... I have no regrets and, under the same circumstances, I would do it again."

Eleanor Roosevelt later said that President Truman had "made the only decision he could." The bomb's use was necessary "to avoid tremendous sacrifice of American lives."

But that was only one of Mr. Truman's momentous decisions.

When The Soviet Union threatened to gobble up Greece and Turkey, and perhaps all of war-torn Europe, President Truman announced what has been called the Truman Doctrine: "the policy of the United States to support free people who (were) resisting attempted subjugation by armed minorities or by outside pressures." The Truman Doctrine changed America's foreign policy toward the Soviet Union from detente to active containment.

Then to give teeth to his policy, Mr. Truman encouraged the U.S. Senate to approve the NATO treaty which said, "The Parties of NATO agreed that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all."

When economic chaos in postwar era portended a communist takeover of the European democracies, President Truman authorized implementation of the Marshall Plan.

When Russia tried to cut off Berlin from the West, President Truman ordered th the Berlin Airlift to break the Berlin Blockade, even though he could not be sure that Russia would not respond with military action.

In an effort to avoid further wars, President Truman backed the formation of the United Nations.

When Hubert Humphrey demanded a strong civil rights plank in the 1948 Democratic platform, Harry Truman embraced it, notwithstanding the fact that Strom Thurmond would bolt the convention, split the Democratic Party and run as a "Dixiecrat."

Then putting his "money were his mouth was," Harry Truman two weeks later, issued Executive Order 9981, which racially integrated the U.S. Armed Services -- knowing this would cost him the support of many in his party.

And then, overcoming his youthful anti-Semitic attitudes, Harry S. Truman, notwithstanding dire warnings of a potential Arab backlash, which might result in loss of access to Middle East oil, recognized the state of Israel in May of 1948 -- 11 minutes after Israel declared itself a nation!

And of course, when General Douglas MacArthur, one of America's greatest heroes, forgot who was commander-in-chief, Harry S Truman fired him, knowing that his decision would be wildly unpopular.

So why do I call myself the "last Truman Democrat?" Because Harry Truman had the guts to try to put the good of the country above partisan politics.

Were he president today, there'd be no sign on his desk saying, "The Buck Stopped with George Bush."




Posted Online: Aug. 04, 2011, 10:35 am - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

The IRS: America's Income Redistriction Service!

Senate Majority Leader Harry Reid, D-Nev., recently said, "we must simplify and streamline our broken tax system ... so everyone pays his or her fair share -- including corporations."

President Obama never tires of calling for "shared sacrifice."

At roughly the same time, Neil Cavuto of Fox Business News reported that "More than half of American households (51 percent) pay no income tax."

His guest, Neal Boortz, added that many of the "poor," rather than paying federal income tax, instead receive checks from the federal government. So, in effect, the government is paying a reverse "tax" to the poor. Is this "shared sacrifice?"

So, what is the fair share that the "rich" should be paying? What is the fair share that corporations should be paying? What is the fair share the "poor" should be paying? But perhaps, more importantly, who gets to say what amounts to a fair share? And who gets to label someone as "rich" or "poor?"

Let's take a simple example. A single man makes $1 million a year on a device that he spent 10 years of his life inventing. What is the fair share he should pay in federal income tax: 20 percent; 40 percent; 60 percent; 90 percent?

And who gets to say so? People with comparable incomes? The 51 percent who pay no federal income tax? Congressmen who are elected by the 51 percent who pay no federal income tax?

Let's take a second simple example. A single man earns $10,000 a year? What is his fair share: 0 percent; 5 percent; 10 percent; 15 percent? And who gets to say so?

At the outset, I don't think it is possible for one who pays no tax to claim he is paying any "share," much less his fair share. When a person "shares" he gives a portion of what he has to another.

Giving your neighbor nothing is not "sharing." It's doing nothing. In Mark's Gospel, we have the story of a poor widow who put two coins worth a few cents into the temple treasury. Christ praised her because she gave from her livelihood, rather than from her surplus. Would He have done so if she had walked by and given nothing? Would that have been "shared sacrifice?"

Is a fair share nothingmore than a percentage? Or, does it take account of the efforts that the wage earner expended to earn his income? Does it take account of the fact that nobody else lifted a finger to help him earn his income? Does it take account of how hard the wage earner worked? His genius in earning the income? What he spent to educate himself to be able to generate the income he has achieved?

What is fair about a married couple earning $250,000 paying 35 percent of their income as federal income tax? Is it more or less fair to say they should pay 50 percent? Where is the line between "fair" and "arbitrary?"

And is it "fair" that someone who earns $10,000 a year, and receives a free public education, medical care and food stamps, should have a right to vote to increase his neighbor's income tax, if he pays no income tax himself. Is it "fair" for someone with "no skin in the game" to have a vote to raise taxes on whoever he labels "rich" without voting to raise his own taxes -- at least a little?

By the way, when does one become "rich?" Or is "rich" like "fair share" in the eye of the beholder?

In a democracy, the majority rules. And that is precisely what bothers me. Since the passage of the 16th Amendment, which authorizes Congress to lay and collect taxes, the courts have never deemed any income tax to be a Fifth Amendment "confiscation of private property for public use," so as to require the government to pay "just compensation" for the "taking" (via taxation).

With the passage of the 16th Amendment, the only "check" upon the government setting income tax rates on the "rich" at 75 percent or even 99 percent, or determining that anyone with an income as small as $25,000 was "rich," has been the fact that everybody paid some tax, and that nobody liked paying more taxes.

Now that 51 percent of "taxpayers" pay no taxes, it is not going to take long before they figure out that it is in their best interest to elect congress and a president who will tax the "rich" at higher and higher rates, and who will insure that those who pay no taxes will be left alone.

The income tax will clearly be shown to be what it is fast becoming: a legal system for plundering your neighbor. As long as everybody is adversely affected by tax increases, there is a practical, if not constitutional, "check" on taxes being raised: self interest. But once 51 percent of the people believe they are unaffected by tax increases on their "wealthy" neighbors, that "check" is gone.

So, as the Internal Revenue Service morphs into the Income Redistribution Service, there is at least some good news:

We will still be able to call the tax collector the IRS.


Posted Online: July 20, 2011, 2:51 pm - Quad-Cities Online

by John Donald O'Shea

Copyright 2011, John Donald O'Shea

How Long Can Illinois Physicians Afford to See Medicaid Patients?

In 2010, Illinois spent $15.5 billion to provide medical care for the poor, according to a recent Associate Press article. (Up from $7.5 billion in 2000.)

The U.S. Census Bureau says that the 2010 Illinois population was 12,830,632. By simple division, the average cost to each resident of Illinois to pay for medical care for the poor is $1,200 per year.

The same said that under the budget passed by the Illinois Legislature, doctors and hospitals have been promised virtually the same fees for services rendered to those on Medicaid that they had received during the prior year. But the amount budgeted to pay for those fees is $1.2 billion short.

The shortfall, however, is only part of the problem. In addition, there are $6 billion of overdue and unpaid medical bills from prior years. Therefore, next year at this time, it appears that there will be $7.2 billion in unpaid medical bills.

Doctors and hospitals will have to wait longer to be paid. A spokesman for the governor suggests a 30-day payment wait might be expected to increase to 120 days.

But is that for "new" bills, or for the bills already six months overdue? In light of this, what can the doctors and the hospitals say other than, "It's better to be paid money eventually, than not to get it at all."

But if doctors and hospitals know they will get paid "eventually," and "eventually" gets 20 percent longer each year, how long will it be before the doctors and the hospitals can no longer wait for "eventually" to happen?

When you buy food from the grocery store and eat it within a few days, it's a little unfair to promise the grocer you will pay him in six months or so. If your grocer is required to pay within 30 days for the meat and potatoes he sells in his store, how is he going to pay his supplier and employees if you don't pay him?

When I was a boy, our family doctor was Dr. Cahill. I don't ever recall going to his office, but I recall him making a house call when I got the chicken pox. But medicine has changed.

Today the practice of medicine is more complex. The doctor is assisted by a clerk/receptionist, an office nurse, a scheduler, an insurance billing assistant, a Medicare billing assistant, etc.

These employees all have to be paid, and the doctor doesn't have the luxury of telling his staff he will pay them in six months or whenever he "eventually" gets paid by the State of Illinois.

When a doctor is forced to wait six months to be paid for seeing Medicaid patients, he had better have a sufficient number of privately insured patients to allow him to meet his employee payroll, to pay for his malpractice insurance, to pay the rent on his office, to pay himself a reasonable salary, etc.

If he doesn't, he won't be in business when "eventually" finally comes. I don't think Dr. Cahill faced these problems.

I think it is fair to say that the state's ability to pay doctors and hospitals isn't going to improve as long as the economy remains in the doldrums, and tax revenues remain low. But then, what happens when Obamacare kicks in?

What happens to those doctors and hospitals who, because of private insurance payments, are now able to wait six months to be paid for services rendered to Medicaid patients?

If doctors' revenues fall sharply, what does that do to their ability to see Medicaid patients, and wait months to be paid? If doctors has to see more non-Medicaid patients (because those patients no longer have private insurance) to keep their revenues at pre-Obamacare levels, does this mean that the doctors and the hospitals will have less time to see Medicaid patients?

I don't know. But if a doctor is used to a certain level of income, and what he can charge patients is reduced, he will need to see more patients to generate the same income. And I suspect, that means, he will be able to see fewer of the poorest patients.

Especially, if the state cuts fees paid, or turns "eventually" into something even longer.



Posted Online: July 6, 2011, 2:53 p. m. - Quad-Cities Online.com

By John Donald O'Shea


Copyright 2011
John Donald O'Shea



John Donald O'Shea of Moline is a retired circuit court judge.