For more than forty years, I owned and managed a systems consulting firm.  Most of our business was salvaging huge automation projects that were failing. We would get a call from a client saying: “We are really in trouble here.  We have $30 million in this project and it isn’t working.  If the new system isn’t up by Christmas, we will all be fired.  You need to bring your guys in and make this work.  If it doesn’t, at least we can blame you and maybe save our jobs.”

So, we got to be pretty good at organizing and managing huge projects that were really in bad shape. We had incredibly skilled professionals and a very long record of never letting an implementation fail.  We were the IT version of the company that caps oil well fires. 

If you do this for a living, it changes your lifestyle.  When you agree to take on the engagement you drop everything, become incredibly detailed and focused, and stay that way until you hammer out the new system implementation.

When I retired, my friends said you are really going to have difficulty adjusting to retired life.  You’re going to immediately switch from laser focus and extreme pressure to dead calm.  That will be challenging.

In fact, I never really changed my lifestyle when I retired.  I simply changed the projects I worked on.  As a consultant, I had to find out why a client lost 60,000 healthcare claims, recover the claims, and fix the system failure that caused the breach.  As a retired person, I had to organize my spice rack.  They were equally complex undertakings.

Let me take you through spice rack optimization.

Most people have a small section of their kitchen cupboard with a collection of all the spices they use.   So did I.  Okay, the pumpkin pie spice may have been eighteen years old, and I may have had four jars of anise seed.  Once every other year I would use two tablespoons of anise to bake up a batch of Aunt Flossie’s Christmas cookies. When I bought supplies at Publix, I would forget that I already had anise seeds in the cupboard.  So I would buy a fifth jar.  Most of the seasonings I used were in the cupboard somewhere. When I whipped up a pot of jambalaya, the most time consuming effort was searching for spices in the spice cupboard. 

I really started to hammer spices when I became a barbecuist.  Being someone who is paid to streamline processes, I quickly realized that my prep time was at least four times longer than it should be because I can’t easily find the spices I need. 

The first step in the great spice optimization project was to identify all of the spices I use.  Most were tied to barbecue but not all of them.  I reviewed all of my recipes and charted all of the spices required for every one of them.  I created a list of 36 spices that I use for everything I cook.  Nobody’s world is perfect but easily 95 times out of a 100, all the spices I need for anything are included in the list of 36.

When I started the indexing process, I could be cooking or barbecuing in three different places.  The ranch, the beach house, or the condo in Ann Arbor.   I never wanted to start a meal and have to stop to run to the store for any spice.  So I tailor made three identical spice racks with all 36 spices.  In fact, I bought three, 36 bottle, sets of unlabeled glass spice jars and created computer generated labels for each spice.  Included on the jars was the logo for the American Smoking Society – Hickory Only.  For easy identification, the spice name was both on the side of the jar and on the round top. The spice rack could rest on a counter or in a cupboard.  The spices were indexed alphabetically.  Anytime I cook, I can pull the desired spice instantly from the indexed racks. 

Of course, an effective spice management system is not as simple as three spice racks. 

Over time, spices start to fade.  Some, like black pepper, last a very long time.  Others, such as dehydrated bell pepper, go flat in six months.  Why would anyone spend a day and a half trying to make the best ribs and brisket in the world using dead spices?  The goal is perfect, explosive flavor.  You want to see your guests do an eye pop when they bite into one of your ribs.  Flat spices won’t get that done.  You are investing a lot of hours in the smoking process.  The spices need to be fresh. 

A second complicating factor is volume.  When you are making sixty pounds of four different varieties of sausage, those nice little spice jars are not going to get the job done.  You may need ¾ cup of sage for the twenty four pounds of breakfast sausage you are grinding.  In addition to the volume challenges, I am stocking three complete kitchens in different locations.  I don’t want to run out of anything, anywhere.

The final challenge was to minimize the cash required to obtain high quality seasonings.

So I set the following strategy.  I would buy the spices in volume from wholesalers, hoping for volume discounts.  I would set up a fourth spice rack of the 36 spices but the fourth rack would be quart jars of each seasoning.  The quart jars would work well for high volume projects, like sausage making, and barbecue sauce. In addition, when the regulation size spice jars ran low, I could replenish them with spices from the quart jars.  To avoid the “dead spice” pitfall, I would toss everything after eighteen months and start with a new batch of seasonings.

I identified several spice wholesalers and called them.  One of my favorites is Planters in Kansas City.  “Hello, this is Mike Sinelli, I am the Exalted Hind Quarter of a renowned barbecue society.  I am sure you have heard of the American Smoking Society – Hickory Only or ASS-HO.  The Society runs through a lot of spices and I am wondering what volume we need to purchase from your fine establishment to take advantage of wholesale pricing?  Minimum weights of one pound lots will give us the reduced prices?  Excellent!  I am looking at 36 spices and I see you have 30 of them listed on your website….”   

As it turns out, a pound of spices is typically a lot of spice.  Heavier spices, such as granulated garlic, might not quite fill a quart jar.  But a pound of Thyme would require three or four quart containers.  Importantly, when I ordered a pound of all 36 spices, I would easily accommodate all of my needs for eighteen months and I could replenish four or five racks for my fellow ASS-HOs.  

Wholesale pricing is greatly reduced from retail.  In fact, I could buy bulk, one pound lots cheaper than buying the regular size bottles from Publix.  I typically spend $325 to $400 every eighteen months when I restock my spices.     

Maximizing the benefit of any project requires fairly constant review and revision.  I change some of my “go to” spices when I tweak recipes or try new recipes.  So I may add new spices to the rack.  Changes require getting new jars and revising the computerized labeling system. 

In addition, I had to rework the storage system.  My quart storage stash is at the Beach House in Florida.  When we spend three months in Michigan, I would burn through a lot of the spices in the small bottle rack on the counter.  It’s a long drive to Jacksonville to replenish the sage jar.  So I added a backup rack of half quart jars to the Michigan Condo.  This rack travels to and from Florida with us.  In essence, I have a 36 quart jar rack in Florida for back up in the sunshine state and a 36 half quart jar rack for backup in Michigan.  I have all of the bulk spices delivered to Florida and I replenish the half quarters from the Florida stash when I travel to and from Ann Arbor.  For now, this system is working very nicely.     

So the great spice optimization engagement kept me fully focused for a long time.  Nobody’s job was on the line, the remuneration wasn’t very good but it had all of the other aspects of a Sinelli and Associates consulting engagement.  You would think that there are only a few spectacular potential missions, like spice optimization, for a retired person.  However, it appears that the list of possible engagements is limitless.  I can find ten or twenty on my own and my wife can easily add another hundred. 

Here are a few. 

Downsizing.  Moving from a big house to a small house can consume a few man years of effort and test all of your planning expertise.  I believe that you touch every item that you own at least three times during the procedure.

Organizing the 5,000 square foot storage locker.  This is really a bi product of the downsizing engagement.  Even though you tossed 80% of everything you own in the downsizing effort, you still have a few thousand things that you can never get rid of.  If you don’t try to organize the storage locker, most of it will end up like the Ark of the Covenant in the first Indiana Jones movie.

Digitalizing family photos.  I know it seems difficult to believe but my wife’s family and my family identified us as patsy’s to store all of the old family credentials and photo graphs.  I sorted through 23 boxes of old family photos.  I bought a scanner and digitalized more than 17,000 photographs.  My indexing capabilities were heavily taxed but I can go to the file and find a picture of Sue’s dad having a beer at Wall Drug on our great west vacation in 1973.  I can start from scratch and pop up the photo in less than ten seconds.  This was a great retired person’s consulting engagement!

Archiving recipes.  Everything I like to cook is in my computer.  I have hundreds of recipes.  The first segmentation isolates Barbecue Recipes, Tailgating Recipes, InstantPot Recipes, Christmas Recipes, and General Recipes.  I’m kind of weird, even with recipes.  When I make something, I will go back and add notes for things that I am not likely to remember the next time I whip something up.  So, I’ll have the recipe and four or five notes of things I may want to change each time I prepare the dish.  If I want to get the Pasta Faggioli right, I need to find the recipe and read the notes.

Instructions for barbecues.  I save all of the processes I follow when I smoke barbecue.  These include rubs, marinades, smoker used (even after downsizing, I still have eleven different grills and smokers), other equipment employed and timelines.

Instructions for tailgates.  If you want to know what the World’s Greatest Tailgaters put together for the 2012 Michigan State (Moo U) tailgate on October 20, 2012, I can tell you.  In addition to chronicling the menus, I have detailed lists of required equipment and timelines.

Sue has chipped in with a vast number of projects that she has prioritized.  We work them into the mix as well. 

If we don’t want to do anything constructive for a month or two, that’s fine.  One of my consulting engagements has been to organize The Retired Person’s List of Potential Consulting Projects.  That’s right.  I successfully completed a project to list, track and manage all of the potential, ongoing and completed projects. If I ever hit “dead calm”, I pick something off the list and I am back to work. 

I get all of the enjoyment and satisfaction of reworking a broken process with none of the downsides.

At Sinelli and Associates, I was updating the CEO of one of the largest health insurance companies in the country on the status of our financial system restructuring.  I pointed out the challenges that we needed to overcome in order to “go live” by January 1st.  We intended to deliver but there were real perils and he needed a complete and honest appraisal of the possible outcomes. The CEO stopped me and said “I don’t like you Sinelli.  You are saying “if this” and “if that”.  The “if” you need to focus on is: “If you don’t have these systems in place by January 1^st, you are going to F****** DIE!”

Key differences with Retired Persons Consulting are: Nobody is getting fired, no one is threatening my life, I’m not working 70 hour weeks, and there is not a lot of pressure from the people paying our fees.  However, I am still doing complex and interesting work. 

Bottom line: I really enjoy Retired Persons Consulting.         

A great comedian, Norm Crosby, was reflecting on the perils of being tried for a criminal offense.  “The scariest thing is having your fate decided by twelve people who are too stupid to get out of jury duty.”

Most of us recognize the importance of this civic duty but really hope that we are not called. It is a sudden event in our highly planned lives that is always inconvenient.  

I have been selected for Jury Duty a few times.  The odds are very long that anyone will actually be selected.  First you have to be summoned.  I was randomly chosen as a potential juror four times.  Most of my friends have never even received an initial notice.  I was instructed to call the Court on Friday afternoon to see if my services may be needed the following week.  Three of the four times they cancelled any requirement for my services. 

Once, however, I was asked put on a suit and report to the Court House.  I was given a number and tossed in to a pool of potential jurors for a civil trial in the State of Florida judicial system.  Somebody was badly injured at work and they were suing a large multinational employer and the employer’s insurance company for damages. Tens of millions of dollars were at stake.  All morning, they kept pulling other people’s numbers out of the hat.  Both lawyers were sorting through potential jurors with a lot of detailed personal and professional questions.  One person was eliminated because she had been employed, as an administrative assistant, by an insurance company.  Another was an accountant for a local bank. One of the lawyers did not want any accountants on the jury.

I’ll be out of here in no time.  I was a CPA who primarily audited insurance companies. In fact, I was Controller of a public insurance company for several years.  I now ran a consulting practice and all my clients were insurance companies.  We were down to just one open slot.  There were twenty prospective jurors sitting with me.  I will be home for lunch.  The judge called both lawyers to the bench.  He seemed unhappy about how long this process was taking. 

The bailiff pulled my number out of the hat. I was ready.  I would be completely truthful in all of my answers.  However, I would clearly show that my life experiences may not make me the best jury candidate for this trial. I would dazzle them with my CPA/auditing experience reviewing a lot of bogus injury claims.  As Controller of the insurance company, we were required to safeguard the reserves for our policy holders by culling out claims that clearly did not meet policy requirements.  I had grown to naturally dislike injury attorneys.  Frivolous lawsuits are the primary reason for excessive insurance costs in our state. 

I sat down for the inquisition.  The attorney opened with a softball.  “Is there any reason you cannot be fair if we seat you on the jury?”  My one word response was “No”.  “Okay, we accept this juror.  Let’s go to trial.” 

Wait! Wait! Wait!  You asked everyone else all kinds of questions about their personal life and employment history.  “Did an attorney ever make you cry?”  Are you happy when you write a check for your insurance premiums? Did an insurance agent ever cut in front of you in a concession stand line. Do you like creamy or chunky peanut butter?  Boxers or briefs?”  What?? I only get this one simple question??

One thing you learn about the judicial system is that jurors don’t get to ask any questions.  You get to answer some in the selection process and that is it.  I only got to answer one.  After a one word, two letter response, I am a juror.

Now I was in Norm Crosby’s cultural category of someone being too stupid to avoid jury duty. 

This was not how I intended to spend the next few days.  I had some challenges at work that needed attention.  However, Jury Duty is clearly an important civic duty.  I was legitimately selected and I will work with my fellow jurors to make the fairest possible decision.  As it turns out, this was one of the most rewarding experiences of my life.

The trial ran for five days.  The six jurors were from very diverse backgrounds.  There was a nurse, a school teacher, a homemaker, a student, a government employee and a business man.  We all followed the judge’s instructions not to discuss the case until it was turned over to us for deliberation. The first few days, I swung back and forth as the attorneys unfurled their cases.  After about three days, it appeared to me that one party was clearly right and the other was not.  I listened carefully until early Friday afternoon and became even more solidified in my position.  I thought, this could be bad.  I am not going to change my mind and it is very likely that some of my fellow jurors are equally entrenched on the other side.  We were a diverse group.  I have consistently found in life that most people don’t think as weirdly as I do.  Deliberations were going to be interesting.

What became very clear, when we were able to discuss the case, was that every single juror had carefully paid attention for the entire trial. There was some confusion about a few key facts. But not many.  We spent some time making sure we all understood them correctly.  Now we had to decide.  Everybody was serious.  We all wanted to get this right. 

We then decided to vote.  There were about five issues to rule on.  In reality, the only issue was “Is the employer liable for injuries suffered by the employee?” Instead of raising hands, we went around the table and asked every juror what their decision was and also asked them to explain why they made that decision.  I was the last person to vote.  At this point the count was 5-0.  Going in to the vote, I was confident enough with my decision to spend a few days in deliberation and hang the jury if others disagreed. My turn. I simply said that I agreed with everyone else.  I don’t need to tell you why because you more than included all of my reasons in yours.    

How did we get a unanimous decision so quickly?  It was not because the case was simple or clear cut.  The jurors were all very different individuals.  Different backgrounds, different political beliefs, different cultures.  What we had in common was a great sense of right and wrong and a very strong desire to reach a responsible verdict. 

This was very encouraging to me.  All six of us paid attention for a full week and made our decisions based on the facts that were presented to us.  No one simply went along with the crowd.  A random group of six people made a terrific effort to ensure that the State of Florida court system was fair and impartial.    

So I have to disagree with Norm Crosby.  There were no stupid people on this jury.  Very likely, all of us would have preferred to not be selected.  But once we were chosen, we did a great job.  I have the sense that this is the way most juries work in America and it is a real tribute to our country.    

---

I have always been confused by units of measure.  Much of the confusion is centered around cooking or barbecue.  I’ll be reading one of my grandmother’s Springerle cookie recipes and it will call for a Smidgen of Almond Oil.  I actually have Almond Oil but what is a Smidgen?  I thought many of these ancient terms were really descriptions, not measurements.  I would splash in a little Almond Oil.  Predictably, no two batches of these Christmas cookies ever tasted the same.  As it turns out, my grandma’s frequently used expressions (Dash, Pinch and Smidgen) are real measurements.  A Dash is 1/8 of a teaspoon, a Pinch is 1/16 and a Smidgen is 1/32.  Through the wonders of Amazon, I now have measuring spoons for these volumes.  I actually use them frequently when I whip up some of the old Italian and German recipes passed down to me by my mom.

When I moved to the south, I found several southern expressions that are quasi units of measure.  Passal is a good example.  Passal means a large amount.  When it is applied to a specific item, it may mean a lot and a specific number.  I invite my friend Bubba over for ribs.  “Bring the family.  We will eat all day.”  Bubba responds “Shooey! With my crowd you’re gonna need a passal of those great ribs.”  In this case, both Bubba and I know we need one passal or four racks of ribs.  In Jacksonville, a passal is exactly half of a whole passal.  So if Bubba says “My sister Billie Jo and her family are staying with us. Can we include them?”  “Sure!”  Now we need a whole passal.  A whole passal of ribs is actually twice as many as a passal. So we need eight racks of ribs. Similarly a passal of hamburgers is twelve and a whole passal is twenty four.      

Much of my experience with units of measure is pretty short on science. To bring clarity to some of these vagaries, I called the National Bureau of Measures.  I had a delightful conversation with Professor Melvin Cowznofski, Chief Regulator for the Encyclopedia of Measurements.  Dr. Cowznofski provided a lot of definition and insight to popular terms that I thought were simply descriptions. In addition, Melvin offered a number of measures that few of us have ever heard. For example:

New York Second.  This is the measure of time between a traffic light turning green and the time a New York cabbie, directly behind you, starts honking.

Microcentury.  A microcentury is the maximum period of time that is allowed for a long, boring explanation of anything.  Officially, it is one millionth of a century or 52 minutes and 35.7 seconds.

Potrzebie.  In a 1960’s issue of Mad magazine, the publication established the “Potrzebie Systems of Weights and Measures”. The base unit is a Potrzebie which equals the exact thickness of the 26^th issue of Mad magazine.  It converts to 2.263348 mm.  Unfortunately, it failed to become the world’s standard for distance measurement.  Many years ago, anticipating the change, I invested 20 bucks in a Potrzebie based slide rule.  I still have this fine instrument manufactured by Axolotl, Inc.

Sagan.  A single Sagan is 4 billion of anything.  It is a base number equaling the smallest combination of multiple billions (billions and billions).  i.e. 2 billion plus 2 billion.      

Beard Second.  A measure of very short distances usually used in the production of microchips.  It is the distance an average beard grows in one second.

Portal Potty.  Time wasted inputting redundant information into every health care provider’s patient portal. An average of 76 minutes per portal.  “I just peed away 2 ½ hours signing up for two new Doctors.”

In Australia, a very small distance is called a Bee’s Dick.  Similarly in Germany, it is called Muggeseggele which translates to “a housefly’s scrotum”.

Software engineers have developed a rating system for newly developed technology.  According to their standards, there are no perfect systems. The Lovelace Scale, however, measures how significantly any particular program “sucks”.

An impressive IT term is a Mickey.  A Mickey is the smallest resolvable unit of distance that a pointing device (Mouse) can travel on your computer.  A typical distance is 500 Mickeys per inch.

Beer.  For many of us, it is convenient to measure elapsed time in beer.  If you’re smoking a pork shoulder for dinner, the elapsed time could be seven beers.  If your spouse’s boss is dropping in for the feast, you may be better off smoking pork tenderloins with an elapsed time of 1.3 beers.  In Buffalo, they gauge snowstorms in beer. Wisely, they only recommend six beers for a two foot blizzard.  Everything is set to scale based on one beer per four inches.  

Standard Giraffe Unit.  This measure is actually used to categorize Near-Earth objects by the European Space Agency.  In essence, they are tracking big rocks that are traveling close to our planet.  An object the size of a Giraffe is rated 1.0 and called a Giraffe.  An object that is .14 Giraffe Size is called a Canada Goose.  If the rock is 1.25 the size of a Giraffe, it is labeled an elephant.  There are seven animals on the SGU scale.    

A final unit of measurement offered by Professor Cowznofski is the Minutes Per Big Mac metric.  This economic yardstick measures how many minutes a worker, earning minimum wage, needs to work to afford a Big Mac.  Obviously, both sides of the equation will vary based on regional differences.  

So I thank Dr. Melvin Cowznofski and Wikipedia for all of this great information.  I may only use Sagans when evaluating government spending and Minutes Per Big Mac will be very helpful in assessing when I need to find a job in my retirement.  I am already measuring elapsed time in Beer and I certainly hope that no Whale objects will be an imminent threat to our planet.

If Potrzebies make a comeback as a distance metric, I have the slide rule.

Now I am trying to figure out how many people are in the Russian Army.  My wife often reminds me that I have enough barbecue to feed them.  I know it is way more than a Smidgen but I can’t get my mind around how many people are really in that group.

The highlight of my preteen summer vacations was a trip to Indianapolis to visit with the Donnelly family.  My uncle Bill, Aunt Florence and cousin Dave were larger than life people.  Flossie was empathetic and kind.  She believed that my parents needed a break from Mikey, Lucretia and Mad Madam Mim (my sisters, Barb and Jo).  She would drive from Indianapolis to Ann Arbor Michigan to pick us up and take us back to Indiana. We played penny ante poker, went to the stock car races, county fairs and toured the Indianapolis racing facility.  My cousin Dave would pile us in his 1940 Ford for a tour of the local Drive Ins, bowling, or even a fishing trip.  After a week or so of fun and frolic, my Aunt would load us back into her Ford Fairlane and drive us back to Michigan.  The trip was about 280 miles, on two lane roads, through midwest farming communities. 

Usually, I could snag a window view in the back seat.  Flossie would dial in a great rock and roll station and we would listen to Chuck Barry, The Coasters, The Platters, Johnny Mathis, The Everly Brothers and many other pop artists of the fifties all the way home.       

A fascinating side light to the trip were Burma Shave signs.  Burma Shave was a brushless shaving cream that came in a tube.  Their ingenious marketing campaign was to post simple jingles on a series of four or five signs.  They spaced out the signs along farm fields so that you could read them in sequence as you drove past.  They had hundreds of humorous statements posted all over the midwest.   The signs were simply narrow red rectangles with white writing and the last sign always said Burma Shave.  I loved them.  Here is an example:

Said farmer Brown      who’s bald on top      I wish I could       rotate the crop     

Burma Shave

The signs were spaced far apart so you could typically only read one at a time.  We would easily pass twenty or thirty postings between Indy and Ann Arbor.  Only a few repeats.  I’m sure a set of five signs cost Burma Shave less than a hundred bucks.  I don’t know how much they paid the farmers but suffice to say this was very reasonable advertising.  As you cruised the two lane highways, you were always looking for the next set of Burma Shave signs.     

A few years ago, knowing my affection for Burma Shave sayings, a great friend of mine gave me a set of five that she found in an antiques store.   At this time, we lived in the country, on a small two lane highway.  Our property sported a white horse fence, 1/3 of a mile in length, along the road.  I thought it would be spectacular to set up the signs and every few weeks, change the poems.  In fact, I thought I would post an original Burma Shave jingle for those traveling East and, on the back of the signs, a modern rhyme for people travelling West.  An aggressive undertaking but well worth the effort.

The real Burma Shave poems I selected were as follows.  To get the original effect, pause for a moment after reading each sign.  That’s how it worked when you passed them on the highway.  You could only read one at a time and it really heightened your anticipation.  

He lit a match          to check his tank         now they call him         skinless frank

Don’t try passing        on a slope                    unless you have           a periscope

A guy who drives        his car wide open        is not thinkin’             he’s just hopin”

Her chariot             raced 80 per             they hauled away        what had Ben Hur

Altho insured    remember kiddo     they don’t pay you    they pay the widow

My modern sayings included:

4 bucks a gallon       makes me cry        I wish I could       sprout wings and fly

It’s okay                      to text and drive          unless you want          to stay alive

Siri said                       turn right now             I did and nearly           hit a cow

Cannabis         is a legal drug          but smoke and drive         you’re in the jug

My EV Truck              can really fly               but only for                 three hours a try

The GPS         says fastest course      I just was passed       by a guy on a horse

I know, it’s hard to believe that someone would consider a running Burma Shave exhibit.  Before long, they could be committing to a weekly humor post. 

For the new sayings, I thought about naming the final signs after my consulting firm.  Instead of Burma Shave, the last sign would say:  Sinelli and Associates, Inc.   If the test market in Keystone Heights Florida was successful, I could take the marketing campaign back to the midwest farm country.  It worked for Burma Shave for nearly forty years.  They sold a lot of shaving cream. Some little guy could drive past with his Mom and say “Hey look at that.”  If she was CEO of a major insurance company and had trouble with her IT systems, she might give me a call.          

Alas, we sold the ranch before I was able to implement the Burma Shave exhibit.  I still have the signs, however.  They are squirreled away somewhere in my 5,000 square foot storage unit.  So the possibility of displaying authentic Burma Shave ditties and new rhymes is not dead.  Don’t be surprised if you are driving through rural Indiana and see:

On curves ahead    remember Sonny     that rabbits foot     didn’t save the bunny  

Burma Shave   

We have been making sausage for personal consumption for more than thirty years.  Breakfast sausage, Italian sausage, Bratwurst, and Kielbasa.  It is a carryover from my competitive barbecue days.  Sausage is one of the five major categories in a barbecue competition.  After experimenting with different commercial products, most barbecuists believe they can create something better.  Over time we tweaked the spice recipes to develop the perfect flavors for us.

We did improve our Sausage scores in the barbecue contests.  More importantly, we made the terrific sausage that we love to eat.

Why is our sausage better?  We grind a great cut of pork for the base.  All of our sausage is made from quality ground pork shoulder. No scraps or spare parts.  No additives or preservatives.  When you order pulled pork, you are feasting on smoked pork shoulder.  All we add are spices.

Following a key barbecuing philosophy (never accomplish with mere words something that can be achieved equally well with a flame thrower),  I purchased a small commercial meat grinder capable of grinding 600 pounds of pork in an hour.

So for many years, every two months or so, I would grind up some pork shoulders, make a variety of sausages, vacuum seal them and put them in the freezer.  Friends would join us for a spaghetti dinner with a fine Italian sausage sauce or we might serve smoked kielbasa and bratwurst as an appetizer for a barbecuing feast.     

Over time, I would get requests for sausage from my friends.  “The next time you fire up the behemoth grinder, could you make a couple extra pounds of breakfast sausage for me?”  “Absolutely” I would respond. 

After a half year I was getting requests from more friends and the demands were less polite.  “Hey! I need six pounds of Italian in three pound lots and six pounds of breakfast in ¾ pound lots.  Can you get them to me by Saturday?  I’m having a brunch for twenty friends.”  Now my response was “Bad news!  I’m not making sausage for anyone anymore.  We are going to make sausage.  If you want any, be at my house at 7:00 PM next Thursday and we will make all the sausage you care to eat.  If you can’t be there, you don’t get any sausage.”        

Surprisingly, three friends showed up on Thursday for the first sausage production session.  We ground, seasoned and vacuum sealed forty five pounds of sausage.  Everyone helped with all aspects of the process, including cleaning and sanitizing all of the equipment and pressure washing the kitchen.  It was a great social gathering and we were all rewarded with a cooler full of made to order sausage.  Start to finish it was less than a three hour effort. We rekindled a couple hundred thousand years of hunter-gathering instincts and it felt great. We planned to hold another session when the larder dwindled in six to eight weeks.

About five weeks later, as supplies ran low, everyone was ready for another production run.  The team found that it really was not difficult to make sausage.  It’s always fun to get together with your buds.  But the real bottom line was we all enjoyed eating really great stuff. 

After a few months, we were getting a little blowback from health conscious spouses.  “Sausage is one of the worst forms of protein you can consume!  You are killing yourselves with all of this fat laden, ground pork!” 

We mounted a defense that would make the National Institute of Health proud.  One of the team members is a cardiologist, another is a world class tax attorney who has argued 100 million dollar cases in the highest courts.  We noted that this was not ordinary, commercial sausage.  We were not grinding up leftovers from slaughtered pigs.  There were no udders, snouts, or pork bellies in our sausage.  It was all pure pork shoulder.  Pork shoulders have a fat content of 25% which is far less than the average 35% of commercial sausage.  Because we had perfected the quick freezing process, we were able to ensure a very fresh product without any preservatives.  Absolutely no additives.  The cardiologist said that moderate consumption of this form of protein was actually helpful to all of our muscle masses, including the heart.  The third team member was an ex-navy fighter pilot and a 747 jockey.  He pointed out that his blood tests had improved significantly after he replaced his frequent consumption of commercial Polish sausage with the fine cuisine we were creating.  Finally, I pointed out that, after years of consuming all of the home made sausage I desired, my total cholesterol level, with no medication, was 131. Of course, the talented lawyer baked all of this information into a brief that would have stunned F Lee Bailey.    

Needless to say, the spouses were non plussed.  “The sausages are going to kill you all.” 

The four of us averaged more than forty five years of marriage.  We know what hills we should die on.  This one was worth the fight. 

So we have continued to make sausage every six or eight weeks.  The group has expanded to seven or eight master chefs.  It is not uncommon to produce 60 or 90 pounds of output in a single session.  All of our friends and family, including most of the health conscious spouses, enjoy eating the sausage in spaghetti sauces, pasta Faggioli, greens and beans, and a spectrum of smoked barbecue formats.  Breakfast sausage is a staple.

Early on, I warned the team that this was not an activity that should be performed in a white dinner jacket.  “Wear a shirt that you may have to toss after each session.”  After some thought, I provided Tee Shirts that captured the spirit of our endeavor.  We all have black shirts that say “Death Bomb Sausage Company” on the front and “Eat what you want.  Die happy.” On the back.

So thirty years after we decided that we could make better sausage than we could buy in the meat market, the Death Bomb Sausage Company is alive and well.  So are all of the brave team members who grind them out every six weeks.        

---

 

Initial Public Offering

Based on the popularity of the Death Bomb Sausages, I am researching the possibility of taking the company public.  I see the entire production team becoming equal owners after the IPO.  Although it has been a while, I have some experience with the public offering process.  I led the effort for three or four clients during my CPA days with Coopers and Lybrand and I reviewed potential acquisitions for Fiserv.

So I know that the venture capitalists will want detailed financial information that clearly shows a robust profit potential for the enterprise.  The first part of the effort is identifying the cost of producing a high quality product.  Based on the cost, we will establish a price that will generate an attractive return for the company.  The resulting corporate profits will then increase the share value, ultimately, rewarding all of the stockholders.  I’d like to think that Death Bomb is on the same path of the original McDonalds.  The book keeper who accepted stock in lieu of $2,000 of back pay is now a multi billionaire.

What does it cost to produce a pound of world class sausage?

We have fixed costs related to the plant and equipment we need to make sausage.  Equipment includes the world class sausage grinder, vacuum sealing machine, scales, cutting boards, knives, and stainless steel pans for different processing stations.  To date we have made more than 1,000 pounds of sausage with little “wear and tear” on the equipment.  I will, conservatively, assume that we will need to replace our equipment after making every 5,000 pounds of sausage.  With these assumptions, what is the real fixed equipment cost needed to prepare a pound of sausage?

Equipment Cost:

            Sausage Grinder                     $ 450

            Vacuum Sealer                          150

            Scales                                         100

            Cutting Boards                              75

            Stainless Steel Pans               150

            Miscellaneous                               50

            Total Fixed Asset Cost        $ 875

If the total outlay for Fixed Assets to produce 5.000 pounds of sausage is $875, the cost per pound is $.18. 

Okay, we nailed that.  What are the variable costs?  Variable cost includes the cost of pork, the cost of spices and the cost of packaging for the final product.  They are variable because we don’t incur any of these expenses until we actually produce some sausage and they are directly related to each pound we produce.

Variable Cost Per Pound of Sausage:

            Pork Shoulders                                    $  2.50

            Spices                                                         .12

            Packaging for the Final Product        .05

            Total Variable Cost                           $  2.67

We have Fixed Cost per pound of $.18 and Variable Cost per pound of $2.67.  Other than labor, the total cost for Death Bomb to produce a pound of the best sausage in the world is $2.85.

What are the labor costs?  Actually, Larry Durbin has provided most of the insights regarding labor costs.  He noted that John Ball, Steve Nauman, Larry Durbin and Mike Sinelli required three hours of effort to produce 33 pounds of sausage at the last production session. They are all accustomed to a significant level of compensation.  We have an expert tax attorney, a heavily experienced 747 airline pilot, a cardiologist, and a CPA/Systems Engineer.  Without disclosing individual compensation structures, at the time of their respective retirements, the average hourly compensation for this group was $268.15 per hour.  So at the last session we required 12 man hours to produce 33 pounds of sausage.  Total labor cost was $3,217.80 (12 x $268.15).  Cost per pound is $97.51 ($3,217.80 divided by 33). 

Our aggregate cost of making one pound of sausage is as follows.

            Fixed Cost                   $     .18

            Variable Cost                  2.67

            Labor Cost                    97.51

            Total Cost per Pound  $100.36

If it costs a little more than $100 to make a pound of sausage, what should our selling price be?  The VC (impressive, insider designation for Venture Capitalists) would like to see 20% margins.  I believe that a 25% markup would be more appropriate.  Shortly after the public offering, I think we will need a corporate jet and our quarterly board meetings should all be in Paris.  25% will do a better job of covering the additional overhead.  So our selling price will be $125.

I like the concept.  Death Bomb sells 10 million pounds of sausage, every quarter, at $125 per pound.  We all earn $270 per hour when we decide to make sausage.  All of the initial shareholders earn at least $100 million profit on their initial shares.      

I’ll be back in touch when I have completed the business plan and had preliminary discussions with the money guys.  

Michael Jay Sinelli, EHQ

Exalted Hind Quarter

Update Number One

I knew if I circulated the preliminary business strategy to all of the Death Bomb Company participants that we would receive great suggestions and insights.

I would like to share the feedback I received from John Ball, Dennis Gray and Tom Blond, Predictably, their vision is in line with their previous occupations.  As a world class tax attorney, John has a legal and regulatory bend.  Dennis is focused on the engineering and production side.  Tom is pure sales.  He aims to maximize our payback in the shortest possible time frame.  His strategy is absolutely brilliant.

John Ball. 

With a keen eye on the numbers, John noticed that our selling price of $125 a pound is slightly higher than Jimmy Dean’s price of $6 per pound.  I replied that we were within $120 and that should not be a real problem.  John responded.

“Agree. And, they probably use underage, illegal, migrants in their processing plants. How else could they sell their product so cheap? Should we report them to the FDA and INS?”

Dennis Gray.

Hey Mike,

I loved the analysis.  I can now see why you went into accounting.  And all this time I thought it was because you liked the calculator to attach to your belt.

Upon review of your analysis, I wanted to point out that your garage refrigerator isn’t large enough to hold 10 million pounds of pork butt, or finished sausage, or combination thereof.  I tried converting pounds to kilos and got the same result.  Upon second review, I see that 10 million pounds is a quarterly number and realized that even Costco cannot supply that many pork butts all at once each quarter.

Based on Costco’s limitations, I worked this quarterly number down to a weekly basis (ya know 10,000,000 divided by 91 day (days in a quarter)  times 7 days (days in a week)).  This resulted in 769,231 pounds per week.  A much more duable number but one that is still too high for one refrigerator.

If we were to add two refrigerators to your garage, do you think Susan would mind leaving her car out every night?

Tom Blond.

“Sounds reasonable to me. Our first customers need to be Elon Musk, Jeff Bezos and Mark Zuckerberg with the pitch that they, singlehandedly, can solve world hunger. One sale and we shut it down and fly off to Paris.”

It is easy to see why Tom was one of the most successful software sales professionals in the country.  Cut the chat.  Straight to the end game.  A clear simple strategy that achieves every objective.  The first workday of 2025 Tom and I will be setting up meetings with Jeff, Elon, and Mark.

I’d like to thank everyone for their incredible feedback.  More updates to follow.

Michael Jay Sinelli, EHQ

Exalted Hind Quarter

Update Number Two

Good news! Preliminary feedback from the Venture Capitalists is very positive. 

Everyone I talked with is well aware of the Death Bomb Brand and they are well aware of the exclusive nature of our products.  A common theme was “We have heard a lot about your sausages but we haven’t been able to wrap our mouths around anything.”  Apparently, the tee shirts have greatly enhanced visibility. The investment pros all tried to hit us up for a few pounds of Breakfast, Italian and Kielbasa.  I told them that this will be arranged after we ink a deal.          

The VC’s were very impressed with Tom Blond’s marketing strategy.  Appealing to Elon Musk, Jeff Bezos and Mark Zuckerberg to ameliorate world hunger with Death Bomb sausages is brilliant. They anticipate at least two of the three billionaires will buy in to the “stop world hunger” slant.  

In addition, they offered a second marketing suggestion.  The investors recommend that we pursue a private deal with the US military.  Evidently, Secretary of Defense, Austin is anxious to try the Brats and the Italian.  The VC point out that the $125 per pound price is nothing for the armed forces.  These guys are accustomed to paying $5,000 for a toilet seat.  In fact, the money people said we should shoot for at least $140 per pound if we sell to the army.  If we grease the skids with 50 pounds of the next production cycle for the Secretary, he may jump at a multi year deal for all 650,000 troops under his command.   I have our accountant, Bryce Watermouse, crunching the numbers but the military deal could be twice as big as the 40 million pounds per year world hunger agreement.

Two simple sales could ring up more than $15 billion in annual revenue.

Meanwhile, Larry Durbin is in the process of looking for a well maintained Boeing 747.  In his opinion it is the best aircraft ever constructed and it should fit the needs of the sausage team very nicely.

More to follow.        

Michael Jay Sinelli, EHQ 

Exalted Hind Quarter

Long ago I saw a great cartoon by S. Harris.  Two scientists are reviewing a mathematical equation on a chalk board.  One says to the other “I think you should be more explicit here in step two”.  The entire equation appears to be complex math but step two simply says “Then a miracle occurs.”  

This spectacular cartoon really struck a chord with me.  I owned a small consulting firm and our primary business was implementing General Ledger Software for large insurance companies.  Very often, we were trying to save projects that were in a lot of trouble.  These were not three day, get off the plane with a briefcase, and say something smart engagements.  They were big, twenty man year, efforts under great duress for timing and success.  Frequently, we got the call because the implementation team was in distress and we had a track record for making these systems work.  

Very often, the project was floundering because no one could figure out how to design and implement a critical system component.  Instead of solving the problem and creating a comprehensive design that would work from beginning to end, the project team simply bypassed the issue.  They inserted a  “Then a miracle occurs” step and moved ahead to other aspects of the implementation.  Down the road, the implementation team realized that there may not be a solution to the “miracle” step or there may not be a solution that will work with everything else they had designed.         

Our consulting methodology was simple.  If we could not design a solution that addressed every aspect of the desired functionality, we could not move forward.  If we can’t design it, we can’t build it.  Building takes a lot of time, effort, and money.  We aren’t incurring any building costs without a rock solid design. 

Miracles are truly acts of a Supreme Being and we never saw very many of them in our business.  We had to know that we could make the software solve the client’s problem, with no Divine Intervention, or we did not get past “step two.”  I bought tee shirts with Mr. Harris’s cartoon for my consulting team.

Unfortunately, the “Then a miracle occurs” methodology for problem solving has become very popular and very common for Americans.  Here are a few examples.

“Then a miracle occurs” with my student loan.  

Like it or not, student loans have major financial impact on many Americans.  Many students do not treat them with the respect they deserve, however.  I have a friend who borrowed $80,000 to attend college.  He was able to avoid working while in school and even had sufficient cash to buy a fine guitar and surf board.  He was adamant that college days were not all about studies.  He needed to expand his social horizons as well.  Eventually, he stepped out into the working world with a BS in Psychology, a 2.6 GPA, fond memories, and $80,000 of debt.  Each year in school I would ask if he thought his higher education was going to provide sufficient income to pay back the loans and support his Bohemian lifestyle.  His response, “No problem.  I’m going to make a lot of money.”  “Then a miracle occurs!!” 

Now that he is five years past graduation and working as a Barista (truly a great and enjoyable job for him), he complains bitterly about the inherent inequity of student loans.  He should not be required to shoulder the odious burden of this kind of debt, especially at his income level.  All student loans should be forgiven.  Why, even bankruptcy may not resolve his student loan debt!  How unfair! 

Unfortunately, barring a direct act from the Almighty, there is no easy solution to my friend’s problem. There is absolutely nothing wrong with working at a job you really enjoy for lower wages.  However, when you’re designing your life, you better not ring up $80,000 in student loans if you are not planning on sufficient income to repay them.        

I have another acquaintance who is solving the student loan challenge very creatively.  Her job and lifestyle have made it impossible to repay her student loans.  She is 70 years old and has been a full time student for more than 50 years.  Obviously, she loves school and can attend evening classes.  Because she has always been more than a “half time student” as defined by the Federal Government, she has not triggered the requirement to begin repaying her loans.  With compound interest, the loan balances must be staggering.  I asked if she will ever start making loan payments.  She said, “I intend to die as a full time student.  I never plan on making a single payment.”  50 years as a full time student is a little extreme but it does solve the loan dilemma and is not “Then a miracle occurs.”  It is a planned solution that works for her. Ultimately, the loan burden will pass to someone else in the form of higher interest rates to cover defaults.

On a macro basis, student loans are a massive problem.  According to the Federal Reserve, total student loan debt on March 31, 2023 was $1.77 trillion second only to mortgage debt.  So if somebody short of God Almighty bails out the students, it would probably have to be the United States Government.  Not a lot of people with pockets that deep.  If congress decides tomorrow to pay off all the student loans, they have to come up with 40% of all the 2023 tax revenues for this single expenditure.         

“Then a miracle occurs” with my retirement account.

Far and away, the best example of “Then a miracle occurs” methodology in our country is retirement planning. 

In November 2023, Forbes determined that the average retirement savings for Americans aged 50 – 59 is $175,400.  This will generate a monthly retirement income of $878.  Let’s say that these Americans made enough to maximize social security contributions for most of their working lives.  That may add another $2,500 per month to the pot.  Retirees in this group may have to live on less than $40,536 of income per year.  If they maximized social security contributions they have been accustomed to six digit income for a long time.  Clearly, their standard of living is going to take a giant step backward.  

Many of my friends are in this boat.  What is amazing is that it has always been very easy to determine how much funding is required for a comfortable retirement. For example, if a 23 year old contributes $5,500 a year into her or his IRA and earns a 6% overall return, they will have $1 million in the account at age 65.  Using the 6% assumption, this would generate $5,000 per month without ever taking out any of the principle.  A much better income number than the current average of $878 per month.  Add in the $2,500 per month Social Security Benefit and annual retirement income is $90,000.

Okay, your saying “How can a 23 year old put $5,500 into a 401K?”   Easily.  At 23, I am going to find a job that pays at least $50,000 per year.  With a few months training I could learn to drive a truck and make $60,000 to $80,000.  That $5,500 contribution is going to get a lot smaller.  First, I am absolutely, going to find an employer that matches my IRA contribution.  Now I only have to put in $2,750 a year.  Second, my IRA contribution is tax deductible.  At a 20% tax rate, Uncle Sam is going to pay another $550 of the annual amount by lowering my taxable income.  For a mere $2,200 a year I have the retirement challenge covered.  That’s less than the cost of my annual pilgrimage to Las Vegas. 

Anyone can get this financial information from the internet with less than an hour of effort.  Why have so few Americans done this?  Why have so few people engineered their way into a situation that will help them cover their retirement needs?  For many years I have talked with friends who say “I know I should start funding my retirement account but I really don’t have the money right now.  The Beemer lease payment is putting the squeeze on me.  I’ll double up next year.  I can work this out.”  “Then a miracle occurs.”  Retirement funding, with small, reasonable contributions, only works if you start when you are young, contribute every year, and let compound interest build your nest egg. 

The tax laws regarding retirement funding are the best benefit that the government has ever offered to US citizens.  You make a deposit in an investment account and actually get a tax deduction for simply saving your own money.  Earnings on the principle are not taxable until you withdraw the money after retiring.  Tax wise, it does not get any better than this!!  

Nothing is easier to compute, easier to plan for, and easier to fund.  Yet, the average retirement savings for men and women aged 50 – 59 is $175,400.  Again, we need real intervention from a Supreme Being to help these folks retire comfortably.                           

“Then a miracle occurs” with legalized marijuana.

Legalizing marijuana has become a very popular social issue.  Most Americans favor legalizing the drug for both medical and recreational purposes.  Competent adults should be able to use cannabis, without criminal repercussions, just as competent adults use alcohol.  “I live in Colorado.  Marijuana is legal.  I can enjoy the drug with no consequences!”  “Then a miracle occurs.”

Although marijuana use is legal in Colorado and other states, so is drug testing by employers.  In fact, for many occupations, drug testing is required by law.  DOT says that you cannot drive a truck, bus, train, ferry, or plane if you can’t pass a drug test.  You can’t be a mechanic for public transportation equipment, you can’t be an air traffic controller.  You can’t build roads. These rules apply to government employees and any contractors who perform similar tasks.  56% of companies in the United States have drug testing programs to ensure that their employees are fully functioning when they are on the job.  Supposedly, the biggest log jam with improving Florida’s highway infrastructure, is finding construction workers who can pass the mandatory drug tests.  Legalized marijuana in Florida is not likely to make the pool of prospective workers any larger.

In the private sector, testing programs are not, simply, altruistic initiatives by responsible employers.  Most of the time they are requirements that the companies cannot avoid.  They are required by the insurance companies that underwrite liability insurance for these employers.  Amalgamated Property and Casualty is not going to sell a policy to Acme Bridge Construction, Inc. in Denver if they discontinue testing steeple jacks for marijuana usage.  In essence, if the company does not ensure safe working practices by their employees, they cannot buy liability insurance. In litigious America, Acme is not moving forward without insurance.  One claim and they will lose their company. 

A key problem with drug testing (and very possibly with the drug) is that marijuana has a long residual marker.  Depending upon the level of usage, someone may fail a drug test weeks or months after they last used the drug. 

So steeple jack Bob, in Castle Rock, may be getting real relief from the high stress of building bridges with a soothing brownie every evening and find himself out of a job with the next random drug test.  This conundrum is not going to disappear.  It may be legal to use marijuana.  It is also legal (and in many cases mandatory) for employers to fire all employees who test positive for doing so.

Summary

In one small cartoon, S. Harris captured the methodology so many of us follow in modern America.  If something is complicated or painful, let’s not address it right now.  We have most of the answers or at least some of answers.  We have a lot of skill and daring.  We can handle anything that comes along.  The law of limited resources is way over rated.  The government will bail us out.  Let’s get moving.  We don’t need a stinking plan! 

This line of thinking created a lot of profits for my consulting business when my clients realized it doesn’t work.        

“Then a miracle occurs.”  Whether or not you believe in a personal God you have to admit that we have not seen a lot of concrete evidence that miracles are occurring for any of these challenges.

Author’s note:  This article is a departure from the typical “foibles of life” rants that I post each week.  We are approaching the Medicare enrollment season, and I am frequently asked about the differences between Traditional Medicare with a supplement and Medicare Advantage coverage. So this is a serious article that attempts to contrast these two alternatives and highlight the historical factors that created two very different products.  Most of you will not be interested in Medicare alternatives and may want to pass on this week’s post.  A number of you, however, may find the information helpful as you review your Medicare options for 2024.      

A few months ago a friend of mine asked me a question about Medicare.  He was retired and his previous employer switched all of the retirees to a Medicare Advantage program for their health insurance benefits.  He asked, “What in the world is Medicare Advantage and is it my only Medicare option?”

Medicare Advantage is an interesting challenge.  

A little background about Medicare can help us understand how we moved to the current environment of Traditional Medicare and Medicare Advantage.  

The Evolution of Medicare

Medicare is not very simple.  The primary reason for the complexity is that it is such an incredibly expensive undertaking by the Federal Government.  Next to Social Security, it is the largest expenditure in the federal budget.  How expensive?  In total, the Center for Medicare and Medicaid Services (CMS) spent $1.48 trillion in fiscal 2023 for Medicare and Medicaid benefits.  Total tax revenues for the Federal Government for fiscal 2023 were $4.5 trillion.  So 33% of the tax dollars went to government sponsored healthcare programs.  That leaves 67% for all of the other products and services the Federal Government supplies.  Things like Social Security and national defense.  Even senate bean soup. Our elected officials cannot simply wave a magic wand and pay for Medicare.  It is too big, even for them.  So many of the strange provisions of Medicare are directed to keeping costs in line with what the Federal Government can afford.    

Over the years, the US Government has tried to accommodate the ever rising cost of healthcare by tweaking Traditional Medicare.  First they increased premiums. Costs kept rising. So they limited benefits and sheared off optional coverage for Medicare recipients.  They established a series of Medicare Supplement coverages that could be purchased from independent insurance companies, passing, perhaps, 20% of Medicare costs back to the recipients.

Today, Traditional Medicare is a standard policy for the entire country. It is totally controlled by one entity, the granddaddy of all insurance companies, the Federal Government.  It provides access to nearly every healthcare provider in the country and there is no arguing or debating over the benefits that will be paid.  Every healthcare entity must accept the compensation documented in the CMS rating schedule. The optional Supplemental coverages are totally regulated by CMS.  If a claim is accepted by Medicare as the primary insurer, it has to be accepted by the Medical Supplement insurer as the secondary insurer.  The required coverages for all of the Supplemental Plans are the same.  Aetna’s Supplement G will not have benefits that differ from Blue Cross Supplement G.

Traditional Medicare is comprehensive and easier to administer because there is one set of rules controlled by CMS.  However, it is not inexpensive and healthcare costs continued their steep rise.

So the Center for Medicare and Medicaid Services, the health insurance industry and the healthcare industry searched for a new program to control Medicare Costs. The result was Medicare Advantage which is also referred to as MedAdvantage or Medicare Part C.   

Whereas most of the risk for Traditional Medicare is assumed by the Federal Government, nearly all of the risk for Medicare Advantage is assumed by private insurance companies.  The US Government pays the private insurers a premium of, approximately, $1,100 a month for each Medicare Advantage enrollee.  The private insurance companies are on the hook from there.  If it is a bad year for medical claims, the insurance companies lose not the Federal Government. On a personal level, you can appreciate the huge cost of Medicare.  The Federal Government is actually paying a $2,200 per month premium for a two person household.  If they did not, how would you like to factor this expenditure into your monthly budget?   The insurance company is the primary insurer and the private insurance companies provide all of the Medicare Part A benefits (hospitals), Medicare Part B benefits (physicians) and all of the Medicare Part D (prescription drug benefits). 

How can private insurers provide coverage at less cost than CMS? 

First, they establish networks of health care providers and negotiate lower benefit payments with hospitals and doctors in the networks.  For example, The Acme Insurance Company will go to Megopolis Health Systems and negotiate a much lower rate for services than the standard Medicare rate.  Why would Megopolis agree?  Acme may have a substantial number of Medicare Advantage policyholders in the geography covered by Megopolis.  If Megopolis cannot agree on an appropriate rate and become a member of the Acme network, they will not have these policy holders as patients.  Acme will continue to negotiate unique rate structures for as many providers as possible in the same region.  Ultimately, Acme wants to create a network of substantially all doctors and health care facilities in a region who will be paid discounted fees for the services they provide. 

Second, the private insurers do not have to offer all of the benefits that Traditional Medicare offers.  The benefits are robust and the plans must be approved by CMS.  Covered medical benefits may be very similar but not identical.  It is a safe bet that any differences will result in fewer benefits in the Medicare Advantage plans. 

Third, Medicare Advantage plans offered by independent insurers require pre approval for healthcare services much more often than Traditional Medicare.  In theory, the insurance companies are ensuring that the services appropriately qualify for coverage.  In reality, the prequalification may significantly delay services and, often, the insurance companies inappropriately declined services that should have been approved.  For example, in 2021, there were 35 million requests for pre-approval by Medicare Advantage policy holders.  2 million were denied.  11% of the 2 million appealed the denial and 82% of the appeals were won by the policyholders.

Fourth, Medicare Advantage policies have a very wide range of options for deductibles, co-insurance and maximum out of pocket limits for approved claims.  Often, they achieve zero premium coverages by bumping up the amounts policyholders must absorb when they submit claims.   

Fifth, the Medicare Advantage offer includes a Medicare prescription drug benefit.  The formulary is reviewed and approved by CMS.  However, it is the result of the best negotiation the private insurer can strike with pharmacies and drug companies.  With Traditional Medicare, the policyholders can choose from any of the Medicare D policies that are offered in their region.  Typically there are twenty to thirty options and some are much more favorable to some insureds than others.  For example, I had a prescription change in 2024.  I have Traditional Medicare.  My current drug plan indicated that my out of pocket costs for 2024, with the new drug, would be more than $59,000.  I chose a different plan with a different formulary and my total out of pocket cost is less than $3,500.  If I was enrolled in Medicare Advantage, I could not make that change.     

Medicare Advantage did a great job of achieving cheap.  By driving down benefit costs, private insurers can offer a number of additional benefits to their policyholders.  Frequently, they tacked on wellness programs, vison coverage, hearing coverage and dental coverage to the medical benefits required for all plans by CMS.  Often the private insurers would establish very favorable rates with the health care providers to the extent that no premium was required from the Medicare recipients.

Medicare Advantage products may be sold to individuals or to large employers for their entire group of retirees.  

What keeps private insurance companies from raking in extraordinary profits with their Medicare Advantage products?  Two significant factors.  First the Federal Government, through CMS, pays the lion’s share of the premiums.  CMS understands Medicare better than anyone and they are very careful to ensure that the premiums they pay private insurers are not egregious.  More importantly, private insurance is a highly competitive capitalistic enterprise.  There are dozens of Medicare Advantage plans offered by many different companies.  If one insurance company gets strong handed with the rates they offer to their Healthcare Provider base, another company will negotiate a better deal with those providers.

A final complicating factor with Medicare Advantage is that you may not be able to switch from Medicare Advantage to Traditional Medicare if you have significant health issues.  The Federal Government stood on the soap box with the Affordable Care Act and preached that pre-existing conditions should all be eliminated from every health insurance plan.  Traditional Medicare has one.  If you do not sign up for a Medical Supplement when you first enroll in Medicare, you may be required to pass a health care review before being allowed to enroll in the future. So, signing up for the cheap Medicare Advantage product when you are completely healthy and switching to Traditional Medicare when you develop a particularly dangerous form of cancer may not be possible.      

The Dilemma

For many years, the primary emphasis for modifications to Medicare has been directed to controlling costs.  There has not been a lot of change that impacts the usefulness of Medicare to the millions of Americans enrolled in the program.  Because of the variability of Medicare Advantage, evaluating whether to enroll in Traditional Medicare or Medicare Advantage is difficult.  No matter which direction you go, you gain something and lose something.  Finally, the factors impacting the decision are definitely not the same for everyone.

If you are totally healthy and do not plan on having any major healthcare issues until a few days before you die, Medicare Advantage is for you.  If you are planning on developing a dread disease that only a few doctors at the Mayo Clinic and Johns Hopkins can treat, Traditional Medicare is for you.  The obvious problem is that we cannot know the answer to either of these health situations before we enroll in a Medicare Plan.  So the dilemma is “do I go with cheap because I’m healthy or do I go with the more expensive plan because I have the most options if something bad happens?” 

The friend who asked me the question about Medicare Advantage is retired from a very large company in Southeastern Michigan.  The Preferred Provider network offered by the private insurer includes all of the major healthcare providers in the region, including the “gold standard” University of Michigan system.  This may work very well as long as he lives in Ann Arbor.  Many of the company’s retirees have moved.  The benefit does not look so good for some of those participants.  The Medicare Advantage networks in Jacksonville Florida, Minneapolis Minnesota and Phoenix Arizona are not as appealing because the Mayo clinic does not accept Medicare Advantage patients. However, the Mayo does accept Traditional Medicare.  A few who have moved to Whidbey Island Washington may have very poor choices in a network that is primarily focused on Southeastern Michigan. In essence, the usability of a regional PPO network may be better suited to a group that all live in the same region.

Drugs can be a huge expense.  Do I want to be limited to the single drug plan of my Medicare Advantage carrier or should I enroll in a Traditional plan that will allow me to change Medicare D plans based on changes in my prescriptions?  In my case, enrolling in a Traditional plan dropped my drug charges $55,500 a year.  For me, a Traditional Policy was far less expensive than a Medicare Advantage policy.

Summary

So my friend has this choice. 

He can stay with the Medicare Advantage plan offered by his employer.  He will have Silver Sneakers wellness, a vision policy, a hearing policy and dental coverage.  There is no premium required to participate.  In fact, whether or not coverage is provided by his employer, there are a number of Medicare Advantage plans that have little or no premiums.  Currently, he and his spouse are in good health and all of their doctors are in the PPO associated with the plan.  He will have to accommodate the cumbersome pre authorization process for many healthcare procedures.  He may not be as pleased with the network options if he moves from Southeastern Michigan.  He will have to use whatever drug coverage is offered by the Medicare Advantage insurer.  He will have to pay a combined premium for him and his spouse of $350 per month for the required Medicare Part B.

My friend can drop the employer coverage and sign up for a Traditional Plan with Supplement G.  A health review may be required.  If the two pass the review, total premiums for him and his spouse will be approximately $750 per month (including the $350 Medicare Part B premium).  So the premium differential for two people is $400 per month.  With this plan, he can become a patient of any health care provider in the country and have 30 different options for drug coverage.  This is the best possible hedge against a catastrophic health event in the future.

In spite of what the marketing people may say, Traditional Medicare is an apple and Medicare Advantage is an orange.  Far and away, most of the effort directed to improving the products has been to address the challenge of continually rising healthcare costs.  For you, MedAdvantage may or may not be less expensive.  It is very challenging to accurately make that determination.  However, a lot is riding on this decision.  We all need to know what the real impact is for us before we make it.