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Hospitals cut back on giving after securing charitable status
 But in many cases, top hospitals’ community benefit spending has remained flat or declined since the ACA took effect, too. For example, Massachusetts General Hospital in Boston, which has been ranked as the best hospital in the world, spent $53.8 million on community benefits in 2015, down from $62.1 million in 2013, even as its total annual revenue went up by more than $200 million.

Hospitals also defend their tax-exempt status by pointing to their total community benefit spending, a roll-up number that can include free screenings and local investments but also less direct contributions, like staff education or hospitals’ internal metrics for when they say there is a gap between what they charge for services and what Medicare or Medicaid pays them.

Hospitals justify the billions of dollars they receive in federal and state tax breaks through a nearly 50-year-old federal regulation that simply asks them to prove they’re serving the community. (Some states have taken a stricter approach for their tax breaks.) And while hospitals acknowledge that their charity care spending has fallen — pointing to the fact that a record number of Americans are now insured under the ACA — some leaders say the trend could reverse itself if the ACA is repealed.

While operating revenue increased under Obamacare for not-for-profit hospitals like the Cleveland Clinic and UCLA Medical Center, the amount of charity health care they provided fell. For example, while UCLA saw operating revenue grow by more than $300 million between 2013 and 2015, charity care fell from almost $20 million to about $5 million.

To put that another way: The top seven hospitals’ combined revenue went up by $4.5 billion per year after the ACA’s coverage expansions kicked in, a 15 percent jump in two years. Meanwhile, their charity care — already less than 2 percent of revenue — fell by almost $150 million per year, a 35 percent plunge over the same period.

The result, POLITICO’s investigation shows, is that the nation’s top seven hospitals as ranked by U.S. News & World Report collected more than $33.9 billion in total operating revenue in 2015, the last year for which data was available, up from $29.4 billion in 2013, before the ACA took full effect, according to their own financial statements and state reports. But their spending on direct charity care — the free treatment for low-income patients — dwindled from $414 million in 2013 to $272 million in 2015.

But the hospitals, aided by their good-neighbor initiative, prevailed. The ACA did nothing more to force the hospitals to share their revenue with their neighbors or taxpayers generally.

At the time, Congress was considering not only whether to remove tax-exempt status for teaching hospitals, a cause of Sen. Chuck Grassley (R-Iowa), but also whether to add requirements forcing hospitals to do more for the low-income, urban communities in which so many of the top hospitals are located. And local leaders in many states were attempting to claw back billions of dollars in forgone tax revenue — a battle that would soon break out between UPMC and the mayor of Pittsburgh, too.

“UPMC is proud to be part of our city’s past, present and, more importantly, its future,” the narrator enthuses, as the camera pans around Pittsburgh scenes of priests, grocery-store workers, even a ballet dancer before coming to rest on the sprawling medical campus — one of the five largest in the world.

One example of the hospitals’ efforts to remain tax-free: the soaring, minutelong TV commercial that popped up on stations across Western Pennsylvania in 2009 by the University of Pittsburgh Medical Center, the area’s flagship hospital and one of the largest teaching hospitals in the country.

And it reveals, for the first time, the extent of the hospitals’ behind-the-scenes efforts to maintain tax breaks that provide them with billions of dollars in extra income, while costing their communities hundreds of millions of dollars in local taxes.

Hospitals’ behavior in the years since the Affordable Care Act provided them with more than 20 million more paying customers offers a window into the debate over winners and losers surrounding this year’s efforts to replace the ACA. It also puts a sharper focus on the role played by the nation’s teaching hospitals – storied international institutions that have grown and flowered under the ACA, while sometimes neglecting the needy neighborhoods that surround them.

A decade after the nation’s top hospitals used all their advertising and lobbying clout to keep their tax-exempt status, pointing to their vast givebacks to their communities, they have seen their revenue soar while cutting back on the very givebacks they were touting, according to a POLITICO analysis.

Johns Hopkins Health System, for instance, said it was responsible for more than 22,000 jobs in Baltimore City — and nearly $1.8 billion in total economic impact.

And they add that looking at profits doesn’t tell the full story, especially because they’re funneling those dollars back in the form of jobs and other civic benefits. For instance, hospitals are the largest employer in many major cities and most congressional districts.

Hospitals dispute that Obamacare has been the engine of their recent success. “We would not attribute our solid financial performance to ACA,” said a spokesperson for the Mayo Clinic — the top-ranked hospital in the US News rankings, which cleared $1 billion in combined operating income in 2015 and 2016. “It’s a result of a fiscal discipline, focus on creating efficiencies, generous philanthropic donations, as well as research funding from NIH and revenue created through our commercialization efforts.”

Gerard Anderson, a health care economist at Johns Hopkins University, co-authored a study in 2016 that found 7 of the 10 most profitable hospitals in the United States are technically not-for-profit hospitals. “The taxing system may not be working properly if nonprofit hospitals are making a lot of profit and not necessarily putting it back into the community,” Anderson said at the time.

Multiple studies have linked the ACA’s coverage expansion to improved financial performance, with one analysis finding that hospitals’ profit margins went up by 25 percent in states that expanded Medicaid in 2014. Overall, the industry boasted an 8.3 percent profit margin that year, according to the most recent figures published by the American Hospital Association. That’s the highest performance on record — more than triple the industry’s 2.6 percent profit margin in 2008, amid the recession and before the Obama administration began pushing its health care reforms — and it’s only invited scrutiny from advocates and researchers who say that it’s a sign the system is broken.

Obamacare may have been a mixed blessing for those seeking coverage through the state exchanges, some of which have seen double-digit annual premium hikes, but it’s been a clear boon for the nation’s hospitals.

“Are they doing enough? I can give you a one-word answer: No,” said Charles Idelson of National Nurses United, a labor union that’s fought with hospitals over their community contributions. “So many of these hospital chains, their clear priority is their budgetary goals or their profit margin.”

Advocates say that not-for-profit hospitals are failing in their responsibilities to their communities, which are beset by rising rates of opioid addiction, diabetes, asthma and other serious but treatable conditions.

“Poor communities around hospitals tend to lack simple conveniences, like grocery stores stocked with healthy, inexpensive food or even places to play or exercise outside safely,” says Elizabeth Bradley, president of Vassar College and co-author of “The American Health Care Paradox,” which offers reams of research on how living in such neighborhoods leads to worse health and social instability. “The paradox is that we focus on and invest in areas like hospital care when social determinants matter so much more,” she says.

One striking figure: The life expectancy rate in Madison-East End is less than 69 years. That’s lower than the life expectancy in impoverished countries like Bangladesh, Turkmenistan and North Korea. It’s also subtly at odds with the message Hopkins sells to the rich patients it courts from around the world, encouraging them to come to a hospital that’s akin to a health mecca, even if it’s actually located in a rundown area.

Walk five minutes off the Hopkins campus in downtown Baltimore and you’ll arrive at the city’s Madison-East End neighborhood, where the poverty is both visible — cracked sidewalks, empty storefronts and more than three times as many vacant lots per house than in the rest of the city — but also silently killing residents. The death rate in the neighborhood is 30 percent greater than the rest of the city and mortality from cancer, stroke and heart disease is more than twice as high.

It’s set up a bizarre contrast. Many U.S. cities boast hospitals that are among the best in the world, but the communities around those hospitals might as well be the Third World.

Financial assistance dropped more than any other category, falling from $169 million to $69 million, as the uninsured rate plunged.

In 2015, as Obamacare’s coverage expansion took full effect, these more locally beneficial categories shrunk further as the hospital wrote off additional Medicaid-related costs and spent more on educating their own staff.

Other categories, like financial assistance and outreach programs, have a more direct impact on the local community but made up a minority of the Cleveland Clinic's community benefit.

For example, in 2013, the majority of the Cleveland Clinic's community benefit was made up of the hospital's Medicaid shortfall – the gap between Medicaid payments and the Clinic’s self-determined costs for those procedures – and education costs mostly associated with training residents, fellows and other clinical staff.

Hospitals are required to provide community benefits in order to keep tax exemptions that, collectively, are worth billions of dollars. But the benefits they cite combine a range of services that don’t always directly benefit their communities, and free care tends to be a small and dwindling percentage.

“A lot of the communities where these hospitals are located are having financial difficulties,” he said . “The hospitals, which are making money, aren’t contributing to the financial reserves of that community. They are obviously employing people, but they are earning substantial profits and not paying any of those profits to the communities.”

But the job gains don’t necessarily help their close neighbors – or improve their health. Anderson, for one, was skeptical that big hospital revenues translate to community improvements. Instead, they often lead to multimillion dollar renovations, more executive compensation and other big-ticket spending items that don’t actually benefit nearby residents.

And for many residents, a vicious cycle begins when they’re young, as Bradley and others have chronicled; many of these neighborhoods have high crime rates, and exposure to violence increases violent behavior among children. It’s also hard for them to escape their circumstances: One 23-year-long study of Baltimore schoolchildren found that, as they grew up, the children born into low-income families generally stayed in the same socioeconomic bracket as their parents.

The nation’s top hospitals do invest in these communities; Hopkins, for example, offers intern training programs and free health education among its community investments. Not-for-profit hospitals are encouraged to publicize these initiatives, so their tax exemptions are not lost.

“It is essential that hospitals voluntarily, publicly and proactively report to their communities on the full value of benefits they provide,” the American Hospital Association instructed its members in 2006, after a series of regulators and Congress began reviewing hospitals’ tax-exempt status. The ACA further codified requirements that tax-exempt hospitals must report on their community benefit activities.

But based on their own self-reports, these hospitals clearly could be doing more. A POLITICO review of community benefit activities reported by these top hospitals found that the organizations counted activities like sponsoring races and hosting lectures toward their community benefit spending. Many of the dollars that hospitals report as “community benefit” are more accurately an accounting trick — the shortfall that hospitals incur when Medicare or Medicaid reimburses the hospital at less than the organization’s price.

Idelson of National Nurses United says this squares with his own organization’s reviews, which illustrate that hospitals approach these investments as “big businesses,” and community benefit programs are too often “their marketing schemes.”

“Hospital staff are going to a marathon and handing out water bottles, and the hospital is calling it a community benefit,” he added. “To us, a community benefit is something that actually improves the health of a community.”

That’s one reason why civic leaders in Baltimore and beyond say they want to see hospitals spend even more on what’s increasingly known as “population health,” or addressing the social needs of residents so they don’t need to visit the hospital in the first place. But there’s no formal requirement to do so. And because hospitals are such deep-pocketed, long-lasting institutions, they can wait out many would-be reformers.

“How do you [convince] an organization that’s existed for decades when you’re only there for a few years? It’s a challenge,” said Abdul El-Sayed, who served as Detroit’s health director from 2015 to 2017. He’s now running for Michigan governor. El-Sayed worked with hospitals to secure public investments like lead screening — a top-of-mind issue for residents in a city just miles away from Flint — but said he had problems winning further compromises.

Hospitals at war

The struggles of El-Sayed and other state and local leaders illustrate what most reformers already know: The best way to pressure hospitals to do more for their communities is at the federal level.

And the best opportunity came in 2009, while Congress was gearing up for what would become the Affordable Care Act. Already reeling from the recession, not-for-profit hospitals were loath to pay an additional $13 billion in taxes if their status changed.

But there were some strong arguments in favor of it, at least politically. Major teaching hospitals kept getting caught chasing dollars from patients who were too poor to pay, such as when The Wall Street Journal detailed how the prestigious Yale-New Haven Hospital was putting massive liens on poor patients and their families — including a 77-year-old dry cleaner slowly paying off the thousands of dollars in interest from his wife’s cancer treatment. She had died 20 years earlier.

Lawmakers led by Grassley, the powerful Iowa Republican, felt the best response would be for the federal government to tighten the loophole that let those high-profile hospitals — and nearly 3,000 others — essentially self-define whether they deserved to be tax-exempt.

So hospitals went to war.

The inside story of how hospital tax exemptions factored into the ACA negotiations was widely overlooked at the time and, until now, mostly untold.

But it begins with the 83-year-old Grassley, the senator who remains Congress’ most reliable investigator of charities and their uncharitable behaviors, more than a dozen current and former Senate staffers told POLITICO. And he might never have gotten involved if not for the American Red Cross — and the Sept. 11, 2001, terror attacks.

As The New York Times and others reported in 2002, the Red Cross received nearly a billion dollars in donations in the seven months after the attacks. But Red Cross executives decided against offering those contributions entirely as relief, electing to bank almost $400 million rather than spend it right away. That didn’t sit well with Grassley, then the ranking member of the Senate Finance Committee, who led an investigation into the group’s operations, accused its chief of trying to mislead Congress and ultimately pushed to restructure the Red Cross board through legislation.

(To this day, Grassley is still skeptical of the Red Cross. In June 2016, he released a 309-page report concluding that the Red Cross mismanaged its Haiti relief effort, and in March he reintroduced legislation to increase transparency of the organization.)

Sen. Chuck Grassley (R-Iowa) pushed the federal government to tighten the loophole that let high-profile hospitals retain their tax-exempt status. (Getty Images)

The battle with the Red Cross began a years-long pattern. A well-regarded nonprofit would get attention for mishandling its funds. A newspaper would write it up. And Grassley would spring into action with detailed requests and subpoenas, ultimately taking him into conflict with Christian ministries, nature conservatories and even the United Way.

He’s a “good government guy,” said former Sen. Max Baucus (D-Mont.), who alternated with Grassley as the Finance Committee chairman or ranking member for years and teamed up on investigations into charitable organizations. Their partnership was intended to transcend partisanship, both men say. (“If Chuck asks you something, it’s like I asked you for it,” then-chairman Baucus once told officials who were dragging their heels on responding to a Grassley request.)

“We didn’t have a subcommittee on nonprofits, but if we did, Grassley would have been the chair,” said Russ Sullivan, who served as Baucus’ top aide.

By 2005, Grassley was chairman of the Finance Committee himself and had found a major target for his investigations: The nation’s 3,000 or so not-for-profit hospitals, which had spent decades inching away from their original charitable missions and increasingly acting like big businesses.

“Hospitals were suing patients who couldn’t pay,” said Theresa Pattara, who was an IRS staffer assigned to the Finance Committee at the time. “It was like trying to get blood from a stone.”

The IRS had once required that tax-exempt hospitals provide free or heavily discounted care to poor patients. But after the creation of Medicare and Medicaid, which dramatically reduced the number of indigent patients, hospitals in 1969 got the agency to relax its rules and allow them to keep their valuable tax exemptions if they provided “community benefit,” a more expansive definition that included charity care but also other activities that advanced patients’ health. Many hospitals included new construction, capital expenditures, even executive perks as community benefits.

It was a nebulous standard that galled Grassley, who led a multiyear investigation into the behavior of 10 hospitals and health systems, including the Cleveland Clinic and New York-Presbyterian Hospital, and convened a series of embarrassing hearings for the health care industry. At one September 2006 hearing, he hinted that core practices — from executive compensation to board structure — needed to be overhauled.

“Some nonprofit hospital executives enjoy the best hotels and great meals, all subsidized by the taxpayer,” Grassley said, as health care leaders nervously looked on. “I find it especially troubling that executive after executive is having country club dues paid for by nonprofit hospitals.”

Some nonprofit hospital executives enjoy the best hotels and great meals, all subsidized by the taxpayer.

— Sen. Chuck Grassley (R-Iowa)

The hospital industry fought back. Major systems took out ad campaigns touting their charitable work. Hospitals quickly moved to voluntarily disclose their community benefit spending and began issuing new annual reports. The powerful American Hospital Association mobilized its lobbyists to try and win over congressmen. But Grassley kept up the pressure.

“Grassley would have senators coming up and saying, ‘why are you bothering the only hospital in my district?’” Pattara recalled. But the Iowa senator wouldn’t back down, having memorized reams of statistics — like executives’ million-dollar salaries — as a counterargument. “Grassley would say, ‘do you know what they’re paying their CEO?’ and the congressmen would be taken aback,” Pattara added. “I loved Grassley for that.”

Grassley’s inquiries and mounting public scrutiny invited more investigations. A Joint Committee on Taxation report, requested by then-House Ways and Means Committee Chairman Bill Thomas, concluded that the hospital industry in 2002 got $12.6 billion in tax savings, as it not only escaped income, sales, and property taxes but also used tax-exempt debt to finance major projects. The financial benefits for those hospitals were actually even larger; for instance, the figure didn’t include the billions of dollars in tax-free donations that hospitals also received every year.

By 2007, Grassley was openly floating the idea that hospitals must provide at least 5 percent of their revenue in exchange for tax exemption. But aides say this was mostly a negotiating ploy to scare the industry rather than fight for explicit requirements on hospitals to provide charity care or be taxed.

Grassley pushed for reporting requirements instead. The IRS ended up redrawing its Form 990, the document that charitable organizations must submit annually, and adding a new section — Schedule H — that specifically required hospitals to detail their community benefit activities.

Grassley had a few reasons for avoiding more punitive measures on hospitals. One was that he didn’t want to be a Republican who was linked to imposing new taxes, aides say, but rather viewed as a legislator who shined a light on dark sectors. Another was that the committee was mostly relying on anecdotes and its own limited investigation into the $1 trillion industry.

“Ideally, you legislate from facts and data,” says Pattara, who returned to the IRS to work on the new Schedule H addition. “And there wasn’t enough data yet” to call for new legislation to reshape the hospital industry.

Digging in for a battle

Hospitals had escaped the biggest threat: New federal regulations. But they were still worried about a series of local challenges, pushed by state attorney generals after regulators in Illinois in 2003 stripped a pair of hospitals of their property-tax exemptions.

The Cleveland Clinic got caught up in one of those fights after it tried to get exemptions for a pair of satellite offices and local regulators said the buildings weren’t providing necessary charity care. The battle dragged on for more than a decade before Ohio’s Republican tax chief in 2012 reversed the previous Democratic administration’s denial of the property-tax breaks.

For opportunistic state leaders, not-for-profit hospitals represented a chance to make a major statement — and recoup some tax dollars as state revenue was declining. Illinois Attorney General Lisa Madigan pushed a bill in 2006 that would have required hospitals to spend 8 percent of their operating budget on charity care. Attorneys general in Kansas, Minnesota, Ohio and other states also began probing hospitals’ spending and pushing for tougher definitions of community benefit standards.

Hospitals dug in, with the American Hospital Association providing air cover and refining the industry’s messaging. Ads began blanketing state capitols, singing the praises of local teaching hospitals. Health care leaders started to aggressively release reports, touting their spending on community benefits. National organizations emerged to offer crisis communications on how not-for-profits could preserve their status.

In Illinois, the Madigan bill was defeated, as hospitals repeatedly steered lawmakers away from imposing new legislative requirements on their charity care; instead, the state ended up simply convening commissions and offering recommendations. It was a case study in how to derail legislation. The industry “has tremendous clout in [state capital] Springfield and has been able to water down any charity care proposals as to make them meaningless,” James Unland, a hospital consultant, said at the time. A subsequent 2012 law that exempted Illinois hospitals from property taxes if they met certain charitable standards has been tied up in litigation for years.

The regional battles also put not-for-profit hospitals on high alert: If they weren’t careful and proactive, their decades-old property tax breaks could disappear if a local board or school district decided to move against them.

Reason to be confident

Back in Washington in late 2008, Democrats had claimed control of Congress and were readying their health care bill. They were also eyeing how best to negotiate with the health care industry, which had fiercely resisted the Clinton-era health reforms and ultimately helped kill them. This time, Baucus’ team reasoned, they needed to get all the major trade groups to the table — and keep them there.

“We had done this whole analysis of every single sector going into ACA,” said a former Senate aide who helped craft the bill. “What do they have to win? What do they have to lose? What are they most afraid of?”

For hospitals, losing tax-exempt status was on their list of potential pain points, and that gave Democrats a bargaining chip with the influential industry. “As long as they were winning on parts, you could press on the losses,” the aide said.

It also gave Democrats a carrot to try and win over Grassley, as Baucus sought Republican votes in hopes of making his committee’s health care legislation into a bipartisan bill.

Baucus had reason to be confident that his longtime collaborator would support a major health care push. In a plan that hasn’t previously been reported, the two men came close to going to the McCain and Obama campaigns in late 2008 in an attempt to secure a commitment — from whoever was president — to work on health reform in 2009. The idea harkened back to 2001, when Baucus crossed the aisle to work on tax reform with Grassley after the previous year’s controversial presidential election.

Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa) preside over a 2009 Senate Finance Committee hearing. The committee passed health care legislation that was considered the most moderate of five health care bills before Congress. (Getty Images)

The two senators ultimately didn’t make their joint pitch to the McCain and Obama camps. “We just couldn’t pull the trigger,” said Sullivan, Baucus’ key aide. But it laid the groundwork for the negotiations to come. “Baucus was convinced that Grassley would be willing to join him on health care legislation,” Sullivan added.

Before the ACA, “we weren’t even contemplating enacting anything around tax-exempt hospitals,” said Pattara, who had rejoined the Finance Committee as Republicans’ tax counsel in 2008.

In early 2009, Democrats’ tactics seemed to be working, as hospitals engaged in negotiations and Grassley expressed support for a health reform compromise. A May 2009 policy paper on proposals to fund the expansion of health coverage — co-authored by Baucus and Grassley — floated a requirement that hospitals “provide a minimum annual level of charitable patient care.”

Early drafts of the ACA legislation specifically included new restrictions on whether hospitals could qualify as tax exempt, as a give to Grassley. But it wasn’t a high priority for Baucus and other Democrats.

“The things that the Democrats were focused on were mostly about [insurance] coverage and subsidies,” a former aide said. “Everybody had a pet project in there — and they paid attention to their pet project.”

On the other side of the table, there was a schism between the hospital lobbyists. The Catholic Health Association, which was working with the Obama administration on the reform bill, explicitly defined community benefit as services rendered. But the American Hospital Association, which was more combative in its negotiations around the bill, took a harder stance on tax exemptions: It wanted a more expansive definition of community benefit that included patients’ bad debt and even Medicare- and Medicaid-related underpayments.

Meanwhile, the Federation of American Hospitals — the for-profit lobbying group — had produced evidence that its members, which paid taxes, provided just as much charity care as their not-for-profit peers.

The industry’s inability to align its message hampered its own negotiating position. But lobbyists for the Catholic Health Association and the American Hospital Association agreed: They couldn’t sign off on any measure that revoked the exemption. It was too valuable. Large health systems were getting tens of millions of dollars in annual benefits from their tax exemptions.

So they hammered out a compromise: Hospitals would need to conduct a community health needs assessment every three years and report their findings to the IRS. The findings would need to incorporate broad feedback from the hospitals’ constituents, be publicized “widely” and lead to changes as necessary. The assessments would help the IRS determine whether tax exemptions were warranted — and if hospitals didn’t comply, they’d have to pay a $50,000 excise tax. The bill also formalized a series of changes to hospital policies, like requiring them to publicize their financial assistance rules.

All things considered, the proposal had relatively little bite, and the rest of the inducements offered by negotiators — like the health law’s planned coverage expansion — were quite generous to the industry. The hospitals publicly threw their support behind the ACA in July 2009.

“Their best play [was] watering it down as much as possible and kicking it to Treasury to make it difficult to implement,” a former aide said, referencing the new community-needs reviews.

Hospital lobbyists agree: Their strategy was delaying and focusing on bigger-ticket items, like near-term changes to Medicare payments. “We knew we couldn’t fight the idea of more transparency,” said one lobbyist who’s still employed by the industry. “We picked our battles and hoped Grassley wouldn’t make too much noise.”

But Grassley had his own troubles. Besieged by protesters at town halls and attacked by tea party activists in August, the Iowa senator ultimately signaled he couldn’t support the ACA legislation. The hospital industry stayed mum as Grassley dropped out.

“Once Grassley was not part of it, they didn’t come back to us and say, OK, now that he’s not on board, we want to take this out,” a former Democratic aide said.

Hospital lobbyists say that was a deliberate decision. “The previous years had made clear, this was a losing issue for us,” said a lobbyist. “The less we talked about tax exemptions, the better.”

Sullivan, Baucus’ key aide, helped track the provision and made sure it remained in the final bill.

Once again, the hospital industry had dodged a major challenge to its tax exemptions — perhaps the most significant in 40 years.

Who should be a nonprofit?

Rolling out the new charity assessments and vetting hospitals fell to the IRS, which spent several years working on the new 501(r) tax section and the ACA’s other tax provisions — the most significant changes to the tax code since Congress’ 1986 tax reform bill.

But the charity reviews forced the IRS into an unusual position, former staffers who worked on implementing the ACA told POLITICO: The agency didn’t really have the experience or expertise to determine whether hospitals should be not-for-profit.

“Using the IRS as an instrument to achieve these important goals … was not the best fit,” said Jason Levitis, who led the Treasury Department’s implementation of the Obamacare regulations. “Why is the IRS the one we want to be [investigating] hospitals’ business about how they’re serving poor people?”

The IRS has largely shied away from battles over revoking tax-exempt status, whether for hospitals or any other organizations. The agency’s most high-profile fight was a two-decade battle over the tax-exempt status of the Scientology organization — which ended after the IRS was overwhelmed with lawsuits and ultimately granted Scientology’s request to be considered as a church.

“It’s not a fight that the IRS wants to have,” said one current staffer, referring to the often politically charged process of removing a group’s tax-exempt status.

Massachusetts General Hospital in downtown Boston. (Getty)

Instead, Levitis and others suggest that the administration’s health care agencies should have played a central role in determining if hospitals should be tax exempt. “Think about institutional competence,” Levitis said. “If you were going to choose a government entity … to be policing tax-exempt status, is the IRS [really] the agency with institutional competence — or is there a better option?”

Meanwhile, ACA standards aren’t specific enough to give any agency clear guidance on when to remove tax-exempt status, critics complain.

Community-health-needs assessments are easy to game, experts familiar with the reviews told POLITICO. One consultant told POLITICO about getting a call from executives who were desperate and needed help before submitting their hospital’s assessment; the consultant ended up dictating stock language over the phone, having never even visited the hospital or its community. “They’re a joke,” the consultant said of the ACA standards, arguing that the reviews are mostly a public-relations exercise.

Not a single hospital has lost its tax-exemption because of the new measures in the ACA.

Nonetheless, hospitals have had difficulty complying even with the law’s relatively light requirements. As of an IRS review last year, one-third of surveyed hospitals had been referred for further compliance checks.

The IRS has had its own problems, failing to promptly file required annual reports to Congress about what it’s learned about hospitals’ compliance. That’s been a source of frustration to Grassley, who despite not voting for the ACA, has pestered the agency to fulfill its responsibilities under the law.

It’s also vexed Democrats. “The problem is that the executive branch, first under President Obama and now under President Trump, has not followed through and done its job under the law,” Sullivan said.

A forgotten fight

It’s not clear who, if anyone, will carry the torch for new regulations or even prod the IRS to put more teeth into its oversight. Grassley has moved on to chair the Senate Judiciary Committee, where his jurisdiction is less focused on hospital issues than it was when he led the Finance Committee. Several of his former staffers now work either directly for hospitals or on behalf of them.

One former Grassley aide points out that since the Trump White House is pushing the idea of major tax reforms, there’s an opportunity to review how hospitals’ tax exemptions are treated. But the Republican Party historically has been hesitant to move against hospitals, and the issue of hospitals’ tax-exempt status isn’t on the table in the negotiations to repeal and replace Obamacare.

Meanwhile, many struggling communities are facing a difficult dilemma: If they pressure hospitals to do more for the families and children who live near them, they risk alienating the one local business that’s growing.

For many poorer cities, hospitals have emerged as anchor institutions while sectors like manufacturing die off. The seven top hospitals reviewed by POLITICO employ about 150,000 people on their main campuses. About 35,000 people work for the Mayo Clinic in Rochester, Minnesota, alone — equivalent to about 30 percent of the city’s entire population.

Pressured by city officials, some tax-exempt hospitals have hammered out voluntary contributions, known as payments-in-lieu-of-taxes, or PILOTs, to help offset the cost of city services like police and fire protection. But those payments are usually a small fraction of the actual cost of those services, while the value of hospitals’ tax exemptions continues to rise.

Boston’s Massachusetts General Hospital would have owed more than $55 million last year if it was taxable. Instead, the city requested that the hospital pay less than $7 million through its PILOT program.

Output: US hospitals are abusing their non-profit status to rake in billions of dollars in tax breaks, while reducing the amounts they offer in charitable donations, according to an investigation by Politico. Revenue for the country's top seven hospitals’ rose by $4.5bn in the two years following the Affordable Care Act's coverage expansions, while the same period saw a 35% drop in charity care. While critics have called for federal legislators to put under pressure hospitals to do more, some fear increased regulation could have the opposite effect in communities dependent on large hospitals for jobs.


Instruction: create a high quality summary of the given input

Input:
IBM unveils IBM Z mainframe with full data encryption capability
 IBM is betting big on pervasive encryption with a new mainframe dubbed IBM Z that may land new workloads amid data breaches.

The company has rolled out the IBM Z, its next-generation mainframe that's capable of handling 12 billion encrypted transactions a day. The general idea is that IBM Z will encrypt all data all the time and reduce the attack surface for enterprises about 92 percent.

With the mainframe repositioning, IBM is looking to juice sales of its stalwart z system lineup. At the heart of IBM Z is an encryption engine that will encrypt data associated with any application, cloud service or database.

The timing is handy given the surge in data breaches and regulations such as the EU's General Data Protection Regulation. Mainframes are still widely used in financial services.

As EU's General Data Protection Regulation (GDPR) looms, tech vendors ready pitches | Video: Tech vendors start lining up their GDPR pitches |

"We think this will be broadly adopted across financial services, government, retail and travel and transportation," said Ross Mauri, general manager of IBM Z. "The encryption is critical for all industries. This new system allows for a customer to encrypt all data on the mainframe. This feature rose to the top regardless of industry or country. Security is a board level issue."

IBM said it co-designed the IBM Z with 150 clients including security experts and chief security officers. The last time IBM respun the mainframe was when it virtualized Linux and open source software about 15 years ago.

Make no mistake. Mainframe sales have a significant impact on IBM's hardware business. There will certainly be an upgrade cycle, but what's unclear is whether IBM can expand the reach of the IBM Z with its approach to encryption. Mauri said IBM so far has preached and collaborated with the base, but the company brings on anywhere from 5 to 15 new Z customers a quarter.

Mauri said the core of the system--software, hardware and firmware--is usually in development about 3 years. Engineers have been working on the base technologies for IBM Z for 5 years. "Customers have been engaged for more than 2 years," said Mauri.

Big Blue also said it plans to build six IBM Cloud Blockchain data centers with IBM Z as the encryption engine. Those IBM Cloud Blockchain data centers launched in New York, London, Frankfurt, Sao Paolo, Tokyo and Toronto to cater to the financial services sector. Mauri said more blockchain centers will be added.

Blockchain explained in plain English | Why Blockchain ushers in the second generation of the internet | Executive's guide to implementing blockchain technology

"There are six that we've built and more in the future," said Mauri. "We located them around the world for latency and more for regulations and data locality."

The pervasive encryption approach includes:

Data is encrypted at rest and in flight wherever it resides. In addition, data can be encrypted in bulk given improvements in the silicon dedicated to the cryptographic algorithms.

IBM Z protects millions of encryption keys with tamper responding hardware that self destructs at any sign of intrusion.

Encrypted application programming interfaces so developers can build applications and services.

As for pricing, IBM unveiled three container pricing models. Pricing for new microservices and applications can be co-located based on quality of service requirements. Application development and test environments will be tripled so capacity can be raised without a license increase. And there's pricing model for payment systems, which is based on the volume of payments not capacity.

These new pricing models will be available by the end of the year for z/OS V2.2 and z/OS V2.3.

IBM Z will be able to support 12 billion encrypted transactions a day, two million Docker containers and 1,000 concurrent NoSQL databases via three times the memory of the z13 and 3x faster I/O and transaction processing.

Output: IBM has released the IBM Z, a mainframe that can cope with 12 billion encrypted transactions a day, and looks to reduce the attack surface for companies by more than 90% by encrypting all data all the time. IBM Z encrypts data from any application, cloud service or database, at rest and in flight, protects the encryption keys with tamper-responding hardware and offers encrypted application programming interfaces. "We think this will be broadly adopted across financial services, government, retail and travel, and transportation," said Ross Mauri, the general manager of IBM Z.


Instruction: create a high quality summary of the given input

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The Trump administration says a new plan will cut drug prices. It’s not that simple
 The Trump administration says a new plan will cut drug prices. It’s not that simple

WASHINGTON — When the Trump administration unveiled a new Medicare proposal this week to cut payments to hospitals as part of a drug reimbursement program, Health and Human Services Secretary Tom Price called the plan a “significant step toward fulfilling President Trump’s promise to address rising drug prices.”

It may not be that simple.

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The proposal takes aim at a controversial drug discount program, known as the 340B program, which is designed to boost revenues for hospitals that primarily serve low-income patients. The program requires drug makers to offer those hospitals sizable discounts on certain drugs. The hospital can then bill Medicare and other insurers at regular reimbursement rates when patients take the drugs, banking the extra savings to spend elsewhere.

Output: When the Trump administration unveiled a new Medicare proposal this week to cut payments to hospitals as part of a drug reimbursement program, Health and Human Services Secretary Tom Price called the plan a “significant step toward fulfilling President Trump’s promise to address rising drug prices.”


Instruction: create a high quality summary of the given input

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In health care, PBMs are crucial — but not regulated
 News

They are called pharmacy benefit managers, or PBMs, and while relatively few people have ever heard of them, it turns out that they are a critical factor in the cost of medical care.

The PBMs originated in the 1960s to help health plans, self-insured employers and government entities, among others, to negotiate prescription drug prices and efficiently distribute medications. “The original intent of PBMs was to assist insurers and employers in managing prescription drug benefit programs acting as third party administrators,” said a legislative analysis.

California has no such regulations for PBMs, unlike 18 other states that have specific statutes requiring PBMs to regularly disclose information.

Since then, they have evolved into a money-making industry without regulations, experts say. By one estimate, three major PBM companies had a staggering $270 billion in revenues in 2014.

“That’s billion with a ‘b’,” said Assemblyman Jim Wood, D-Healdsburg, who is pushing legislation to regulate them.

Health care advocates believe that information needs to be disclosed by PBMs in California, partly to determine their impact – if any – on drug costs.

Beth Capell, lobbyist and policy advocate for Health Access California, said it is unclear if there is a correlation between increasing drug prices and PBMs, but “in order to help understand why health care costs are going up, we shine a light on it.”

Pharmacists, pharmacies and drug and insurance companies are highly regulated in California, but the state currently has no such regulations for PBMs, unlike 18 other states that have specific statutes requiring PBMs to regularly disclose information about their finances and operations.

Pharmacy benefit managers create formularies that efficiently administer prescription drug plans for 266 million insured Americans.

“The reality is that there is no oversight over these business entities and they’re making a huge amount of money,” contends Wood.

PBMs and their allies say the entities provide efficiency, expertise and reliability in a key sector of the health care market, crafting agreements that serve consumers and help limit costs. Although they negotiate rebates and discounts from drug manufacturers and stores, according to Wood, it is unclear how much they charge for negotiations or how any excess money from the discounts is distributed in California.

His AB 315 requires PBMs to be licensed by the Department of Managed Health Care — the same state agency that regulates HMOs — and to publicly disclose financial information, including drug acquisition costs, rebates from pharmaceutical companies and the drug prices negotiated with pharmacies.

The bill, which passed through the Senate Health Committee and was referred to the Appropriations Committee this week, also requires a PBM to exercise good faith and fair dealing in performing contractual duties.

Express Scripts, OptumRx and CVS Caremark are the top three PBMs that control nearly 80% of the market place.

“They started as a benign claims processing company and over the years they’ve created this market where they touch every component of the drug delivery system.” — Jon Roth

The Pharmaceutical Care Management Association (PCMA), which represents PBMs, says pharmacy benefit managers create formularies that efficiently administer prescription drug plans for 266 million insured Americans and determine out-of-pocket costs.

PCMA, which lobbies on behalf of PBMs, says that not all transparency is helpful in cutting costs. Government requirements that give drug companies and stores pricing information could help collude with their competitors to drive prices up, a process that PCMA believes Wood’s bill could exacerbate.

“In its current form, AB 315 is a special interest mandate that will increase prescription drug costs for California’s consumers and employers,” said PCMA spokesperson Greg Lopes.

Representatives for the three major PBMs were not immediately available for comment.

In attempt to create transparency on PBM’s negotiations and rebates, Wood said he’s faced the strongest backlash of anything he’s ever worked on.

Critics contend that the PBMs have grown into a major economic piece of the health care industry with scant oversight.

“They started as a benign claims processing company and over the years they’ve created this market where they touch every component of the drug delivery system,” said Jon Roth, CEO of California Pharmacists Associations. “They’ve become this goliath in the supply chain of getting medications to people.”

One of the biggest health plans in the country, UnitedHealth Group – which owns OptumRx — has drawn skepticism about PBMs’ contractual relationships.

“Dollars are moving back and forth in these corporations and it’s very troublesome because they operate in a black box,” said Roth.

In attempt to create transparency on PBM’s negotiations and rebates, Wood said he’s faced the strongest backlash of anything he’s ever worked on.

“If you are the good guys that you claim to be, PBMs, why should you be pushing back on this? You should be happy to prove to your clients you are what you say you are,” he said.

Wood’s AB 315 is one of several related measures dealing with health care industry issues. Another is SB17, authored by Sen. Ed Hernandez (D-West Covina) and co-sponsored by Health Access California. Hernandez chairs the Senate Health Committee. Both bills received bi-partisan support.

SB 17, which was referred to the Assembly Appropriations Committee, aims to expand transparency of insurance premiums and drug pricing increases and decisions. It also requires drug makers to share drug purchasing data and give advanced notice on significant drug price increases.

—

Ed’s Note: Anna Frazier is a Capitol Weekly intern from the University of Arizona.

Output: They are called pharmacy benefit managers, or PBMs, and while relatively few people have ever heard of them, it turns out that they are a critical factor in the cost of medical care.


Instruction: create a high quality summary of the given input

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The inequality at the heart of Medicaid
 Over the past few months, Democrats have hammered Republican health care reform proposals as dangerous and devastating for the poor. Sen. Elizabeth Warren exclaimed, “These cuts are blood money. People will die,” while others have suggested that they are the “real death panels.” These attacks have only the loosest relationship with the facts, but Democrats have a point when they argue that the GOP’s Medicaid reforms don’t simply reinstitute the pre-Obamacare status quo.

Critics frame this as a bad thing and warn that the changes “would end Medicaid as we know it.” But Medicaid has already changed greatly from its authors’ original design. While often failing to secure essential services for the neediest beneficiaries in the poorest states, the program allocates a disproportionate and ever-increasing amount of money to the richest states, whose representatives now boast of it as a “middle-class program.” The program’s lopsided growth has left it poorly focused on its core mission—and needing reform to get back on track.

Enacted along with Medicare in 1965, Medicaid was designed by a moderate Southern Democrat, Rep. Wilbur Mills (D-Ark.), to help states fund essential medical services for individuals on welfare who could not be expected to work for reasons of age, disability, or family responsibilities. Over the past half-century, able-bodied adults have increasingly been made eligible and the array of services covered under the program greatly expanded. As a result, enrollment has increased from 22 million in 1975 to 69 million in 2017, while total spending has soared from $16 billion in 1975 to $545 billion in 2015.

The federal government currently distributes Medicaid funds to states according to how much they themselves spend on services for eligible beneficiaries. The system was intended to offer the most help to the poorest states: providing $3 for every $1 that Mississippi spends, compared with $1 for every $1 that New York spends. But in practice the wealthiest states have been able to put up more of their own money, and have therefore received the lion’s share of funds. As eligibility restrictions have been loosened, this has resulted in enormous disparities: Connecticut, for example, received $12,240 in federal Medicaid funds per resident under the poverty line in 2015, while Alabama was able to claim only $4,070.

To take this escalating inequity in federal Medicaid spending off autopilot, the House GOP has proposed to cap the annual increase in payments that each state is able to claim per enrollee. For adult and child enrollees, the suggested cap increases at the rate of medical inflation, while for the elderly and disabled it increases at the rate of medical inflation plus 1 percent. Future Congresses could adjust these caps every year, but it would prevent the highest-spending states from automatically claiming additional funds without federal taxpayers getting a say.

Democrats have argued that Medicaid costs will increase faster than the rate of inflation, forcing all states to contend with ever-steeper cuts over time. But, per enrollee Medicaid costs grew at an average annual rate of only 2 percent from 2000 to 2015, while the rate of medical inflation has increased by 3.7 percent. A recent report from the liberal Urban Institute suggested that the per-capita caps proposed by the House GOP would actually become more modest over time — reducing spending on the traditional Medicaid population by only $0.4 billion in 2028, a rounding error on the program’s total projected cost of $559 billion. The Senate bill therefore amended the House proposal, from 2025, to link the cap to the general rate of inflation, which has increased at 2.2 percent per year.

In addition, the Senate bill includes a provision specifically designed to narrow the disparities between poor and rich states. It allows the secretary of Health and Human Services to adjust the caps up or down by 0.5 to 2 percent depending on states’ spending relative to the national average. This would help states with little fat in the system, and ensure any cuts are concentrated on the most expensive programs. Congress could further improve this provision by allowing this equity adjustment to compound over time, and amending it to constrain inflated enrollments.

Opponents of per-capita caps have argued that it would prevent a flexible response to sudden spikes in medical needs. But, the current system of open-ended matching funds has fared poorly in allocating resources in response to these challenges. While 39 percent of Medicaid beneficiaries with hepatitis C in Hawaii received prescriptions for Sovaldi, a new drug that costs an average of $84,000 for a course of treatment, in the first quarter of 2014, only 1 percent of those in West Virginia did. In Canada, where the federal government provides a fixed allocation of funds to support health care in each province, unanticipated spikes in health care needs have been met with ad hoc supplemental appropriations. This incremental approach allows a better-targeted response to new challenges than reliance on a system of matching funds, of which many states are unable to take advantage.

Medicaid now costs more every year than the entire U.S. Department of Defense, but its basic services often remain inadequate in the poorest states. We need a fairer way to allocate funds between states to ensure that the neediest Americans have access to essential care, without busting the federal budget. A system of per-capita caps is a good first step to move us in that direction.

Chris Pope is a senior fellow at the Manhattan Institute and author of “How Per-Capita Spending Caps Can Help Advance Equity in Medicaid.”

Authors:

Output: Over the past few months, Democrats have hammered Republican health care reform proposals as dangerous and devastating for the poor. Sen. Elizabeth Warren exclaimed, “These cuts are blood money. People will die,” while others have suggested that they are the “real death panels.”


Instruction: create a high quality summary of the given input

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The Senate Health-Care Bill Would Be a Giant Step Backward
 The draft of the Senate G.O.P. health-care bill that Mitch McConnell, the Majority Leader, released on Thursday is, in one way, an improvement on the previous version of the bill. The latest draft dropped a proposal to repeal two tax increases on very high earners, which were part of the Affordable Care Act. The revenue from those tax increases was used to help fund some of the A.C.A.’s most progressive features, including the expansion of Medicaid and the subsidies offered to families of modest means for the purchase of private insurance plans.

But the merits of the revised Senate bill stop there. Enacting it into law would be a disaster. The old and the sick would be forced to pay far higher premiums; deductibles would go up for almost everyone in the individual market; and many millions of Americans, many of them poor, would lose their health-care coverage entirely.

Before delving into the details, it is worth restating what is at stake here: the principle that society is made up of people with mutual obligations, including the duty to try to protect everyone from what Franklin Roosevelt called the “hazards and vicissitudes of life,” such as old age, unemployment, and sickness.

To deal with aging and joblessness, F.D.R. introduced Social Security and expanded unemployment insurance. Originally, he intended to include publicly funded health care as part of Social Security, but opposition from the medical profession persuaded him to leave it out. In the decades since F.D.R.’s fateful decision, it has become clear that private insurance works tolerably well for people who hold well-paid, steady jobs at large companies—especially when the tax authorities don’t treat employer-provided health insurance as taxable income. But for everybody else—the elderly, people with low-wage jobs that don’t offer benefits, the self-employed and employees of small companies, people who are employed intermittently or who are out of work—private insurance is costly, complicated, and often hard to obtain.

During the nineteen-sixties, the Lyndon Johnson Administration introduced Medicare, for senior citizens, and Medicaid, for poverty-stricken families with children. But people outside those categories were left to the mercies of the insurance market, the shortcomings of which eventually became glaringly obvious. By 2013, close to one in five adult Americans didn’t have any health-care coverage. The A.C.A. took a two-pronged approach to fixing that situation.

The A.C.A. raised the income thresholds for eligibility to Medicaid, allowing individuals and families with incomes just above the poverty line to qualify for the program. This policy worked wonders. Since going into effect, at the start of 2014, it has enabled about fourteen million Americans, most of them from working families, to obtain health-care coverage.

The A.C.A. also tried to make private insurance more affordable and accessible. One way it did this was by offering hefty federal subsidies to low-to-middle-income households. But it also issued a series of directives. To improve the quality of insurers’ risk pools, it forced everybody, including the young and the healthy, to purchase coverage. At the same time, it obliged insurance companies to offer standardized policies that provided a comprehensive set of benefits, banned them from turning away people with preëxisting conditions, and placed strict limits on how much more they could charge older people.

All of this was an effort to recognize the principle of mutual obligation while preserving a private insurance system. The revised Senate bill would largely dismantle this effort, reversing both the expansion of Medicaid and many of the reforms that were designed to make private insurance work more equitably. If it passed, the Republican reform would eventually return the country to a system a lot like the one in place before the A.C.A., when older people, sick people, and the working poor struggled to find coverage—or went without.

Despite objections from some Republican senators from states that have expanded Medicaid under the A.C.A., the revised bill leaves in place seven hundred billion dollars of cuts to the program, as well as the idea of converting it to a block-grant program. The consequences of these changes would be dramatic. By 2025, according to the Congressional Budget Office, about fifteen million fewer people would be covered by Medicaid and its sibling, the Children’s Health Insurance Program.

On the private-insurance side, the authors of the revised Senate bill took some of the money saved from dropping the tax cuts for the rich and allotted it to compensating insurers for covering high-risk individuals. But the revised bill also includes a new amendment championed by Senators Ted Cruz and Mike Lee: as long as an insurer offered a standardized, A.C.A.-compliant policy on a government-run exchange, it would be allowed to sell unregulated, catastrophic-care plans outside the exchanges.

To people unschooled in the economics of insurance markets, this proposal may look innocent enough, but it is a torpedo aimed at the exchanges, which are an essential part of Obamacare. For people in their twenties and thirties, the premiums on the unregulated plans, which would come with very large deductibles, would be fairly low. But the insurers would be allowed to charge less desirable customers—older and less-healthy individuals, including ones with preëxisting conditions—much higher prices for these plans, or even deny them coverage. As most of these people continued to buy comprehensive plans, while more and more young people chose the cheaper options available outside the exchanges, the risk pools in the Obamacare-type markets would deteriorate sharply.

This would have devastating consequences. Insurers would hike their premiums, and many people wouldn’t be able to afford them, including people with serious illnesses. A cycle of rising prices and falling enrollments could eventually cause the exchanges to collapse. The only way to prevent this from happening would be for Congress to offer bigger and bigger subsidies to the buyers of comprehensive plans and the insurers who offer them.

Whether this is Cruz and Lee’s intention is irrelevant. It is how private health care works when it isn’t regulated and the principle of mutual obligation is ignored, or relegated to a secondary consideration. “Choice always sounds so good, like with the Cruz amendment,” Larry Levitt, a senior vice-president at the Kaiser Family Foundation, explained on Twitter. “But in insurance, it's generally a recipe for instability and discrimination.” The United States lived for decades with a health-care system that discriminated against the old, the sick, and those too poor to afford coverage. Will Republican ideologues be allowed to plunge the country back into this dark past?

Output: The draft of the Senate G.O.P. health-care bill that Mitch McConnell, the Majority Leader, released on Thursday is, in one way, an improvement on the previous version of the bill.


Instruction: create a high quality summary of the given input

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In Clash Over Health Bill, a Growing Fear of ‘Junk Insurance’
 Julie Arkison remembers what it was like to buy health insurance before the Affordable Care Act created standards for coverage. The policy she had was from the same insurer that covers her now, but it did not pay for doctor visits, except for a yearly checkup and gynecological exam.

“I couldn’t even go to my regular doctor when was I sick,” said Ms. Arkison, 53, a self-employed horseback-riding teacher in Saline, Mich.

The plan did not cover her exams before and after hip surgery, her physical therapy after her operation, the crutches she needed while she recovered, or any of her medications. She estimates that she spent $20,000 on medical care in the seven years before she could buy a plan through the marketplaces created by the Affordable Care Act.

As Senate Republican leaders struggle to secure enough votes to repeal and replace the health law, the centerpiece of their effort to win conservative support is a provision that would allow insurers to sell such bare-bones plans again. The new version of the bill released on Thursday incorporates an idea from Senator Ted Cruz of Texas that would permit insurers to market all types of plans as long as they offer ones that comply with Affordable Care Act standards. The measure would also allow companies to take into account people’s health status in determining whether to insure them and at what price.

Output: Julie Arkison remembers what it was like to buy health insurance before the Affordable Care Act created standards for coverage. The policy she had was from the same insurer that covers her now, but it did not pay for doctor visits, except for a yearly checkup and gynecological exam.


Instruction: create a high quality summary of the given input

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How the Medicaid Debate Affects Long-Term Care Insurance Decisions
 There is another option: Life insurance that offers a long-term care benefit. If you don’t need it, your heirs get money when you die. It outsells traditional long-term care insurance, according to Limra, a research company. My colleague Paul Sullivan wrote about it late last year.

Financial services representatives are positively gleeful. One article in a trade publication described “off the charts” interest and “strong crowds” at professional events. This exuberance should make their clients extremely wary. If you’re considering any such product, hire an independent adviser on an hourly basis (say, from the Garrett Planning Network) to examine the policy side by side with traditional long-term care insurance and the possibility of paying for care out of pocket.

Sophisticated readers who wrote to me in recent weeks described doing all of the above and still throwing up their hands in confusion. It took a professional storyteller, Julie Gillis, to help me understand why.

Ms. Gillis spent many years watching her mother slowly melt away from dementia. In an interview this week, as she contemplated her own future, Ms. Gillis spoke of changing generational narratives: Once upon a time, you grew up, married, had kids, got your pension, the end. “The entire storytelling trajectory has now changed,” she concluded, after describing her mother’s last few years, when she did not recognize her daughter. It is not how she wants her own life to play out.

Image Ms. Flanders’s father, Robert Mann, who had dementia.

So here’s my guess as to how the story might end in the future — and why we should all think very hard before buying a lot of pricey insurance that we’d need to keep for decades. As several of you pointed out in your emails, there is something radically unfair about the fact that Medicare pays for years of expensive treatment for cancer and heart disease but won’t touch the long-term care and supervision that is, in effect, the prescription for people with memory conditions.

Given how strapped Medicaid is likely to become and how many more of us will live long enough to find our brains and bank accounts depleted before our bodies, it seems quite likely that the federal and state governments will have to do more, not less, to keep older Americans off the streets. No one in Washington seems to want to own up to that, but they will soon have no choice.

Output: The latest version of the Senate’s health insurance bill appeared on Thursday, and it didn’t do much to change the drastic reductions in Medicaid spending that were in the original legislation.


Instruction: create a high quality summary of the given input

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Governors From Both Parties Denounce Senate Obamacare Repeal Bill
 PROVIDENCE, R.I. — The nation’s governors, gathered here for their annual summer meeting, came out strongly on Friday against the new Senate bill to repeal the Affordable Care Act, turning up the pressure on Republican leaders struggling to round up the votes to pass the bill next week.

Opposition came not just from Democratic governors but from Republicans who split along familiar lines — conservatives who said the legislation did not go far enough and moderates who said it was far too harsh on their state’s vulnerable residents.

Gov. Brian Sandoval of Nevada, who at the moment may be the most pivotal figure in the health care debate, said he had “great concerns” with the legislation, and all but declared that he could not support any bill that would scale back Nevada’s Medicaid program. His decision to expand Medicaid under the Affordable Care Act had been “a winner for the people of our state,” he said of the government health insurance program for poor and disabled people.

“I have to be comfortable that those 210,000 lives are going to continue to enjoy the quality of life and health care that they have right now,” he said, referring to the number of Nevadans who gained coverage through the expansion of Medicaid under President Barack Obama’s signature health law.

Output: The nation’s governors, gathered here for their annual summer meeting, came out strongly on Friday against the new Senate bill to repeal the Affordable Care Act, turning up the pressure on Republican leaders struggling to round up the votes to pass the bill next week.


Instruction: create a high quality summary of the given input

Input:
Medical Transportation Provider Accused Of Disserving L.A.’s Frail Patients
 Some days, the drivers showed up late to take Julian Myers to and from dialysis. Other days, they didn’t come at all. When that happened, Myers, who has end-stage kidney disease, scrambled to find a ride.

“My blood pressure was rising and I’d get anxious,” he recalled. “I was frustrated. It’s a regular appointment. They should be here on time.”

Myers complained regularly to LogistiCare, the company contracted to provide his medical transportation, but said the situation didn’t improve.

Medicaid beneficiaries like Myers are entitled to non-emergency, free transportation for medical appointments if they physically can’t get there on their own. But patient advocates and social workers say low-income and vulnerable patients in Los Angeles County have frequently been unable to get to their appointments on time — or at all.

Use Our Content This story can be republished for free ( details ).

“The uncertainty of when or if LogistiCare is going to come … takes a tremendous toll on people who have no resources,” said Toni Vargas, an attorney at Neighborhood Legal Services of Los Angeles County, a public interest law firm. “They don’t have the resources to say, ‘Enough is enough. I am going to go with another company.’”

Neighborhood Legal Services recently sued LogistiCare in Los Angeles County Superior Court, alleging that the company harmed the county’s Medicaid patients by failing to provide “safe, reliable, and timely transportation.” Among the patients ill-served by the company were a double amputee, a woman partially paralyzed from a stroke and a man with a brain injury, the suit said.

Patients who needed help were left on the curb or waiting for hours for rides, and others were harassed or driven in unsafe vehicles, according to the suit. Two patients allegedly were injured when their wheelchairs weren’t secured in a van.

Similar issues with LogistiCare, a Georgia-based private company that works in the majority of states around the nation, also have been reported in New Jersey, Connecticut, Wisconsin and elsewhere.

“This is a problem around the country,” said Sheldon V. Toubman, a staff attorney at New Haven Legal Assistance Association. “It directly impacts access to care, with people literally not going to medical appointments they had because they could not get there.”

They don’t have the resources to say, ‘Enough is enough. I am going to go with another company.’ Toni Vargas, Neighborhood Legal Services of Los Angeles County

LogistiCare officials declined to be interviewed but the general manager for California, Jody Gonzalez, said in an e-mail that the company takes the lawsuit very seriously, plans to mount a “vigorous defense” and believes the allegations will be disproven.

“We emphatically believe that the claims by [Neighborhood Legal Services of Los Angeles County] are completely inaccurate, and do not reflect the reality of how our system operates in LA or any of our operation centers,” Gonzalez wrote.

Gonzalez said the company serves 5.6 million people in California, including those on Medicaid (called Medi-Cal in the state), Medicare or with private insurance. The rides — done by a network of local drivers — help patients avoid unnecessary emergency room visits and hospitalizations.

“Given the scale of the trips that we manage, we have a very high level of satisfaction and a relatively low number of complaints,” Gonzalez wrote.

All complaints are investigated and addressed, though some are less serious than others, he said. Gonzalez added that the company regularly reaches out to families and facilities to address concerns and is already working to improve operations, by incorporating GPS technology for better oversight and adding more resources to serve the Medi-Cal population.

The California Department of Health Care Services, which oversees Medi-Cal in the state, declined to comment because of the pending litigation. Medi-Cal managed-care plans contract directly with LogistiCare.

In Connecticut, the state issued a bid for a new Medicaid contractor for non-emergency transportation because of the problems. The new company hasn’t yet taken over, and pediatric cancer patients and those with mental health issues, still frequently miss appointments because of delays and other problems, said Bonnie B. Roswig, a senior staff attorney at the Center for Children’s Advocacy in Connecticut. “Patients just aren’t getting the transportation they need,” Roswig said. “Medical providers are beside themselves.”

In New Jersey, a survey of more than 300 Medicaid recipients with mental health issues found that nearly a third had serious safety concerns and that almost one-quarter stopped using LogistiCare’s service because they were treated poorly or the services were not reliable. Proposed legislation in the state would require more accountability and training for Medicaid transportation services.

Vargas of Neighborhood Legal Services said she spent years trying to work with LogistiCare in California to improve the service. Though the company addressed some individual concerns, it failed to deal with broader underlying issues of untrained drivers, not enough drivers, poor management and a disorganized dispatch system.

“It was like putting Band-Aids on a leak in your swimming pool,” she said. “The exact same problems keep coming up again.”

The lawsuit also alleged that drivers often didn’t help certain patients to and from the door as required, and that some patients were transported without seat belts.

Shelly Frasier, a social worker at the DaVita Hollywood Dialysis Center in Los Angeles, where Myers receives treatment, said the unreliable transportation is both inconvenient and dangerous for patients.

“It’s really important to have the consistent filtration of the blood,” she said. “That is what is keeping them safe and alive. Missing just one treatment can put them in a perilous place.”

Frasier said she has often called LogistiCare, only to see the problems occur again. “There is no incentive to fix the problem,” she said. “It’s just a mess.”

Myers, an aspiring screenwriter, said he worried about his health each time a ride was late. If he was forced to have a shorter dialysis session, Myers said, he came home nauseated.

Another one of the plaintiffs, Hassan Allen, is diabetic and wears prostheses after having both legs amputated. He said he is weak and unsteady after dialysis and relies on the drivers to help him get home safely and quickly.

Several times, Allen said, drivers arrived long after his appointment ended. “When you finish dialysis and you have to sit around and wait an hour or two for transportation to pick you up, it’s a very tough situation,” said Allen, 44, who lives in Los Angeles. “You are agonizing and extremely frustrated.”

Allen is supposed to get help to and from the door, but he said LogistiCare regularly sent cabs with drivers who didn’t do that. “The taxicab situation was just untenable,” he said.

“It doesn’t matter what you tell them,” he said of LogistiCare. “Nothing changes. … Patients who are being poorly served by them deserve better.”

KHN’s coverage in California is funded in part by Blue Shield of California Foundation.

Output: Some days, the drivers showed up late to take Julian Myers to and from dialysis. Other days, they didn’t come at all. When that happened, Myers, who has end-stage kidney disease, scrambled to find a ride.


Instruction: create a high quality summary of the given input

Input:
HSBC calls for investigation into palm oil firm's deforestation
 HSBC has triggered an investigation into Noble Plantations following allegations the company was preparing to clear thousands of hectares of rainforest in Papua for oil palm cultivation.

In a decision hailed as a first by a major bank, HSBC has asked the Roundtable on Sustainable Palm Oil (RSPO), a sustainability body for the palm oil industry, to investigate the claims.

The move follows pressure from campaigning organisations Environmental Investigation Agency (EIA) and Greenpeace, which last month wrote to four banks linked to a new $750m (£580m) bond issued by commodities giant Noble Group.

The NGOs asked HSBC, ABN Amro, ING and Rabobank to take action on allegations that Noble Group’s subsidiary, Noble Plantations, was gearing up to clear 18,000 hectares of pristine rainforest in Papua.

Map of Papua. Map of Papua

None of the banks made a formal complaint, according to Greenpeace, but HSBC did pass the documents on to the RSPO, which instigated the probe into Noble Plantations. While declining to comment on specifics, a spokesman for HSBC said the bank “is keen to ensure that the RSPO’s standards are observed and that any credible allegations of non-compliance are investigated”.

Palm oil, which is a common ingredient in a huge number of consumer products, is an important driver of deforestation. Palm plantations cover an estimated 27m hectares of land worldwide and oil palm was responsible for an average of 270,000 hectares of forest loss a year from 2000-2011, according to one study.

“Given the seriousness of the allegations and supporting documentation,” said an RSPO spokeswoman, “the RSPO has advised the company to stop all further development on the concession pending full independent investigations and assessment by RSPO, and possible referral to its complaints panel.”

A spokeswoman for Noble would only refer to the company’s sustainability document (pdf), which states that work on its plantations in Papua is on hold pending “additional sustainability analysis”.

The palm oil industry is expanding in Papua, home to about one third of Indonesia’s remaining rainforests. Photograph: Yudhi Mahendra/Mighty

Campaigners say banks have traditionally lagged behind companies when it comes to supporting ethical palm oil practices. But Greenpeace says HSBC’s move is the first public evidence that the bank is taking its palm oil policy seriously. “After years of turning a blind eye, the financial sector is finally starting to take a tougher line on rogue palm oil companies,” said Jamie Woolley of Greenpeace UK.

HSBC was recently the subject of Greenpeace’s “Dirty Bankers” report, which accused the bank of providing funding to palm oil companies complicit in environmental destruction.

In response HSBC announced a stricter lending policy based on a “no deforestation, no peat, no exploitation” commitment. While saying the bank’s policies show it has “no interest in financing illegal operations,” HSBC Group CEO Stuart Gulliver admitted “the financial sector can play a greater role”.

HSBC Group CEO Stuart Gulliver on the bank’s stricter palm oil policies.

Audrey Versteegen of EIA agrees: “Banks could do so much more, it’s frustrating to see that they don’t,” she says. While she called HSBC the “most progressive bank out there”, she criticised its decision not to make a formal complaint to the RSPO, urging it to act more assertively when it comes to the negative social and environmental impact of its clients.

A spokeswoman for ING said the bank was not involved in financing Noble Plantations but “we have raised the matter with the RSPO”. An ABN Amro spokewoman said the bank could not discuss individual client relationships publicly but that its policy prohibits the clearing of uncertified primary forest and it will investigate any indications of client non-compliance. A Rabobank spokeswoman said “we are concerned by the reports and we apply our sustainability policy both in letter and spirit also in this case”.

Following the money to clear up palm oil

Where previously campaigners for sustainable palm oil have focused on brands and consumers, they are now starting to focus on banks and investors to put pressure on them to stand by their ethical commitments.

Research last year from forests NGO Fern said that EU-based banks and investors have played a huge role in financing companies implicated in concerns over land grabbing and deforestation. US investors and pension funds were the target of a Friends of the Earth report (pdf) accusing them of fuelling environmentally and socially damaging palm oil production through investing billions into companies driving deforestation and land grabbing.

A Greenpeace investigator documents peatland in IOI’s oil palm concession in West Kalimantan, Indonesia. This area of the concession suffered extensive fires in 2015. Photograph: Ulet Ifansasti/Greenpeace

US-based sustainability organisation Ceres launched its Engage the Chain report earlier this month aiming to help investors better understand the risks of investing in food companies. It details the environmental and social threats associated with commodities including palm oil.

“Palm oil supply chains are perhaps the clearest example of where investors have seen the environmental and social impacts translate into financial risks,” said Allan Pearce of Trillium Asset Management. “Investors have seen share prices drop as producers fail to protect forests.”

Following HSBC’s move, other banks are starting to make public commitments. French bank BNP Paribas last month announced a new set of guidelines around palm oil investment, requiring companies to comply with stricter policies around deforestation and emissions.

The move was praised by campaign organisation Mighty Earth as a “breakthrough” in forest finance. “Banks and investors need to stop giving deforesters a lifeline,” said Deborah Lapidus, campaigns director at Mighty Earth.

Deutsche Bank and Standard Chartered have also been under pressure to publish stricter palm oil policies. A spokeswomen for Standard Chartered said the bank is “enhancing its policies to incorporate no deforestation, no peat and no exploitation requirements with independent verification”. She said more would be published over the coming months. A Deutsche Bank spokesman said “we are currently reviewing our environmental and social policies and guidelines”.

Versteegen says banks need to step up their commitments and quickly. “At the end of the day, money is the only argument everybody understands so [banks] have a huge role to play.”

Output: HSBC has called on the Roundtable on Sustainable Palm Oil to investigate allegations that Noble Plantations is planning to clear large areas of Papua rainforest for palm oil crops. The move is the first of its kind by a major bank. It comes in response to requests from Greenpeace and the Environmental Investigation Agency which last month wrote to ABN Amro, ING, Rabobank as well as HSBC in relation to a £580m ($750m) bond issued by commodities firm, Noble Group. The campaign groups asked the banks to act on the allegations of planned deforestation by the group’s subsidiary, Noble Plantations.


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Millions More Uninsured Could Impact Health Of Those With Insurance, Too
 Much has been written lately about how individuals’ health could suffer if they lose insurance under the health proposals circulating in the U.S. House and Senate. But there is another consequence: creating millions more people without insurance could also adversely affect the health of people who remain insured.

“We know that communities with higher rates of uninsurance have worse access to care for those with Medicare or private insurance,” said John Ayanian, director of the Institute for Healthcare Policy and Innovation at the University of Michigan. And if either of the GOP proposals under consideration becomes law, he said, “it’s very likely we would go back to some of those same problems we had a decade ago with high rates of uninsurance.”

The Congressional Budget Office has estimated that either the bill passed by the House or the one under consideration in the Senate could result in more than 20 million more Americans without insurance over the next decade.

Use Our Content This KHN story can be republished for free ( details ).

Ayanian was part of an expert panel from the nonpartisan National Academy of Medicine that examined the implications of being uninsured in a series of studies from 2001 to 2009. An entire report looked solely at the spillover effect of large numbers of uninsured people on those around them. “The Committee believes it both mistaken and dangerous to assume that the persistence of a sizable uninsured population in the United States harms only those who are uninsured,” said the report.

That is mostly because it is difficult for health providers to maintain services in areas with large numbers of patients who cannot pay for care. “Those communities are less attractive for physicians and other health care providers to locate,” said Ayanian. “That affects access to care for everyone,” he said, particularly for critical but high-cost services like trauma care, burn care and neonatal intensive care.

The potential is not merely theoretical. Hospitals in sparsely populated areas, particularly in states that did not opt to expand the Medicaid program, have been cutting back services like maternity care or closing altogether in recent years. These are the same parts of the country that voted for President Donald Trump by large margins.

The impact is not just on availability of services. A 2007 study from researchers at the University of Pennsylvania in the journal Health Affairs found that in areas with many uninsured people, the quality of care was lower as well. Primary care doctors “reported that the higher the proportion of uninsured people in their community, the less likely they are to be able to refer their patients to high-quality specialists,” found the researchers. “Specialists also reported that the higher the community uninsurance rate, the less able they are to deliver high-quality care to their patients,” the study said.

That spillover effect extends beyond access to health care itself, according to a new report from The Commonwealth Fund. Researchers from George Washington University found that if the House-passed health bill were to become law, nearly 1.5 million jobs could be lost over the next decade.

“We’re talking about a net funding loss to states of millions of dollars,” said Leighton Ku, the study’s lead author. “What this means is that states will have higher needs, less revenue to pay for services, and at the same time the federal government is putting less money into Medicaid,” he said. “So it all adds up to a great revenue crunch that’s similar to the Great Recession” of the past decade.

While most of the job losses would be in health care, other jobs would be affected too, he said.

For example, health care workers who lose jobs will then purchase fewer goods and services, affecting the bottom line of local businesses. Health care facilities that were planning to expand might not, affecting the construction industry. And the impact could cross state lines, said Ku. “We might see fewer people going to Disney World,” he said, because people who lose their jobs would lack money to take vacations.

Output: Much has been written lately about how individuals’ health could suffer if they lose insurance under the health proposals circulating in the U.S. House and Senate. But there is another consequence: creating millions more people without insurance could also adversely affect the health of people who remain insured.


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Saving Swimmers, Well Into Senior Years
 From his wooden perch overlooking the shoreline, Gerry Lambert stood up and eyed three teenagers caught in a rough ocean’s sudden riptide.

“We got a little situation,” Mr. Lambert said calmly to his fellow lifeguards resting behind the stand.

At 73, Mr. Lambert is the oldest lifeguard at Tobay Beach, an oceanfront expanse on the South Shore of Long Island just east of Jones Beach, where he has been working since the late 1950s.

He blew his whistle at the teenagers and took off his hat and sunglasses, but relaxed after seeing the swimmers safely regain their footing.

Output: From his wooden perch overlooking the shoreline, Gerry Lambert stood up and eyed three teenagers caught in a rough ocean’s sudden riptide. “We got a little situation,” Mr. Lambert said calmly to his fellow lifeguards resting behind the stand.


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Retirement at 65 becomes a reach for some, as seniors stay in the workforce
 A person's 65th birthday used to be a milestone. That was the age at which your working days were over and your retirement began.

For millions of Americans nowadays, however, that's no longer possible. Nearly 20 percent of people age 65+ are still working full or part-time—the highest rate since 1962. After the end of the Great Recession, more seniors were forced to stay in the workforce for longer, in order to make ends meet.

"It is financially driven," AARP's senior vice president of programs Jean Setzfand told CNBC's "On the Money" in a recent interview.

"Our research shows us that 34 percent of the people we surveyed tell us that financial drivers are a major reason why they're staying in the workforce," she added.

In 2000, 13 percent of Americans age 65 and over were still working full or part time, according to data from Pew Research. Currently, that number has grown to 19 percent yet by 2021, the Bureau of Labor Statistics estimates 32 percent of boomers will still be on the job.

Meanwhile, even that number is expected to increase. With fewer pensions and not enough retirement savings, retiring at 65 isn't financially possible for many.

For decades, companies have been "moving away from pensions to 401(k) defined-contribution plans," Setzfand said. "What happens there is you have a lower base of guaranteed income. Everyone is really reliant on Social Security as that floor. They no longer have that traditional pension that lasts them through their lifetime."

Setzfand said that according to AARP research, about 55 million private-sector employees in the U.S. don't have access to workplace retirement savings plans.

The organization also found that without a retirement plan at work, only 5 percent of people open their own individual retirement account (IRA). Setzfand said that makes saving for retirement "15 times harder for them."

According to the Labor Department, the number of people in the labor force between the ages of 25 to 54 isn't projected to change much between now and 2024.

However, seniors are more likely to be working than teenagers. Today, there are more workers in the 55-and-over group than there are in the 16- 24 age group—and that gap is expected to widen.

But AARP's Setzfand said that's a good thing, because "19 percent of the folks that we talk to actually wanted to stay in the workplace because they actually enjoy it."

Work is "a social outlet, they feel productive. So there's a good reason for people to actually want to stay in the workplace longer," she said. "Because we're actually living longer and what greater way to stay engaged but at the workplace."

On the Money airs on CNBC Saturday at 5:30 am ET, or check listings for air times in local markets.

Output: A person's 65th birthday used to be a milestone. That was the age at which your working days were over and your retirement began. For millions of Americans nowadays, however, that's no longer possible.


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Google uses scale to widen gap with rivals in image recognition
 Another week, another record-breaking AI research study released by Google—this time with results that are a reminder of a crucial business dynamic of the current AI boom. The ecosystem of tech companies that consumers and the economy increasingly depend on is traditionally said to be kept innovative and un-monopolistic by disruption, the process whereby smaller companies upend larger ones. But when competition in tech depends on machine learning systems powered by huge stockpiles of data, slaying a tech giant may be harder than ever.

Google’s new paper, released as a preprint Monday, describes an expensive collaboration with Carnegie Mellon University. Their experiments on image recognition tied up 50 powerful graphics processors for two solid months, and used an unprecedentedly huge collection of 300 million labeled images (much work in image recognition uses a standard collection of just 1 million images). The project was designed to test whether it’s possible to get more accurate image recognition not by tweaking the design of existing algorithms but just by feeding them much, much more data.

The answer was yes. After Google and CMU’s researchers trained a standard image processing system on their humungous new dataset, they say it produced new state-of-the-art results on several standard tests for how well software can interpret images, such as detecting objects in photos. There was a clear relationship between the volume of data they pumped in and the accuracy of image recognition algorithms that came out. The findings go some way to clear up a question circulating in the AI research world about whether more could be squeezed from existing algorithms just by giving them more data to feed on.

Showing that more data can equal more performance out even at huge scale suggests that there could be even greater benefits to being a data-rich tech giant like Google, Facebook, or Microsoft than previously realized. Crunching Google’s giant dataset of 300 million images didn’t produce a huge benefit—jumping from 1 million to 300 million images increased the object detection score achieved by just 3 percentage points—but the paper’s authors say they think can widen that advantage by tuning their software to be better suited to super-large datasets. Even if that turns out not to be the case, in the tech industry small advantages can be important. Every incremental gain in the accuracy of self-driving car vision will be crucial, for example, and a small efficiency boost to a product that draws billions in revenue adds up fast.

Data hoarding is already well established as a defensive strategy among AI-centric companies. Google, Microsoft and others have open-sourced lots of software, and even hardware designs, but are less free with the kind data that makes such tools useful. Tech companies do release data: Last year, Google released a vast dataset drawn from more than 7 million YouTube videos, and Salesforce opened up one drawn from Wikipedia to help algorithms work with language. But Luke de Oliveira, a partner at AI development lab Manifold and a visiting researcher at Lawrence Berkeley National Lab, says that (as you might expect) such releases don’t usually offer much of value to potential competitors. “These are never datasets that are truly crucial for the continued market position of a product,” he says.

Google and CMU’s researchers do say they want their latest study on the value of what they dub “enormous data” to catalyze the creation of much larger, Google-scale, open image datasets. “Our sincere hope is that this inspires the vision community to not undervalue the data and develop collective efforts in building larger datasets,” they write. Abhinav Gupta of CMU, who worked on the study, says one option could be to work with the Common Visual Data Foundation, a nonprofit sponsored by Facebook and Microsoft that has released open image datasets.

Meanwhile, data-poor companies that want to survive in a world where the data rich can expect their algorithms to be smarter have to get creative. Jeremy Achin, CEO of startup DataRobot, guesses that a model seen in insurance where smaller companies (carefully) pool data to make their risk predictions competitive with larger competitors might catch on more broadly as machine learning becomes important to more companies and industries.

Progress on making machine learning less data hungry could upend the data economics of AI; Uber bought one company working on that last year. But right now it's also possible to try and sidestep the AI incumbents’ usual data advantage. Rachel Thomas, cofounder of Fast.ai, which works to make machine learning more accessible, says startups can find places to get rich applying machine learning outside the usual purview of internet giants, such as agriculture. “I’m not sure these large companies necessarily have a huge advantage everywhere, in a lot of these specific domains data just isn’t being collected at all by anyone,” she says. Even artificially intelligent giants have blind spots.

Output: A machine-learning image recognition collaboration between Google and Carnegie Mellon University has found superior results can be obtained from existing learning algorithms by feeding them with even more data than is customary. The project used 50 graphics processing units to train a neural network on a database of 300 million images, a process which took two weeks and resulted in a 3% improvement in prediction accuracy over training with a standard batch of around one million images. The researchers hope the results will encourage the vision community to advance joint endeavours to construct bigger datasets.


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Lemonade pays first charity 'giveback' from premium pool
 Lemonade Insurance announced today that 14 charitable organizations, which were selected by policyholders, will become the beneficiaries of donations that together total 10% of the company’s revenues to date.

The startup’s “2017 Giveback” campaign is “something our entire community can be very proud of,” Lemonade CEO and cofounder Daniel Schreiber said in a press release. “While we’re small, and the absolute numbers are modest, Giveback should scale as we do. Think what our industry could achieve if others adopted the Giveback way.”

Output: InsurTech start-up Lemonade has given $53,174 to 14 charities in the first "giveback" of cash left over from its premium pool. The digital insurance pioneer became operational last year with the promise that any money remaining after claims had been paid out would go to worthy causes. Its business model is based on the belief that policyholders would be more responsible if they knew that the alternative to making fraudulent claims was to put money back into society. The handout accounts for just over 10% of revenue.