Universal Health Care Fuzzy Math

June 30, 2009

Getting to the Bottom of the Real Number of Uninsured

By John Newcomer:

Congress will soon be  wrestling with the proverbial Gordian Knot —  how to provide health insurance for every American.  Those in favor of universal health care claim that 46 million Americans do not have health insurance.  That would be a staggering number if it were true.  Thankfully, the number of uninsured Americans  is not that large and the problem not as immense as both sides are saying.

Before you can fix a problem, it is important to get the facts not the rhetoric and get a grip on what exactly you are trying to fix.  So, let’s give it a go.

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Madoff Sentenced: 150 Years!

June 29, 2009

Bernie MadoffBernard Madoff apologized ever so briefly at the end of the hearing where he was sentenced to the maximum of 150 years in jail for the biggest Ponzi scheme ever in the United States.  According to CNN, Madoff turned to his victims as he left the courtroom and said, “I’m sorry.  I know that doesn’t help much now.”

The 71-year-old financier said Monday at his sentencing that he “will live with this pain, this torment, for the rest of my life.”

Attorney Ira Sorkin says the 150 years in prison recommended by prosecutors or the 50 years recommended by the federal probation department are excessive.  Sorkin asked that Madoff receive just 12 years in prison.

On Friday, the judge ordered that much of  Madoff’s assets be confiscated, including his Manhattan apartment, leaving his wife with a total of 2 and one-half Million dollars.

Victims who lost millions of dollars earlier urged a stiff sentence for the former Nasdaq stock market chairman.

Madoff has pleaded guilty to securities fraud and other charges in March and has been jailed ever since.

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Health Insurance Nightmare – Coverage Canceled!

June 25, 2009

A Texas woman battling breast cancer fought back against a big health insurance company when it canceled her coverage after she was diagnosed.  It’s little known, controversial, insurance industry practice called rescission.  Companies like Blue Cross Blue Shield dump patients after it’s learned they have a serious illness.  The practice is an outrage, and this woman wasn’t going to take it.  CNN Money’s Jim Acosta shares her fight in this report.   Click here to watch the video and learn more about “rescission” and how patients are denied coverage.

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Crime & Punishment : The Bernie Madoff Scam

June 24, 2009

By: John Newcomer

Bernie MadoffThe man accused of running the biggest financial scam in US history will soon find out his punishment.  Bernie Madoff is set to be sentenced on June 29th in the U.S. District Court of New York.  Earlier this year, Madoff pled guilty to fraud, money laundering, perjury, and filing false statements with the Security and Exchange Commission, in what prosecutors say was a $65 billion Ponzi scheme.  The maximum sentence for the 71 year old is 150 years.

His Ponzi scheme stole money from more than 1,341 victims.  The losses tallied so far are in excess of $13 billion, and the prosecutors are not done counting.

A Ponzi scheme uses new investor money to pay more mature investors, thus creating a sense that everything is legitimate.  Madoff confessed that he had been running his Ponzi scheme for at least 13 years, and during that time never invested any of his client’s money.

Crime does pay.

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What’s Wrong With the Cost of Health Care – A Tale of Two Cities

June 22, 2009

By John Newcomer:

money & stethescopeThe crazy world of health care costs can best be illustrated by the “Tale of Two Cities.”  Health care spending varies wildly based on no logical measure.  The absurdity of it all came to light in a recent study on Medicare reimbursements for 2006 (the latest data available).

According to the study conducted by the Dartmouth Atlas Project and published in the New England Journal of Medicine, the 2006 national average for Medicare spending per enrollee was $8,304.  This is Medicare not Medicaid. Medicare is for U.S. citizens over the age of 65.  Medicaid is the U.S. health program for low income citizens who qualify.  Hawaii, a state that has a very high cost of living has the lowest reimbursement, $5,311.  New York has the highest $9,564.

The amazing thing about the study is that the spending varies so widely with no apparent rhyme or reason.

Spending By the Numbers

The real shocker is when you drill down to the 306 local health-care markets.  The most expensive market is Miami. Average cost per enrollee — $16,351. That’s right, almost twice the national average.  Are seniors less healthy in Miami than Hawaii? Or are they just more demanding for more medical tests and medical specialists. After all, Miami is a very affluent, well educated population.

But then you look at the second most expensive city.  It is the dusty rural town of McAllen, Texas. Average annual income is approximately $12,000 per year. Yet the average annual Medicare reimbursement per enrollee is $14,946. Yes, more than $6,000 above the national average and only 14 years ago McAllen was $300 below the national average.

Neighboring San Antonio’s average cost was only $8,793.  Did the seniors of McAllen somehow become very sickly over the last 14 years, and why are the good senior citizens of San Antonio so much healthier?  The answer is simple and obvious.

If you Order It, They will Pay

According to the study, doctors in the high spending areas were much more likely to recommend expensive and discretionary services, such as non-critical hospital admissions, referrals to sub-specialists, and more diagnostic tests. But the study also concluded that all this extra medical care did NOT result in any greater survival rate.  It just cost more money.  To find out what the Medicare reimbursement rates are in your area,   click here for an interactive map of the United States.

Atual Gawande of the New Yorker interviewed doctors in McAllen.  They even admitted the problem was over-utilization.  That’s a fancy word for ordering unneeded tests.  Gawande came to the conclusion that about 15 years ago, a few McAllen leaders took profit growth to be perfectly acceptable in the practice of medicine.  He writes “a medical community came to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers”

Here’s the real kicker!  According to the Dartmouth study, at current spending rates the Medicare balance sheet will be $660 billion dollars in the red by 2023.  But if we just contained costs like Hawaii and San Francisco (yes San Francisco!) in the year 2023 Medicare would be in the black $758 billion.

Maybe the answer is easier than we think.  Make hospitals and doctors act like they are in Hawaii.  Heck, I would even pay to send them to Maui for training if it would help.

Homeopathy, Zicam & the FDA – The Dangers of Unregulated Drugs

June 18, 2009

By Terry Smiljanich:

With the FDA announcement that Zicam, a homeopathic cold remedy,  was shown to have potentially dangerous side effects (how would you like to lose your sense of smell?), the whole issue of homeopathy and the FDA has come back to the forefront. Are homeopathic medicines any good? Should they be required to back up their claims just like any other drug?

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Want a Lower Mortgage Payment? Just Ask!

June 11, 2009

By Nicole Mayer:

With property values dropping dramatically, property taxes are also falling, and that could be an opportunity for you to save money. Many homeowners are paying much more, often hundreds of dollars more, a month than they have to on their mortgage. If you want to lower your mortgage payment with little hassle, try looking into your escrow account.

When you pay your mortgage monthly, part of the payment goes to the principal and interest on the loan, while the other part goes into an escrow fund to cover your property taxes and insurance.

So, if your taxes have gone down, you may be able to pay less to your escrow account which lowers your monthly mortgage payment. Not only that, but you may actually have an escrow overage, which could entitle you to a handsome check, sometimes hundreds or even thousands of dollars.

Your mortgage servicer is only required by law to adjust your escrow payment every twelve months, beginning from the day you purchased the home.  But if you ask, you might find success getting a reduction early.

Some servicers are working with people to adjust escrow payments when a customer calls and requests what is known as an “escrow analysis.”  That’s basically a review of how much you are paying per month. The law allows servicers to conduct an escrow analysis upon request of the borrower.

Proof That It Can Work!

One homeowner, who works with Consumer Warning Network, followed this strategy and was able to reduce her mortgage payment by $250 a month AND get an escrow refund check sent to her in the amount of $2,200!

The borrower, who is a Bank of America customer, found out Bank of America was still calculating her mortgage payment based on her 2007 property taxes, which were much higher than her current taxes. Not only that, but the property appraiser’s office had also miscalculated the square footage on her home.  That miscalculation caused her to pay extra money in taxes.

Bank of America called the tax collector’s office on a conference call with the homeowner, got the information needed and immediately made the adjustments to her mortgage account.  All of these little mistakes can add up to big money for homeowners.

How to Lower Your Payment Step-by-Step

  1. Review your escrow account analysis, which can usually be obtained from your lender’s website or upon request to your servicer.
  2. Review the yearly tax amount listed on the escrow analysis.
  3. Call your county tax collector and ask how much was paid for your 2008 property taxes. Also, ask if they can provide an estimation of what your 2009 taxes will be. Many tax collectors have already released the 2009 property tax bills, which are often significantly lower than 2008 property taxes.
  4. Compare the tax amount your lender has listed in the escrow analysis and see if your lender is using  the the old real estate tax rate. If so, proceed to step five.
  5. Call your mortgage servicers, preferably the tax department, and explain that you believe they are using an incorrect amount to calculate your escrow analysis. Request that they perform an escrow analysis using the numbers you were given by the tax collector. Even if the lender is willing to do this, they will want to verify the figures with the tax collectors office. Bank of America’s tax department (which now owns Countrywide serviced loans) will likely call the tax collector with you on a conference call.

Don’t Give Up!

If you run into any hassles with your servicer, try explaining the following things

  • If your servicer doesn’t want to conduct an escrow analysis because it has not been 12 months since your last escrow analysis, advise them that you are more likely to be able to pay your mortgage if your payment goes down and an escrow adjustment will help with that;
  • Explain to your servicer that the law allows them to conduct an escrow analysis upon your request (Surprise! Even the servicers don’t understand the complex rules on this stuff, sometimes.)
  • Explain to your servicer that the law requires them to use the charge for your taxes in the next computation year if they know it.  You will help them know this amount by obtaining it from your county tax collector’s office and offering to have a conference call or get the documents in writing.
  • If the servicer claims there is no way to estimate what the 2009 property taxes will be then make sure they are at least using your 2008 property tax bill in your escrow analysis. We have seen some servicers still using 2007 taxes, which were MUCH higher;
  • If your servicer refuses to conduct an escrow analysis until 12 months from your last one and if it appears they are using the correct tax amount, then make sure to find out when the 12 month mark is so you can call and try again

Get Your Money!

If it turns out you have an escrow surplus over $50, then the servicer has to send that money to you within 30 days. Make sure they do! If you get an escrow payment adjustment, then make sure your future mortgage payments are adjusted properly.

Could you be eligible for a reduced mortgage payment? You’ll never know if you don’t ask.

The Short Sale Got’cha – SELLER Beware

June 10, 2009

By John Newcomer;

An All Too Familiar Story:

So you got caught in the double whammy of the recession and the real estate melt down, and are trying figure out how to get out of your mortgage nightmare.  You bought your home for $200,000.  You put 10% down and owe $180,000 on your mortgage.  Your spouse has been laid off, and now you can’t make the mortgage payment.

To make matters worse, the value of your home has plummeted to $160,000.  The harsh reality — you owe more on your home than it is worth.  It’s called being “under water,” and with good reason.  You, no doubt, feel like you’re drowning.

It really stinks, because you have done everything right.  You could just walk away, but you know that is not the right thing to do.  So you are maintaining the home, and actively trying to sell it for the highest price.  You think this should be a win-win situation for both you and the mortgage company.  The bank benefits, because you sell the home for the best price.  You benefit, because you have gotten out from underneath the mortgage.

The Short Sale Trap

Enter the “Short Sale.”  This is when the mortgage company agrees to allow someone to buy your property for less than you owe on your mortgage.  There is just one tiny problem.  Most mortgage companies are only releasing the property from the mortgage lien. They are not releasing you, the borrower, from the remaining debt.

WHAT??!!

Just because the mortgage company has consented to the sale and released the lien on the property, it does not mean the borrower has been released from the debt.  In fact, the release agreement often spells it out, but unfortunately it’s spelled out in “lawyer language.”   Buried in the agreement, you will usually see language like this:

“BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless prohibited by law….”

In real people speak, that means they can come after you in the future for the remaining debt. That’s the “Short Sale Got’cha.”

Prominent Tampa attorney, Henry Hicks, who has handled dozens of short sales in the last year, is concerned about short sales where the lender has not provided a forgiveness of debt agreement.  He tells his clients it is likely that in two or three years the lender will sell that debt to some third party debt collector.

Yes, just about the time you are getting back on your feet financially, this nightmare may come back to haunt you again.  Imagine debt collectors hounding you for the difference in what your property sold for and what you actually owed the lender.

What to do?

How can a seller avoid this situation?  Ask the mortgage company to release the underlying debt.    Some companies will do just that.  You just need to ask. 

If the bank is not willing to forgive your debt in a short sale, you may just be setting yourself up to have them come back and sue you for it in the future. Not exactly what you had in mind, I’m sure.

Which Airplanes and Airlines are the Safest?

June 9, 2009

Air France Tail SectionBy Terry Smiljanich:

The crash of Air France Flight 447 in Brazil in 2009, killing 228 passengers and crew, has renewed questions about airline safety in many people’s minds.

How safe is flying? Which airlines have the best track record? What airplane models have fewer fatal crashes? [For an update as of August, 2010, please see our more recent story on the same subject.]

Flying safety

Last year alone, U.S. airline passengers traveled 798 billion miles. During the same period, Americans traveled about 3 trillion miles in automobiles. Using comparative figures, it has been calculated that the chances of a fatality in driving between Boston and Washington, D.C., is 8.5 times greater than the chances of an airline fatality for that same trip. So there is no question that airline safety still beats driving risks by miles.

Statistics show that on average in the U.S. a person dies in a plane crash for every 4 million flights taken.  These are the kind of odds faced in winning the lottery with a single ticket. You are more likely to die from stumbling while walking, an accidental firearms discharge, or suffocating in bed while sleeping than from perishing in a plane crash.

Which Airlines Have the Best Safety Record?

The top eight airlines in the United States (those having more than 2 million flights per year) all have good safety records. Their rank, based on the number of fatal events per million miles traveled, is as follows:

  1. Southwest Airlines           0.00 (no fatalities in its history)
  2. Delta Airlines                   0.17
  3. Northwest Airlines           0.21
  4. Continental Airlines         0.24
  5. US Air                              0.28
  6. United Airlines                 0.31
  7. Alaska Airlines                 0.33
  8. American Airlines             0.40

This is an average of 0.24 fatal events per million flights.

How does that compare to the airlines of other countries? The sixteen airlines based in other countries with flights exceeding 2 million per year average 1.10 fatal events per million flights, or more than four times worse than the U.S. average. The top 5 safest foreign airlines are:

  1. British Airlines                 0.17
  2. SAS                                 0.19
  3. Lufthansa                        0.22
  4. All Nippon Airlines          0.22
  5. Air France                       0.72 (not including the 6/1/09 crash)

The foreign airlines with the worst fatality records are:

  1. Turkish Airlines               3.60
  2. Indian Airlines                 3.53
  3. Aeromexico                     1.76
  4. Japan Airlines                  1.36
  5. SwissAir                          1.20

It should be noted that the official airline of China, Air China, does not release mileage or accident statistics. It is a good bet that if China does not want the world to know the answers to these questions, it must not like the answers.

There is no doubt that the American airline industry is on average the safest in the world.

What Airplanes Have the Best Safety Records

The top 5 airplanes currently in production and flown in more than 10 million flights per year rank as follows:

  1. Airbus A320                     0.13
  2. ATR 42/72                       0.33
  3. Boeing 737                      0.36
  4. Boeing 767                      0.40
  5. Boeing 747                      0.76

Other airplanes no longer in production but still flying include the Boeing MD80/90 (0.26), the Boeing 757 (0.30), the Boeing 727 (0.49) and the Airbus 300 (0.54).

What about the Airbus A330 involved in the Air France disaster? This airplane came into production in the late 90’s. 1,021 planes have been ordered, but only 609 have actually been delivered.

Compared to the Airbus A320 (6,321 ordered, 3,893 delivered), comparatively few of the A330 planes are in the air. The fatality statistics kept on this plane are currently unavailable, perhaps due to the lack of a sufficient track record, but the Air France crash will obviously push this model nearly to the top of the list.

This might be considered an unfair comparison, since only one accident can seriously skew the statistics. Take the Concorde SST, the supersonic airline in operation from 1976 to 2003. It only had one fatal accident in its entire history, but because it flew less than 100,000 flights total, its fatal events per million flights is 11.36, the highest of any aircraft model.

It could be argued that statistics such as these are misleading, since so few airline crashes occur, making them susceptible to the vagaries of chance occurences. What can be gleaned from these statistics, however, is that the major airplane models in current use have good track records, and that the air safety regulations in a few other countries are suspect.

Bank of America Picks Up Defense Tab for Ex-Countrywide CEO Charged with Fraud

June 4, 2009

One of the biggest companies responsible for the nation’s mortgage meltdown is finally being held accountable by federal regulators.  The Securities and Exchange Commission has charged Countrywide’s high profile former CEO Angelo Mozilo with civil fraud.

Countrywide was bought by Bank of America last year for $2.5 Billion.  Now, comes word that BofA is picking up Mozilo’s legal tab for his defense. BofA told Reuters News Service Mozilo is covered under an indemnity clause that was in place from his days as chief of Countrywide.

Also charged were two other company executives, former Chief Operating Officer David Sambol and ex-Chief Financial Officer Eric Sieracki.

Here’s a full account of the fraud charges from the Associated Press:

By MARCY GORDON -The Associated Press

WASHINGTON: Federal regulators on Thursday charged Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial Corp., and two other company executives with civil fraud.

The Securities and Exchange Commission’s civil lawsuit, filed in federal district court in Los Angeles, also accuses Mozilo of illegal insider trading.

Countrywide was a major player in the subprime mortgage market, the collapse of which in 2007 touched off the financial crisis that has gripped the U.S. and global economies.

Mozilo, 70, is the most high-profile individual to face formal charges from the federal government in the aftermath of the crisis.

Mozilo has denied any wrongdoing. His attorney did not immediately return an e-mail message for comment Thursday afternoon.

Civil fraud charges also were filed against Countrywide’s former chief operating officer David Sambol, 49, and ex-chief financial officer Eric Sieracki, 52.

The trio “deliberately misled” Countrywide shareholders, SEC enforcement director Robert Khuzami said at a news conference at agency headquarters. While they painted a picture of robust performance, the real Countrywide was “buckling under the weight” of soured mortgage loans, he added.

Khuzami said Mozilo reaped nearly $140 million in illicit profits from his stock sales.

It was the first major case led by Khuzami, who joined the agency in March. SEC Chairman Mary Schapiro brought him in at a time when the agency was being assailed by lawmakers over its failure to detect the massive pyramid scheme run by fallen money manager Bernard Madoff despite red flags raised to its staff by outsiders over the course of a decade.

Sambol’s attorney Walter Brown said his client will fight the charges.

“The SEC wrongly asserts that Countrywide’s disclosures to its investors regarding its lending criteria should have been more extensive, and that Mr. Sambol is somehow responsible for insufficient disclosure,” said Brown. “Making groundless allegations and losing in court will not help the SEC restore its reputation. I am confident that Mr. Sambol will be vindicated completely.”

An e-mail message to Sieracki’s attorney, Shirli Fabbri Weiss, was not immediately returned.

The SEC and federal prosecutors have undertaken wide-ranging investigations of companies across the financial services industry, touching on mortgage lenders, the Wall Street investment banks that bundled home mortgages into securities sold to investors, and other market players.

The SEC’s scrutiny of Mozilo’s stock sales began in the fall of 2007 with an informal inquiry.

The filing of the agency’s lawsuit is a striking turn for Mozilo, the man who 40 years ago co-founded what grew into the nation’s largest mortgage lender. He moved the company in 1969 from New York to the housing hotbed of suburban Los Angeles, guiding Countrywide through numerous boom-and-bust housing cycles.

After the mortgage crisis hit, Calabasas, Calif.-based Countrywide was forced to cut thousands of jobs and saw its shares plummet. Its downward spiral ended in it being bought by titan Bank of America Corp. in July 2008 for about $2.5 billion. Countrywide itself is the target of multiple lawsuits related to the mortgage meltdown.

A criminal probe into Countrywide’s lending practices continues in Los Angeles. A person familiar with the matter who requested anonymity because of the ongoing probe said no charges were imminent.

Mozilo’s influence stretched from the California real estate market through the corridors of power in Washington.

The Democrats were roiled a year ago by revelations that Sens. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, and Kent Conrad, D-N.D., head of the Budget Committee, got mortgages at favorable rates through a VIP program dispensed by Countrywide for so-called “friends of Angelo.”

Dodd insisted that the controversy over the two loans he received did not compromise his ability to lead Congress’ efforts to address the effects of the subprime mortgage meltdown.

Mozilo sold about $130 million in Countrywide stock in the first half of 2007 through a prearranged 10b5-1 trading plan. These plans, popular among corporate executives, allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of significant nonpublic information.

North Carolina’s state treasurer, who asked the SEC in 2007 to investigate Mozilo’s stock sales, raised questions about changes made to Mozilo’s plan in the months before the company’s stock plunged, which allowed Mozilo to significantly increase his sales of Countrywide shares.

Mozilo had sold company shares through prior arrangements since 2004; the pace of his sales began to quicken in October 2006 when he put a new plan into effect. Mozilo has said that he did so to reduce his stake in Countrywide and diversify his personal investments in an orderly fashion before his retirement, which was slated for December 2009.

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