No. of Recommendations: 6
That's the proposal from Nobel Prize winning economist Richard Thaler.

The big drawback with the annuities sold by private insurers is the 15% to 20% skimmed off the top by the insurer to pay for multi-million dollar executive salaries, private jets, and sales conferences at 5-star resorts with free hojos. The guy that runs Social Security makes less than $200,000/yr and flies commercial.

Nobel laureate Richard Thaler thinks you should be able to use your 401(k) to get a bigger Social Security check. Other experts aren’t so sure.
https://www.cnbc.com/2019/04/23/expert-advocates-using-a-401...

That’s where Thaler said his new idea regarding Social Security benefits would come in.

The plan would let you take a portion of your 401(k) benefits — say, $100,000 or up to $250,000 — and send it to the Social Security Administration.

What you would get in return would be the only indexed annuity that’s guaranteed by the federal government at a fair actuarial value [i.e., minus the 15%-20% skim of a private insurer], Thaler said.

</snip>


intercst
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What you would get in return would be the only indexed annuity that’s guaranteed by the federal government at a fair actuarial value

In other words, increase taxes (or in reality, increase the fed debt and deficit).

The money in SS isn't really invested in anything that earns a dividend or appreciates in value. The trust fund purchases treasuries - effectively loaning that money to the government. The more money invested in treasuries, the more interest payments the federal govt must pay on that debt.

Additionally, and as your link suggests, such a plan would suffer from adverse selection. Those most likely to benefit - those most likely to live longer than average, will be the ones most likely to use such a plan, making SS even more insolvent in the future.

The only way a plan like this could possibly work would be, quote:

By forcing everyone to put $50,000 to $100,000 of their 401(k) funds in a Social Security annuity that's actuarially fair, that would avoid adverse selection and get everyone in the same pool, Kotlikoff said.

"With that caveat, I do like this plan," Kotlikoff said. "It has to be compulsory and everybody has to be bought in."


----------

Seems like Kotlikoff is unaware that most probably don't even have $50,000 saved in a 401k yet he wants to force them to surrender what little they OWN to the government. Good luck with that!
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Hawkwin writes,

<<What you would get in return would be the only indexed annuity that’s guaranteed by the federal government at a fair actuarial value>>

In other words, increase taxes (or in reality, increase the fed debt and deficit).

</snip>


Not at all. The key phrase there is "fair actuarial value".

Wealthier people with a demonstrated longer lifespan would be charged a higher premium than lower income folks who for a variety of reasons tend to die younger. It would still be cheaper than buying an annuity from a private insurer.

I think the Kotlikoff plan of making it compulsory and then charge a level premium is probably a non-starter. That's just a gift to wealthier folks who understand arithmetic.

intercst
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The key phrase there is "fair actuarial value".

Yes, since women tend to live longer then men for the same contribution they should receive less monthly income as the lifetime income is the same.

Social Security used to do that, see how well it lasted. "fair actuarial value" will be ignored due to political pressure calling it unfair when looked at from a different perspective.
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Not at all. The key phrase there is "fair actuarial value".

This would be the government that pays $900 for a hammer and builds a $1,000,000 outhouse?

Wealthier people with a demonstrated longer lifespan would be charged a higher premium than lower income folks who for a variety of reasons tend to die younger. It would still be cheaper than buying an annuity from a private insurer.

Do a lot of wealth people buy annuities (other than perhaps for estate-planning purposes)? I think they don't. If you don't want to buy a thing, then it doesn't matter if you can get it on sale.

My first thought on this Kotlikoff plan was "Give a potload of money to the Social Security Administraton and expect to get money back as monthly payments. What could possibly go wrong?"
How many people would send money from their paycheck to the SSA if it wasn't required by force of law?

Heck, any rich(ish) person could write the script of what would happen.
"SS Trust Fund runs out of money. SS benfit payments need to be cut. Oh, wait, we can't cut grandma's check, she needs that money to eat and to pay rent. So where can we cut? Where ever can we cut? Oh, how about those rich people who already have more money than they need? Yeah, that's the ticket, we'll cut rich people's checks and leave grandma alone."
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Rayvt analyzes,

This would be the government that pays $900 for a hammer and builds a $1,000,000 outhouse?

</snip>


Your failings with arithmetic are showing. Fee-for-service Medicare costs the Gov't 12-15% less than Medicare Advantage. Obamacare beneficiaries on Medicaid at 138% of the Poverty Level cost the Gov't about $3,000/yr less than the beneficiaries just over the 138% FPL threshold who must buy private insurance plans on the exchange and are heavily subsidized to do so.

Who would have guessed that adding a for profit insurer's overhead and profit would make health insurance more expensive? People who understand arithmetic.

Same dynamic would be at play if the Gov't was selling "actuarially-fair" annuities.

intercst
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I read the CNBC article and confused about the problem that Robert Thayer is attempting to solve. It is not the income inequality problem that many economists and pundits think needs to be address for a more stable economy.

Unless Congress passes some law that requires all employers to provide 401(k) plans to all employees, it doesn't address the retirement needs of working class Americans. (Notus bene: I prefer the European definitions to that used by US politicians. If you're not an owner of a business, at or above your employer's middle management level, or in the top fifth of the income spectrum; you are working class.) Some working class Americans are covered by 401(k) plans but the majority aren't.

So, Robert Thayer's proposal seems to be a plan that benefits those that don't really need an extra $700-$!500 per month when they reach 85 or some earlier designated age. Does it really make sense to withdraw $150,000 or $250,000 from a 401(k )and transfer it to Social Security in order to get a slightly higher monthly payment when you claim retirement benefits?

I could use $125,000 in my current traditional IRA account and buy a Qualified Longevity Annuity Contract (QLAC). It would reduce my RMD withdrawals but not appreciably. Nor does it substantially reduce my taxes as the annuity produces taxable income.
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Not at all. The key phrase there is "fair actuarial value".

It doesn't matter how 'fair' you make it. If I loan money to the government, I expect to earn interest on it. If the government pays interest on that loan, then they only way that they can make this interest payments is through tax revenue.
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If the government pays interest on that loan, then they only way that they can make this interest payments is through tax revenue.

Well...there is another way: it can simply print the interest payment - the wonderful (?) thing about fiat currency.

Pete
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Well...there is another way: it can simply print the interest payment - the wonderful (?) thing about fiat currency.

Sure, they can increase the deficit and the debt but while that can theoretically last forever, we know it won't and really can't. At some point, market forces will come into play. All that excess debt will become a drag on GDP (probably already is) and it will cause a recession or a depression.

The list of top 10 countries by debt to GDP ratio reads like a cautionary tale.

We are 12th on that list.
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"Your failings with arithmetic are showing. Fee-for-service Medicare costs the Gov't 12-15% less than Medicare Advantage. Obamacare beneficiaries on Medicaid at 138% of the Poverty Level cost the Gov't about $3,000/yr less than the beneficiaries just over the 138% FPL threshold who must buy private insurance plans on the exchange and are heavily subsidized to do so."

***************************************************************

And as is the case with medicare, the government will have the "responsibility" to review
your "need" of funding - to "review and approve" your proposed spending plan - and have the
ability to reject if they judge the spending to be against the "best interests" or against
the "charter".

Howie52
Letting the government nose under your tent may not lead you to the promised land you
expect- unless the promise is to live as the bureaucrats decree.
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And as is the case with medicare, the government will have the "responsibility" to review your "need" of funding - to "review and approve" your proposed spending plan - and have the ability to reject if they judge the spending to be against the "best interests" or against the "charter".

And how is this different than any insurance company?
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"And as is the case with medicare, the government will have the "responsibility" to review your "need" of funding - to "review and approve" your proposed spending plan - and have the ability to reject if they judge the spending to be against the "best interests" or against the "charter".

"And how is this different than any insurance company?

Bingo.
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And as is the case with medicare, the government will have the "responsibility" to review your "need" of funding - to "review and approve" your proposed spending plan - and have the ability to reject if they judge the spending to be against the "best interests" or against the "charter".


And how is this different than any insurance company?


The government does not have any competition.
They can confiscate premiums from you by force.

Really, do we need a primer on public vs private sector?

I get the point that the insurance companies can and definitely do limit their payouts, but they are regulated, can be (and are) sued, have to compete, etc. The government has no such boundaries when providing services.
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"I get the point that the insurance companies can and definitely do limit their payouts, but they are regulated, can be (and are) sued, have to compete, etc. The government has no such boundaries when providing services."

So which one do you think is more likely to limit those services?
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""I get the point that the insurance companies can and definitely do limit their payouts, but they are regulated, can be (and are) sued, have to compete, etc. The government has no such boundaries when providing services."

So which one do you think is more likely to limit those services? "

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

You may want to ask someone from Venezuela - or one who is not a government official.

However, on a visit to Moscow I met several people who wished the old Soviet government
was still in power. They were upset that the government no longer provided services.

While I was in China, I never heard folks complain - especially when the police went
marching down the center of the street with their machine guns at the ready.

Howie52
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Howie: "You may want to ask someone from Venezuela"

Why did you bypass Australia, Canada, France, Germany, Netherlands, New Zealand, Norway, Sweden, Switzerland and the UK?

https://www.internationalinsurance.com/health/systems/
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"You may want to ask someone from Venezuela - or one who is not a government official.

However, on a visit to Moscow I met several people who wished the old Soviet government
was still in power. "


When we reach the stage of Venezuela or Russia, health insurance will be the least of our problems.

But the problem there is the plundering of the economy by the dictators, not the economic system itself.

Kind of like what our aristocracy wants to do.
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"I get the point that the insurance companies can and definitely do limit their payouts, but they are regulated, can be (and are) sued, have to compete, etc. The government has no such boundaries when providing services."

So which one do you think is more likely to limit those services?


I really don't know.
BTW I'd like to avoid comparing our system with any other country's, be it Venezuela or UK, to avoid oft-repeated arguments.

My impression is that you can argue with an insurance company, plead, negotiate, threaten (legal action) etc. So there is more room to give. Balance this with the 15% cut that they take (in CA).

The government (Medicare) is very low overhead. But I don't know, if that becomes the only option, how much a private citizen can appeal against their rulings. Bureaucrats are generally unresponsive and unsympathetic to people who have to pay into the system compulsorily anyway, as opposed to insurance guys who still need the repeat business and usually have some competition except in some rural areas.
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" Howie: "You may want to ask someone from Venezuela"

Why did you bypass Australia, Canada, France, Germany, Netherlands, New Zealand, Norway, Sweden, Switzerland and the UK?"

***************************************************

Two reasons - first - the thread is about offering annuities - in other words controlling
the selling of financial assets to all individuals. Single payer - for all intents and purposes.

Second - I tend to expect that people - and governments - will tend to eventually live
down to the lowest common denominator levels - they intend to have no competition.

Howie52
Simple really.
When there is no competition - consumers have no recourse - other thaan going to the
black market.
And only those with "pull" or extraordinary resources can access the black market.
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Howie: "Second - I tend to expect that people - and governments - will tend to eventually live
down to the lowest common denominator levels - they intend to have no competition.

That is a proclamation of ideological faith rather than a factual claim. It cannot be argued intelligently on either side of the debate. The best I can do is point it out.

You are not alone in that regard. A large contingent of U.S.'ian conservatives, many of whom post on this board, have become so ideological that facts no longer matter when the debate turns political. If you spend time in the countries listed above, and spend some time learning about them outside of the right wing biosphere, you might conclude that democratically elected governments like the ones listed above are generally answerable to to the people. They often do a better job of it than we are in the healthcare realm because insurance companies will always put profits above the concerns of the people -as they are doing right now.

You retreated directly to the example of Venezuela because you had to go to the lowest common demoninator to find a country to fit your stereotype.
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At a minimum, government can supply health care without the 30% profit/overhead premium inherent to most private health insurance.

Medicare is doing a generally good job at providing health care without obstruction to access, while the current paradigm of private insurance has already proven its failure with respect to cost and access.

FD, in the biz for over 30 years.
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And how is this different than any insurance company?

An insurance company cannot stick a gun in your ear and say, "This is the way it's going to be."

An insurance company cannot tell you, "I am altering the deal. Pray I don't alter it any further."
(Well unless you are stupid enough to sign a deal like a LTC policy or Indexed Universal Life policy which has a clause that lets them change the deal if they want to.)
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That is a proclamation of ideological faith rather than a factual claim. It cannot be argued intelligently on either side of the debate. The best I can do is point it out.

Human history didn't start yesterday, or even in 1776. We have a few thousand years of historical data, to look at and see how things generally work out.


...you might conclude that democratically elected governments like the ones listed above are generally answerable to to the people.

Yes, look at England with BREXIT. The people voted for BREXIT, and the democratically elected government got right on that and took Britain out of the EU.

Oh, wait.....No they didn't.
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An insurance company cannot stick a gun in your ear and say, "This is the way it's going to be."

That's exactly how they do it - or at least as much as the government would. You have no choice when they say it, you're already in need of the service.

'Stick a gun in your ear'? If our government reaches that point, health care and annuities will be the least of our worries.

An insurance company cannot tell you, "I am altering the deal. Pray I don't alter it any further."
(Well unless you are stupid enough to sign a deal like a LTC policy or Indexed Universal Life policy which has a clause that lets them change the deal if they want to.)


Not sure of your point here, you provided an example of insurance company behavior altering a deal.
There are lots of them.
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"Two reasons - first - the thread is about offering annuities - in other words controlling
the selling of financial assets to all individuals. Single payer - for all intents and purposes."


That doesn't answer the question. Most of the countries you bypassed that were listed were single payer as well.

"Second - I tend to expect that people - and governments - will tend to eventually live
down to the lowest common denominator levels - they intend to have no competition."


That is a statement of faith not based upon the evidence available.

The evidence shows almost every first world country (and many second and third world countries) have healthcare systems that have at least as good of outcomes as the U.S. healthcare system and oftentimes better outcomes despite those other countries healthcare systems being some form of government sponsored system.

That is a simple fact.

So to pick Venezuela as representative of government sponsored healthcare does not fit the available evidence. It is misleading at best and outright dishonest at worst. You picked it because it fits your religion, not the facts.

"Second - I tend to expect that people - and governments - will tend to eventually live
down to the lowest common denominator levels - they intend to have no competition."


That is where your religious beliefs fall apart in the face of reality. In a representative democracy there is immense competition. Every few years there is an election where people compete with proposed policies on how the system can be improved.

"When there is no competition - consumers have no recourse - other thaan going to the
black market.
And only those with "pull" or extraordinary resources can access the black market."


That is rather ironic. Like most things taken as faith in the upside down world of conservative religion it is the exact opposite of the real world. In the real world of the U.S., many of those without "pull" or extraordinary resources do not have access to healthcare at all (until it becomes an emergency). Due to the lack of "pull" or extraordinary resources they simply go without insurance until there is a problem then they go to the emergency room where they will then be faced with extraordinary expenses that will insure that they stay poor without any "pull" or resources.

Anyone with a basic understanding of how markets work would realize that a market based system doesn't work in an industry like basic healthcare where the goal is to help all, not just those who can afford to pay the most for it. Market based systems are not designed to service all.
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'Stick a gun in your ear'? If our government reaches that point, health care and annuities will be the least of our worries.


You think they haven't already? Must be paying your taxes on time then and never had an imminent domain claim come on property some local crony wants to develop for his REIT.
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An insurance company cannot stick a gun in your ear and say, "This is the way it's going to be."

An insurance company cannot tell you, "I am altering the deal. Pray I don't alter it any further."


Seriously, if you truly believe this, I’ve got a nice bridge for sale...

Technically, you are correct. However, insurance coverage is governed by state laws and legal precedents that can supersede policy provisions. Some policy provisions are confusing, and if they are truly not clear are supposed to be interpreted in favor of the policy holder. Getting there, however, can be tricky and expensive though.

MEK
Works in insurance.
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Seriously, if you truly believe this, I’ve got a nice bridge for sale...

Did you vote for raising the Soc Sec retirement age from 65 to 67? Who here thinks they won't soon make it 70?
The government can unilaterally alter a contract, since technically, "they" represent "us".
("We have met the enemy...")
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An insurance company cannot tell you, "I am altering the deal. Pray I don't alter it any further."

Sure they can and they do, especially with health insurance.
In the 80's my Dad, a CPA, was on the board of a regional hospital here's how he described it.

Insurance companies do not cancel individual policies. They increase the group premium every year until the healthy people move to another individual policy group. The sick people don't qualify for a new less expensive policy group. Eventually the policy group consists of only sick people. At which time the policy group is losing money and gets cancelled, leaving the sick those who don't qualify for a new policy group without insurance or without the ability to get insurance.

Not sure how that varies at a practical level of altering the deal...
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Your comment was about private sector determine available coverage, changing the topic to doesn't change the fact that private insurance companies already have death panels.
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At a minimum, government can supply health care without the 30% profit/overhead premium inherent to most private health insurance.

I'm not certain that's true. It could also be that government would employ more workers earning more pay than an insurance company for the same work. That isn't automatically the case, but assuming the same cost as an insurance company minus the profits isn't a guaranteed "floor."
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No. of Recommendations: 18
TheBreeze writes,

I'm not certain that's true. It could also be that government would employ more workers earning more pay than an insurance company for the same work. That isn't automatically the case, but assuming the same cost as an insurance company minus the profits isn't a guaranteed "floor."

</snip>


I know that's what they're telling you on Fox News, but the actual numbers are quite different. Medicare Advantage (which is run by for-profit insurers) cost the Gov't 12%-15% more than fee-for-service Medicare which is managed by Gov't bureaucrats.

https://www.nytimes.com/2017/08/07/upshot/medicare-advantage...

intercst
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"I know that's what they're telling you on Fox News, but the actual numbers are quite different. Medicare Advantage (which is run by for-profit insurers) cost the Gov't 12%-15% more than fee-for-service Medicare which is managed by Gov't bureaucrats.

https://www.nytimes.com/2017/08/07/upshot/medicare-advantage......

intercst "

******************************************************

medicare Advantage plans cover more than basic Medicare. Medicare does not cover at
100% - which is why there is a Supplemental Plan - and the Advantage plans supposedly
cover both - along with some coverage beyond what Medicare includes.

Howie52
So far I have not been disappointed by Medicare - but I could see folks being
disappointed if Medicare was the only piece available.
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medicare Advantage plans cover more than basic Medicare. Medicare does not cover at
100% - which is why there is a Supplemental Plan - and the Advantage plans supposedly
cover both - along with some coverage beyond what Medicare includes.


Medicare Advantage plans also DONT’T cover some things covered by traditional Medicare. Many Advantage plans require you go to a certain network of doctors; if you need a specialist and the nearest one on the plan is 100 miles away, that can be a problem. Also, copays can be different for different services.

Under an Advantage plan, you may be subject to the same utilization reviews that are present under private health insurance. So you can get the “you’re not sick, go home today” message. That can be a real issue if you’re trying to find a nursing home or rehab facility.

So even though you might “get more services” in the form of a gym membership or vision coverage (glasses, etc. Medicare pays for stuff like cataract surgery), unless you’re a healthy senior to whom these plans are targeted, you may find yourself in trouble if you get really, really sick.

Personally, after having been through all this with my mom, Medicare plus a good supplement is the way to go. Plus Part D—Rx coverage. The drug coverage, though, needs to be improved. Every year I end up paying for about 4 months of Eliquis for my mom when we can’t get samples or freebies—about $275 a month.
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MissEdithKeeler writes,

So even though you might “get more services” in the form of a gym membership or vision coverage (glasses, etc. Medicare pays for stuff like cataract surgery), unless you’re a healthy senior to whom these [Medicare Advantage] plans are targeted, you may find yourself in trouble if you get really, really sick.

</snip>


From what I've seen, Medicare Advantage seems to attract lower income folks who are poor at arithmetic and unable to detect the fact that Medicare Advantage offers poorer coverage if you get really sick. As you indicate, wealthier beneficiaries seem to select traditional Medicare with a Supplement, or no supplement at all if they feel they can cover the co-pays on their own.

intercst
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From what I've seen, Medicare Advantage seems to attract lower income folks who are poor at arithmetic and unable to detect the fact that Medicare Advantage offers poorer coverage if you get really sick. As you indicate, wealthier beneficiaries seem to select traditional Medicare with a Supplement, or no supplement at all if they feel they can cover the co-pays on their own.

The primary disadvantage of the Medicare Advantage program is that it is an HMO. It costs the same as Medicare Plan B and includes Medicare Plan D prescription coverage.

When I first retired, my wife and I signed up for Medicare Plan D and Medicare Supplemental Plan F as it provided insurance similar to what we had under my employer's medical insurance plan. After a few years, we came to the conclusion that we were simply throwing money away for no reason. Neither of us saw a doctor or took any medications that justified the money we were paying for our Medicare plans.

My wife died in January and I am seriously considering dropping the Medicare Advantage plan and going back to the basic Medicare Plan B as it would remove the restriction of seeing only "in network" doctors. As a disabled Vietnam Era veteran, I can get any prescriptions that I might need through the VA without any copay requirements.
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Going to throw in some real-life escapades and rock-a-da-boat

Mother. In the "poor person" category. Lots of health stuff. Diabetic. Cancer. Heart attack/bypass. Eyeball problems diabetes and non-diabetes related. Later wanted back surgery for pain. Doctors advised against it but she insisted. They did it. She survived and I guess had somewhat less pain. She was charged little to nothing for all of this. I saw some of the invoices. They specifically had stamped on them: PATIENT CANNOT BE CHARGED FOR THIS PROCEDURE"

All under Medicare Advantage. She lived along the I-95 corridor. I suspect Medicare Advantage being designed as something of a lowest common denominator / wide net program works best in those high-density areas. Networks are hardly a problem in that environment. Not in there? Now you're talking variability. being poor and or bad at math didn't seem to be the issue. Yes, she was poor but she knew what she was doing when she picked a program.
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