Why Big Health Insurance Supports the Democrats

Posted on May 30, 2008
Filed Under Healthcare economics, Investment "advice" |

As difficult as it undoubtedly will be for most readers to believe, DrRich still hears from skeptics who ridicule his theory that a Democratic victory this fall will be the best thing that could happen to the health insurance industry. For example, consider this from Anonymous in Montana:

Democrats hate ALL corporations and want to eliminate profit as a concept. Democrats believe that the most evil companies in all the evil corporate world are the murderous health insurance outfits, because they make their filthy profits withholding healthcare from the sick. If the Democrats win this fall the health insurance industry is toast. For you to suggest that the health insurance industry will be better off with a Democratic victory is nonsense. And suggesting that the insurance industry will support the Democratic candidate is dumber than suggesting that Smith & Wesson will be a big Obama booster. You twit.

DrRich has not given much thought to which candidate the armaments industry will be supporting this year. He expects it will be Mr. McCain, who once operated some pretty impressive firepower himself. On the other hand, one could easily predict a huge boost in gun sales if Mr. Obama wins, triggered by concern (among those Bible-thumping, gun-toting non-supporters) over the possible repeal of the 2nd amendment. So, Smith & Wesson’s support could go either way. DrRich will have to consider the matter further.

But, my dear Anonymous, in regard to which candidates the health insurance industry will be supporting this year, the verdict is already in.

The Wall Street Journal Health Blog reported this week that the health industry has suddenly shifted from a preference for Republicans to a preference for Democrats. Specifically, political contributions from the health sector are showing a 55% to 45% split in favor of Democrats. This is a reversal of the traditional split that for at least 20 years has strongly favored Republicans.

Furthermore, a visit to the website of the Center for Responsive Politics, which tracks these sorts of data, will show that political contributions from HMOs (i.e., the big insurers) has trended even more strongly in favor of Democrats: 69% for Democratic candidates, and only 31% for Republicans. This is a Hillary-in-West-Virginia-magnitude rout.

Non-readers of this blog (and, of course, Anonymous) will be surprised by these statistics. After all, both Mr. Obama and Ms. Clinton propose to phase-out private health insurers (though they won’t come right out and say so) by attrition, by forcing them to compete for subscribers with a new government-sponsored, taxpayer-subsidized “Medicare for Everyone” health plan. Mr. McCain, on the other hand, proposes to maintain private health insurance as the backbone of the American healthcare system, relying nearly entirely on this industry as the engine for healthcare reform. So why would HMOs be giving financial aid to Obama/Clinton and not to McCain?

DrRich’s theory, first formulated six months ago, provides the answer. In the evolution of their managed care products, health insurers finally have reached the point where they need to demonstrate their ability to grow their profits by actually managing the medical care of sick people. The notion that they can do so is, of course, absurd. Furthermore, the notion that the Republicans would be relying on the insurers not only to make a profit, but also to reduce the cost of American healthcare at the same time, literally scares the bejeebers out of insurance executives. The very last thing Wellpoint and UnitedHealth Group want is for McCain to win the presidency, then turn to them and say, “OK boys, do your cost-reducing stuff!” A Republican victory would suddenly reveal the insurers to be entirely bankrupt of useful ideas, and would expose them to a sudden, ugly, stock-tanking demise.

Democrats, of course, will also bring about the demise of the private health insurance industry, just as Anonymous asserts. But at least they will have the grace to do it gradually and predictably - and with one last profit-inducing, stock-soaring windfall thrown in as a sweetener.

It was for these reasons that DrRich predicted last fall that the big insurers would have no choice but to root for and support the Democrats in 2008. (DrRich actually specified at that time that the insurers would support Ms. Clinton. He did not realize that she was then in the process of blowing the nomination by - among other things - forgetting to organize in the caucus states.)

Since DrRich initially posed his theory we have seen Warren Buffet (a major booster of Democratic candidates) placing a huge bet on the big health insurers - which undoubtedly means a) he strongly believes a Democrat will win the White House this fall, b) he understands what this victory will mean to the industry, and c) he reads this blog, which is the only place you can get political and economic theory like this.

We have also seen the major health insurers completely capitulate on their chief mission of providing affordable health insurance to the masses, thus announcing to the world that they no longer have the means, the will, or the intention of seriously trying to reduce the cost of healthcare. A clearer plea by the insurers to “Vote Democrat - Please!” could hardly be imagined (except, of course, for the fact that they are giving their financial support overwhelmingly, and for the very first time, to the Democrats).

DrRich admits that his theory originally was laced with a certain amount of sarcasm and irony, and was based at least partially on speculation, intuition, and confabulation. Nonetheless, developments since that time have provided us with hard facts that, while seemingly impossible to explain with more conventional thinking, are readily explained and even predicted by his theory.

Indeed, DrRich’s theory (and Warren Buffet’s investment strategy that is so obviously based upon it), look more infallible each and every day.

Comments

6 Responses to “Why Big Health Insurance Supports the Democrats”

  1. ck on May 31st, 2008 5:16 pm

    Hm. I had no doubt that health insurance companies would support Democrats this year. I thought it was kinda obvious with the proposals for mandated health coverage. Contributing $30-40M in return for 40million new subscribers (via mandate) seems like a bargain.

  2. James on June 3rd, 2008 8:30 pm

    The insurance companies supporting the democrats has nothing to do with their policies toward health care reform and everything to do with the fact that the democrats currently control congress and are going to control the executive branch for the next 4 years. You’re not going to give all your money to someone who’s not going to be making policy for you.

  3. Trading With Common Sense on April 7th, 2009 8:33 am

    The real problem that is probably going to be unearthed is that we probably have alegacy of underfunding in healthcare issues that goes back decades and only now is it starting to come to the surface when we all realise that there are more people at rock bottom than was first imagined.The double whammy to all of this is that to fix it is going to possibly take more than we have available.

  4. DrRich on April 7th, 2009 8:39 am

    Dear Trading,

    As a matter of fact, I have just described that very thing in one of my latest posts:

    http://covertrationingblog.com/general-rationing-issues/the-healthcare-bubble

    Rich

  5. Mel Thompson on August 6th, 2009 6:53 pm

    I am currently a victim of health care rationing. But that rationing didn’t come from the government. That rationing came from corporate HMOs. I never had access to the mythical “private doctor,” nor did hardly anyone I know. Most people have dramatic rationing through HMOs, and, in fact, they get far more health care, and way less rationing, when they go on Medicaid or Medicare. By the way, Dr. Rich, since you love private health insurers, could you please name one that you love, so I can go see how great they are. This is my challenge. Name one good one. Well, you can’t, because when it comes down to specific insurers, no government agency is ever as horrible as them, and you know it. That’s why you name one, because you can’t. It’s all vaguely called “private.” But the most private part apparently, is the name of any insurer that any Republican believes in, because I can’t get one Republican to say the name of any private health care insurer they claim is ethical and doesn’t ration. So, you see, I am already a victim of rationing. Your private-enterprise rationing. So I can’t be “afraid rationing will come,” since rationing has been here for most of my life. So, rationing isn’t on it’s way. It’s here. You and the insurers you believe in, but won’t name, are already doing it.

  6. DrRich on August 6th, 2009 7:41 pm

    Mel,

    I agree with everything you say, except the part where you say that I think insurance companies are not rationing. I can’t fault you for not reading enough on my blog to understand my overriding theme (being certain that you’ve got better things to do), but if you did read far enough you would see that here, and in my book, I have gone to great lengths to demonstrate how the insurance companies are indeed rationing, that they have tried every means they can think of to withhold medical care from anyone they can, and that they’ve tried everything short of dispatching teams of ninjas in the dark of night to slaughter their more expensive subscribers in their sleep. It’s what society pays them to do.

    If you need convincing, here’s an excerpt from my book that dissects the underhanded methodologies that insurance companies have developed for covertly rationing your healthcare:

    http://guthealthcare.com/understanding_it/modern_managed_care_3.html

    Our choice is not between rationing and not rationing, it’s between whether we do the unavoidable rationing openly (which at least would give us an opportunity to try to do it fairly and effectively and efficiently) or to continue doing it covertly. Covert rationing can be (and is being) conducted by both private insurers and the government. We can argue about which of these entities would be worse. I say it’s fire and ice. Both are just as lethal.

    Rich

Leave a Reply