Open Mike

PENSION AND MEDICAL BENEFITS

Mike Critelli — Wed, 23 Jul 2008 14:30:49 +0000

In my last blog, I commented on a July 11 article by Mary Walsh of the New York Times on the crisis relative to horrifically large pension and retiree medical obligations for government employees. Coincidentally, as I traveled to and from Europe between July 15 and 20, I had an opportunity to catch up on reading, and I read Roger Lowenstein’s great book While America Aged.

In this book, Lowenstein details the history of three out-of-control pension and retiree medical commitments, the commitment by the Big 3 automakers to their employees and retirees, the commitment to the Transit Workers Union and other municipal unions in New York City, and the commitment to San Diego’s municipal workers. He draws broader conclusions from these analyses, consistent with Mary Walsh’s. As Lowenstein puts it on page 1: “America has a crisis of epidemic proportions. The fabric of the nation’s pension system is collapsing – at the very moment when the American population is rapidly aging.”

I agree with Lowenstein’s conclusion, and I also agree with some of his key recommendations. Most importantly, we need to apply private pension and retiree medical accounting to state financial statements. Today, while governments are expected to size their obligations in total, they are not required to set aside money every year to pay for a portion of the long-term commitments they have made. They are only required to cover the current year’s obligations in a pay-as-you-go system. As noted in my last blog, private sector employers had to change to a full accounting of pension benefits on their income statements in 1987, and to a full accounting of retiree medical obligations in 1993.

While I agree with Lowenstein’s recommendation that there be a form of universal health care that combines benefit requirements for the elderly with those of people of all ages, I do not agree that it should be managed under the same system as Medicare or Medicaid. Throughout his book, he eloquently talks about the many pressures brought to bear on elected officials to do something popular today, such as keeping down current-year expenses, while mortgaging the future.

Unfortunately, much of what is required for a sensible health care system requires decisions to invest in health today to reap the benefits in future years. For example, preventive screenings, immunizations, outreach to increase adherence to chronic disease treatment plans, and programs for youth health and fitness are great medium and long-term investments, but almost never is there a current fiscal year payback. Therefore, any universal health care system that operates on annual budget cycles is likely to be subject to the same pressures as the corporate executives and government officials Lowenstein describes.

Moreover, just as Lowenstein described special interests that interfered with objective decision making in the San Diego and New York situations, health care has great potential for special-interest decision making, as evidenced by the power of medical lobbies to drive for coverage mandates that are highly-specific and often not justified by best-in-class health care.

If we are to have universal health care supported for underserved groups by the government, it is imperative that we construct a system that is not susceptible to annual cost reduction pressures. Similarly, as Lowenstein recommends, any system needs to have highly-transparent analysis of the longer-term consequences of any major decision, since short-term savings often breed significantly higher long-term costs.

What shocks me most about these issues relative to government employee retirement obligations is how little attention is paid to them in the popular media. Mary Walsh and Roger Lowenstein deserve credit for the courage of their convictions in dealing with a “dirty little secret” about the massive and often unintended wealth transfer from a large number of taxpayers to a small number of government employees.

I do not blame the employees or their union leaders for demanding rich benefits, because the leaders are expected to be strong advocates for their members, although they need to insure that pension trusts are appropriately funded. However, I believe that we need to hold elected officials accountable for responsible decision making in the area of legislated or otherwise bargained-for employee benefits. I also believe that our media do not do a good job educating the public on this issue, because, except for a situation like New York’s (where there was a major transit strike three years ago) or San Diego (where the city basically lost its ability to access the bond markets because of financial insolvency caused by under funded pensions) it is a crisis in slow motion, rather than a single dramatic event.

We must demand more relative to how our tax dollars are spent!!

GOVERNMENT PENSION LIABILITY

Mike Critelli — Thu, 17 Jul 2008 18:48:20 +0000

In the July 11 New York Times there was an article on the serious issue of state and local government pension liability, and the debate about the extent to which the Government Accounting Standards Board should require governments to reflect pension and retiree health liabilities on their income statements.

I was pleased to see this issue get coverage because it is one of the biggest issues of our time. We are an aging society, and like every other developed country, we are facing the dual challenge of meeting our commitments to the elderly, while at the same time being able to meet commitments to the rest of our population. Before we can address the dual challenge, we need honesty and transparency as to what the commitments to our elderly populations are going to cost us. (more…)

IMPACT OF PRICE INCREASES ON CIGARETTE AND ALCOHOL CONSUMPTION

Mike Critelli — Tue, 15 Jul 2008 18:21:58 +0000

In the July 11 issue of the New York Post, there was an article which highlighted the fact that the number of calls to the New York City 311 hotline requesting city service support for smoking cessation has tripled with the increase in taxes that have made a pack of cigarette cost around $10 in some communities.

I have always believed that cigarette and alcohol consumption could be cut significantly by increasing the price of these items. For hard-core addicts, price increases are probably less effective, except for those already predisposed to quit. But high prices are clearly a deterrent to those who are considering starting to smoke or drink, and, over time, reducing the health and other costs of cigarette smoking and alcohol abuse will reap large dividends in reducing the incidence of chronic and acute health conditions. (more…)

SPEECH TO LEADERS-TO-LEADERS CONFERENCE CENTERS FOR DISEASE CONTROL AND PREVENTION WASHINGTON, DC JULY 9, 2008

Mike Critelli — Mon, 14 Jul 2008 19:59:42 +0000

I want to begin by thanking Doctor Gerberding and her team for convening and hosting this extremely important conference. I come to you as a leader of a company, Pitney Bowes that defined employee health and well-being as a core value even before I became CEO in 1996.

Our mail stream businesses have always required a high degree of subject matter expertise and relationship-building with postal services and customers that take many years to learn and master. Therefore, for several decades, we had been a generous company in delivering benefits that rewarded and encouraged employee loyalty and commitment.

In 1990, this commitment to employee health and well-being was being challenged by our inability to continue offering health plans that essentially provided medical benefits without meaningful employee contributions in terms of premiums, co-pays and deductibles. Our costs were increasing at an alarmingly high 14% per year, and we were not delivering a high degree of employee satisfaction. When I became head of human resources in 1990, I had the unenviable task of committing us to a long-term course of action that required higher employee premiums, co-pays and deductibles, but I also recognized that we had to maintain and/or increase employee satisfaction with our benefit offerings, or we were going to lose one of our key talent retention tools. (more…)

MAKING HEALTHY BEHAVIORS ATTRACTIVE

Mike Critelli — Tue, 08 Jul 2008 20:20:45 +0000

In the July 1 New York Times, there was an interesting article about the effort of the Congressional Black Caucus to get the addition of menthol to cigarettes banned because menthol cigarettes are the choice of 75% of African-American smokers. There is a clear recognition that menthol and other sweeteners added to cigarettes make them more attractive to vulnerable populations, like young people, minorities with health risks that make smoking health-threatening and young women.

When I read this article, it occurred to me that the misuse of menthol and other sweeteners to attract people to cigarettes can be turned on its head to make healthy foods more attractive to eat. When our younger son, who is now 17 years old, was under 10 years old, we had a great deal of difficulty getting him to eat anything other than junk food. We had particular difficulty getting him to eat green vegetables. (more…)

ENVIRONMENTAL IMPACT OF MAIL

Mike Critelli — Mon, 07 Jul 2008 19:38:01 +0000

Last week, we posted on the Pitney Bowes web site at www.pb.com/mailimpact a white paper detailing preliminary findings on the environmental impact of mail. Several points stand out when we look at the study:

Mail is a relatively minor source of carbon footprint compared with common personal and household activities, such as taking a two-minute shower, which has the same carbon footprint as receiving 40 pieces of letter mail.
Electronic communications, on the whole, have a carbon footprint similar to paper-based communications
As noted on pages 21 and 22, the ultimate question is not whether mail or paper-based communications have an environmental impact that could be reduced. No one questions the need to reduce the carbon footprint of mail or paper-based communications, and the paper talks about sustainability initiatives. (more…)

ENVIRONMENTAL IMPACTS OF POSSIBLE RESPONSES TO ELIMINATING DIRECT MARKETING MAIL

Mike Critelli — Fri, 13 Jun 2008 15:27:45 +0000

As anyone who has read my past blogs on environmental issues knows, I believe that eliminating unsolicited direct marketing mail may help reduce the “annoyance factor” some mail recipients experience, but there’s no assurance that it will improve the environment.”

I have been concerned that if some of those individuals who stop receiving unsolicited mail get into their automobiles and buy an item at a retail store that they would ordered through a direct mail solicitation, the environment is worse off. Until I attended the recent Center for Research on Regulated Industries Conference, I did not have data to support my point. Now I do. (more…)

SOCIAL OBLIGATIONS ATTACHED TO COMMUNICATION MEDIA

Mike Critelli — Wed, 11 Jun 2008 15:00:33 +0000

Having just finished attending the Conference on Research in Regulated Industries sponsored by Rutgers University and led by Dr. Michael Crew, I have been immersed in many presentations relating to many subjects, but one, in particular, caught my attention:

What universal or public services do we expect of major communication media?

With respect to mail, postal services around the world all have a variety of what are called “universal service obligations.” They are expected to maintain a network that allows every citizen in their country to transact business, to deposit mail into collection boxes or at a conveniently-located post office, and to receive mail at a designated home or business address 5-6 days a week all year. Additionally, their governments expect them to subsidize charitable and educational organizations, to charge affordable and uniform prices for mail originating from individual citizens and to be large employers and anchors for rural communities. In the U.S., the Postal Service also absorbs an enforcement responsibility for obscene, offensive, and fraudulent material that gets sent through the mail. In recent years, Congress has deferred its payments to the Postal Service for the mandates imposed on the Postal Service to subsidize certain categories of mail and certain types of users, such as non-profits. (more…)

FALSE DISTINCTION BETWEEN ATOMS AND BITS

Mike Critelli — Thu, 29 May 2008 01:10:35 +0000

In many blogs, I have commented on the issue the mailing industry faces with respect to the attacks on unsolicited marketing mail by environmentalists or privacy advocates. In particular, environmentalists argue that it would be better for the environment if everyone communicated electronically, instead of doing so in paper-based communications.

I am in the process of reviewing the increasingly robust research which suggests that electronic communication has substantial environmental hazards, in some cases, greater than physical mail-based communications. But the insight I want to share in this blog is that the boundary between physical and electronic communication is not clear, and is getting more muddied as time goes on. (more…)

MORE IS NOT ALWAYS BETTER

Mike Critelli — Wed, 21 May 2008 14:22:10 +0000

One of the basic assumptions of many health care reform advocates is that a “richer” plan which provides a broader range of benefits and which has a higher percentage reimbursement for medical events is automatically better for the plan participant. This is flawed thinking.

A health insurance plan is better for plan participants and for society as a whole if it causes participants to engage in healthier behaviors and if it drives physicians, hospitals, and other providers to deliver a higher quality of health care. In the blog entitled “Results-Driven Health Care” explores the five steps to higher quality, and lower cost health care. (more…)