Medicare Advantage finance

Some people with Medicare Advantage coverage wonder why they must pay Medicare Part B premiums when they aren't covered by Medicare. They show their Medicare Advantage card to medical providers and pharmacists and don't need to show their Medicare cards. A few of these even pay Part A premiums, which are higher than the Part B premium for most such people, when neither they nor their spouse has 40 or more quarters of Social Security coverage.

Why must they pay said premiums when they do not have Medicare coverage? Medicare Advantage insurers relieve Medicare of paying claims on behalf of those who choose a Medicare Advantage plan. Medicare -- more specifically the Center for Medicare and Medicaid Services (CMS) -- pays Medicare Advantage insurers for each person who enrolls in a Medicare Advantage plan. Indeed, CMS pays them a lot of money -- called capitation payments -- currently on average about $11,000 per year per person enrolled in a Medicare Advantage plan. So in effect, the Part B premium (plus any Part A premium) paid by the Medicare Advantage insured is an indirect payment to the insured's Medicare Advantage insurer. For most the Part B premium of $1,626 (=12*$135.50) for 2019 is about 15% of the $11,000.

The capitation rates vary by county and are higher for higher risk insureds. Receiving said capitation money is how some insurers can offer and advertise a Medicare Advantage plan with $0 premium.

"$0 premium" does not mean the insured person pays nothing. In addition to the Medicare Part B premium, and for a few the Medicare Part A premium, the insured persons pay deductibles, coinsurance, and co-pays when they utilize the services covered by the Medicare Advantage plan. This page gives more detail.

In 2018, 34% of Medicare beneficiaries – 20.4 million people – were enrolled in a Medicare Advantage plan (link). So about 66% have original Medicare. They may also have a Medicare supplement plan (also called Medigap) and a Part D prescription drug plan. In 2016,  81% of original Medicare beneficiaries had some type of supplemental insurance, including employer-sponsored insurance (30%), Medigap (29%), and Medicaid (22%). Link.

The major sources of revenue for all of Medicare in 2018 were general revenues 43.2%, payroll taxes 36.2%, and premiums 15.3% (source: Medicare Trustees Report).

Transistors and the history of hearing aids

A book I am reading about the invention of transistors -- Crystal Fire -- includes the following about hearing aids. As a preface, Alexander Graham Bell was the founder of the Bell Telephone Company, and AT&T was initially a subsidiary of Bell Telephone (link).

In keeping with Alexander Graham Bell's devotion to helping the deaf and hearing-impaired, AT&T and its Bell Labs, where the transistor was invented, extended royalty-free licenses to hearing aid manufacturers. In 1952 Sonotone began selling hearing aids in which one of the three vacuum tubes was replaced by a transistor. A few days later the Maico Company came out with a model with three transistors and no vacuum tubes. A few months later Acousticon came out with a model with only one transistor and no vacuum tubes.

The principal limitation on vacuum tube hearing aids was the expense and encumbrance of the batteries needed to power the amplifying unit, generally worn around the waist. With the progress of miniaturization, solid-state circuits eventually allowed making hearing aids that could be worn entirely within the ear (p. 205).

The military was by far the biggest customer for transistors in the early 1950's. Their military use was in radar and guided missiles. Hearing aid manufacturers were probably the second largest customers. They were soon surpassed by the makers of transistor radios, which were introduced in October, 1954 by Texas Instruments, partnered with another company (Regency TR-1 radio).

For a little more on the history of hearing aids, Wikipedia has an article about it. Of course, hearing aids have become smaller along with microprocessors becoming smaller in the last 60 or so years

NY Times Promotes Hate Speech

In the opinion section of yesterday's NY Times is an op-ed (pay-walled) about the massacre in Christchurch, New Zealand. The subtitle is, "All those who have helped to spread the worldwide myth that Muslims are a threat have blood on their hands."

The author says the white nationalist who committed the massacre was inspired by the millions of people the author includes in the quoted subtitle. Not even once does the author use a quantifier such as no, some, few or all next to "Muslims." Does he want us believe that no Muslim is ever a threat? The author exemplifies the absence of thinking about individuals, and only about amorphous collectives. He never mentions that any Muslim, even the 9/11 highjackers-murderers, was or is a threat. Moreover, anyone who has ever condemned any Muslim terrorist-murderer "has blood on his hands." That includes me. By his innuendos condemning even one Muslim is tantamount to condemning every Muslim and abetting crimes against Muslims. Most of the article is hate speech towards anyone has ever had a negative thing to say about any particular Muslim or Islam. Moreover, it is hate speech promoted by the NY Times.

Little math problem

For pi day here is a little mathematical proof problem for math geeks.

For every natural number n, 20 + 21 + ...+ 2n = 2n+1 − 1.

It's true for n = 1 to 5 as follows:

n=1: 20 + 21 = 3 = 22 − 1

n=2: 20 + 21 + 22 = 7 = 23 − 1

n=3: 20 + 21 + 22 + 23 = 15 = 24 − 1

n=4: 20 + 21 + 22 + 23 + 24 = 31 = 25 − 1

n=5: 20 + 21 + 22 + 23 + 24 + 25 = 63 = 26 − 1

The general formula for all n is proven by mathematical induction as follows and shown here.

Base case: Set n = 0. Then 2⁰ = 1 = 2¹ − 1.

Induction step: Show that if the equation holds for any particular n, which the above does, 
it also holds for n+1.
Let n be any natural number and 2⁰ + 2¹ + ... + 2ⁿ = 2ⁿ⁺¹ − 1 is true.

Then 2⁰ + 2¹ + ...+ 2ⁿ + 2ⁿ⁺¹ = ( 2⁰ + 2¹ + ... + 2ⁿ ) + 2ⁿ⁺¹

                                               = ( 2ⁿ⁺¹ - 1) + 2ⁿ⁺¹

                                               = 2 * 2ⁿ⁺¹ - 1

                                               = 2ⁿ⁺² - 1. QED

There is another proof as well. I will post it this weekend to give readers some time to try to find it on their own.

+++++++++++

March 16. The other proof follows. 2⁰ + 2¹ + ...+ 2ⁿ is a sum of a geometric progression. Using long division, the quotient of (xn+1 − 1)÷(x - 1) is xn + xn-1 + xn-2 +... 1 = xn + xn-1 + xn-2 +...+ x0.
Reverse the order of the sum and let x = 2:
20 + 21 + ... + 2n = (2n+1 − 1)÷(2 - 1) = 2n+1 − 1.

Cost of Socialist Healthcare

Pied pipers of socialism such as Rep. Alexandria Ocasio-Cortez and Sen. Bernie Sanders have high praise for Denmark's and Sweden's healthcare systems, while sweeping the cost, government controls, and other negatives under the rug. The government of Denmark's and Sweden's neighboring country Finland, also with heavy-handed socialist healthcare, has collapsed in large part due to it. I much agree with this Zero Hedge article about Finland.

Included: "The Kaiser Family  Foundation found that 58 percent of Americans oppose “Medicare for all” if told it would eliminate private health insurance plans, and 60 percent oppose it if it requires higher taxes, according to a report by the Washington Free Beacon."

Like I asked five days ago, how much higher taxes? Double all taxes -- income, payroll, and sales -- on yourself and all your friends, relatives, and co-workers who pay taxes?

Amazon HQ2 #4

Cleveland did not make the list of Amazon's top 20 cities contending for its HQ2 announced several months ago. This article, also in yesterday's Cleveland Plain-Dealer print addition, reports that Cleveland, Cuyahoga County, and Ohio offered Amazon about $3.5 billion in incentives to put HQ2 in Cleveland. This wasn't as much offered to locate HQ2 in Alexandria, VA or Queens, NY.

What was offered to locate in Cleveland? There were the typical reduced real estate taxes for many years. In addition, the county subsidy included the creation of a power micro-grid,  which would allow Amazon to power its facilities independent of the main power grid. The micro-grid would cost $200 million, and be paid for by the sale of bonds. Cleveland is believed to have been the only city to offer Amazon an independent and redundant power supply.

Of course, there were other reasons for Amazon not choosing Cleveland -- airport capacity and being an area with a smaller tech workforce than other cities.

Tax Rates for Socialism

Pied pipers of socialism Rep. Alexandria Ocasio-Cortez and Sen. Bernie Sanders are very popular, and the media's attention on them is very high. They love telling voters about how much the voters will receive if the two's socialist proposals are adopted. Free this. Free that. Tax employers and individuals in the top 1% or 10% of income to pay for at all. They ignore or downplay what they propose will cost, even to those who are in the lower 99% or 90% of income. They posit Denmark or Sweden as ideal. They revel in half-truths that are worse than lies. What they don't say is high taxes for all, Venezuela, and Cuba exemplify socialism, too.

Here is a good article that counters their half-truths. Quote: "To turn most self-described socialists into capitalists you really only need to ask one question; would you yourself be willing to pay more?"

How much more? I believe the question should be more realistic, as follows. Would you yourself be willing to pay twice the taxes you do now? That's double all taxes -- income, payroll, and sales. Also ask, Do you want to also double all tax rates on all your friends, relatives, and co-workers who pay taxes? That would raise taxes to about their magnitude in Denmark or Sweden. See the graph on Wikipedia here.

You may note Sweden's 0% income tax rate on the first 18,800 kronor. At the current exchange rate 18,800 kronor is the equivalent of about $2,000 in U.S. dollars. So the average folks pay a 32% income tax rate on most of their income.

Jerry Merryman RIP

Jerry Merryman, co-inventor of the first handheld electronic calculator at Texas Instruments, died February 27 (link). I had not heard of him. I recently read Walter Isaacson's The Innovators. It included a half page about the invention of said calculator. It referred to Patrick Haggerty and Jack Philby, but did not mention Merryman. So I sought to learn a little more about him.

This led me to a two-part article in ElectronicDesign about Merryman and the invention of said calculator. Part 1 download page. Part 2 download page. Registration is free. "How the Computer Got Into Your Pocket" is another story about the early years of the handheld calculator, with more details about Merryman's role.

Income Taxes 2018 #2

One week ago I posted about the many news stories I saw about tax refunds being smaller than last year. By innuendo said stories alleged the Tax Cuts and Jobs Act didn't reduce taxes after all.

Such allegations were based on the earliest filed tax returns. Since then with more returns filed, the average refund has risen to be slightly greater than last year. The Washington Examiner notes that the newsrooms that rushed to report tax refunds were smaller this year -- such as The New York Times, Washington Post, and National Public Radio -- have been silent on the IRS data showing the average refund has since increased.