Government-Run Healthcare “Despite” Obama?

November 6th, 2008 by DrRich

In his campaign, President-elect Obama did not promise or even advocate a universal healthcare system controlled by the government. Indeed, he referred to government-run healthcare as an “extreme” option that ought to be avoided. Instead, he advocated a system in which people who liked their current health insurance would be permitted to keep it, while those who did not have health insurance or who did not like their current insurance would be able to join a new government insurance plan, based on the plan “available to members of Congress.”

Conservatives and cynics, of course, pointed out that such a plan amounted only to a stealth government takeover of healthcare. Since the new government insurance plan would be competing with private insurance, and since the government would be establishing the rules of competition, it would be a simple matter to arrange things so that, before too long, the private competition would melt away.

As a matter of fact, DrRich himself painted such a scenario, and even suggested that the insurance company executives were supporting Obama over McCain during the election precisely because Obama would present them with a graceful (and lucrative) exit strategy. (Mr. McCain’s plan, in contrast, relied on insurance companies to invent the “efficiencies” that would control healthcare costs, as if the insurance companies hadn’t already been trying unsuccessfully to control those costs for 20 years, and were not already completely bereft of useful ideas.)

The fervent wish of the insurance executives, DrRich surmised, was this: Mr. Obama would provide them with one last, huge windfall, in the form of government-provided premiums for some significant chunk of the 47 million uninsured Americans. Then (DrRich went on) a couple of years later and having realized their final gains, they would get out of the health insurance business altogether and let the feds have the whole mess.

But now, things have changed.

Thanks to the sub-prime mortgage crisis and the economic meltdown that has resulted, it will be difficult if not impossible for Mr. Obama to implement any sort of organized healthcare reform, or any other reform that promises to greatly increase federal spending. (Dick Morris points out in a column today that the realities of our current economic situation will serve as a general constraint to the Democrats now controlling the administration and both houses of Congress.)

But if Obama-style healthcare reform is off the table, or even significantly delayed, the health insurance companies are likely to be in deep trouble - and soon.

The market value (i.e., stock price) of these companies completely relies on their continued growth. Through the 1990s and for the first half of this decade, their growth was spurred by the acquisition of public assets (not-for-profit institutions) at a tiny fraction of their real value, and on mergers and acquisitions among insurers. But there are no more non-profits to take over, and these companies have pretty much run out the string on mergers.  So, for the past few years their growth has almost solely relied on their participation in government programs such as the Medicare Advantage Plans (which, by the way, may be going away soon given the recent election results). The entire prospect for future growth (and therefore viability) in the health insurance industry, as DrRich has explained, depends on an Obama-style expansion of government programs that will provide a new stream of insurance premiums.

One sure thing is that health insurance companies have no hope of even maintaining their current profitability, let alone continuing their growth, solely by doing what they are supposed to be doing - by managing the healthcare of their enrollees. (The prospect of having to survive by doing that, once again, is what frightened them so much about the McCain plan.)

Panicked insurance company executives are not in a pretty place. On top of a mounting recession in which their customers (American businesses) are cutting back or failing, and during which their own costs continue to increase at a double-digit rate of inflation, they now have to face the likelihood that in spite of Mr. Obama’s election there won’t be a massive infusion of government dollars into their businesses any time soon. These poor souls are very likely casting about for a Plan B.

And Plan B seems pretty obvious to DrRich. The path has been very recently blazed by others.

Over the last two months it has become obvious that when businesses vital to the public welfare are about to fail, the government has little choice but to take them over. This was the case with AIG, with Fanny and Freddy, and to a lesser extent with several major banks.  We now see the American auto industry lining up for a bailout/takeover. It is easy to imagine the gasping airline companies forming themselves up into the same landing pattern.

So if you are a health insurance executive, you are probably looking at your current broken business model, lamenting that your savior Mr. Obama is probably not going to be able to come to your rescue with the one last windfall he has promised, and observing what is happening with other “vital” American industries in similar straits.  DrRich imagines that these executives have already resolved themselves to a government takeover (indeed, this was the end-game they have long planned once their last Obama windfall played itself out), and that they are merely calculating the right moment for it. How best to divest their stock before hinting that such a takeover is in the works? With careful planning and negotiation, can some of the takeover money be parlayed into executive bonuses, or at least into one last, extravagant junket (a la AIG)? There is no real hurry, after all - whenever the health insurance industry says it just can’t do this any more and that the government needs to take over healthcare, then no matter which other industries the government will have already acquired, what choice will the feds have?

If DrRich is right in such speculations, we may end up with government-run healthcare  sooner than we think, despite the promises and intentions of Mr. Obama, and despite the seeming unlikelihood of achieving organized healthcare reform in the foreseeable future.

DrRich humbly suggests that those who currently own stock in health insurance companies should take note of what happened to the shareholders of AIG and other companies whose demise the feds have recently engineered - which is to say, they were completely wiped out.  DrRich is not really trying to give investment advice here, and admits to being entirely unqualified to do so, as anyone would agree who saw his portfolio. He’s just sayin’.

Posted in Gekkonian Rationing, Healthcare economics, Investment "advice" | 5 Comments »

Healthcare Is a Right If the Authority Says It Is

October 14th, 2008 by DrRich

DrRich has been traveling, so he is late to comment on the presidential debate last week in which our presumptive next President declared that healthcare is a right for all Americans. (In contrast, Mr. McCain said healthcare is merely a responsibility, but since he’s only a Senator we can safely discount his opinion on the matter.)

Medical bloggers far more notable than DrRich have since provided commentary on whether healthcare ought really to be called a right.  DrRich particularly recommends posts by Shadowfax and Maggie Mahar, both of whom offer beautifully nuanced arguments which are singularly interesting in that, while both of them are American progressives who favor both universal healthcare and Mr. Obama, neither is quite willing to label healthcare a right.  Presumably, when awarded too (as it were) liberally, the granting of new “rights” raises the hackles of too many people. Rather, after much analysis and thought, they prefer to call healthcare either an entitlement (Shadofax) or a moral obligation (Ms. Mahar).

DrRich, being a relatively conservative American, does not do well with such nuances.  In his simplistic, Palin-esque way of seeing things, nuances (even when he is too thick to follow them) are fine if they draw meaningful distinctions. But they are not so fine when they are invoked chiefly to disguise or confuse.

The Stanford Encyclopedia of Philosophy says that a right is an entitlement to perform certain actions or to be in certain states, or an entitlement that others perform certain actions or to be in certain states. In other words, a right is simply an entitlement, or an obligation imposed on others, or both.  So, when some insist on calling healthcare an entitlement or an obligation instead of a right, they are merely engaging in soothing obfuscation.

DrRich is sorry to say that the common argument that conservatives like to use against creating a “right” to healthcare - that there is no such thing as a right that imposes obligations or limitations on the individual rights of others - is mistaken.  This is easy to see when one considers certain of the rights that have been legally promulgated during the course of human history, such as the exceptional rights of the aristocracy (especially the divine rights of kings), the unique rights of the clergy, or the special rights of the politburo (or the Congress), all of which clearly imposed more-or-less oppressive obligations on, and limited the individual rights of, the masses.

Where we conservatives tend to get confused is by the notion of natural rights, such as those natural rights to life, liberty and the pursuit of happiness enumerated in our Declaration of Independence. Natural rights are equal rights granted to all people by the Creator (or by “nature”), and cannot be legitimately modified by any mere governmental authority.

Conservatives tend to forget that there is also such a thing as legal rights, which are man-made, created by legislation (or decree, depending on the governmental structure), are not necessarily equally distributed to all people, and are subject to amendment and modification at any time.  In many cases governments will find that, for the overall benefit of the society, or of some subset of society (or even of the governing class), a new “right” will be necessary that produces a limitation on the freedoms or property of individuals within that society, and that those limitations are often not equally distributed.  The progressive income tax, eminent domain, and the military draft immediately come to mind, all of which have been used in countless ways to support innumerable legal rights the government has granted to some or all Americans.

So, DrRich’s message to his progressive friends is: Don’t sweat the “healthcare is a right” kerfuffle. The now-nearly-official right to healthcare is not fundamentally different from other obligations and entitlements that the government has granted to or imposed on American citizens over the years, particularly over the past 70 years.  There is plenty of precedent for it, which should be immediately obvious even to many of us conservatives once you take a second to explain it to us.

So, now that President-Nearly-Elect Obama has decreed it to be so, just go ahead and use the “R” word, and save your nuances for other times when they might be more necessary.

Posted in General Rationing Issues, A right to healthcare | 2 Comments »

Enjoying the Financial Crisis So Far?

September 23rd, 2008 by DrRich

For a while last week, apparently, the American financial system bordered on a complete collapse, one that threatened not only to bankrupt the remaining major investment banks, but that also threatened to freeze all lending and borrowing across the entire American economy. According to some, we were within a day or two of seeing major brand-name non-financial corporations being unable to operate, and all American commerce essentially coming to a grinding halt. Apparently we were about to go, in very short order, from a global economy that functions at Internet speed, to one that works instead on the principle of bartering, if not hunting and gathering.  (At last Mr. McCain’s choice of a running mate becomes clearer.)

And so, on Wednesday evening, stunned congressional leaders listened to Mr. Paulson and Mr. Bernacke tell them that, unless they rapidly passed a massive federal bailout for all the bad loans, then “Heaven help us all.”

The subsequent announcement of the proposed government bailout package has stabilized things for the time being, and has injected sufficient confidence into the financial markets to allow normal commerce (of a sort) to continue. But however this whole mess turns out, whether it leads to another Great Depression, or whether it turns out to be just a really bad quarter, when it’s all over the American taxpayer is going to be saddled with a new debt burden of at least $700 billion, and that some say may reach $2 trillion.  That’s a sizable increase to our total national debt, which today is “only” about $9.7 trillion.  Once they’re old enough to figure out what we’ve just done to them, our children and grandchildren will be pissed.

Even before we reach any kind of resolution of this current fiscal crisis, the blame game has commenced.  It’s too much de-regulation by Republicans vs. too much social engineering by Democrats.  This blame game is potentially a good thing, because unless we objectively assess how this financial crisis happened, we will (as is our habit) devise “solutions” that will just make the next financial meltdown even worse. Unfortunately, the likelihood that we can be objective about assigning blame, especially in an election year, seems slight.

DrRich’s take is that there is plenty of blame to go around. As he sees it, the root of the problem is fourfold:

1)    Our government decided that for purposes of fairness and diversity, mortgage firms should be “encouraged” (and to the government, this means “forced”) to make loans to individuals who, by any reasonable risk standards, simply did not qualify for loans.
2)    The federal reserve made money very cheap, and borrowing relatively easy.
3)    Fannie Mae and Freddie Mac, companies created by government and not subject to normal market forces, bought up the risky mortgages in huge amounts, then repackaged them in complex instruments which it sold to investors all over the world.  Investors (such as the big-name brokerage houses, huge conglomerates like AIG, and the Chinese) bought up the risk-laden instruments, and from them they assembled even more convoluted high-risk investment instruments, which they traded back and forth until nobody knew who owned what, or how much worthless debt everybody had on their books.  This, of course, is where the “free market” went wild, magnifying a very bad problem into an astoundingly dangerous one. The unrestrained wildness was at least partly encouraged by the assumption that, since Freddie and Fannie were quasi-government entities, ultimately the whole mess would be backed up by the U.S. government. (Turns out they were right.)
4)    Mortgage firms, fully realizing that the government really wanted them to lend to unqualified individuals and was happy to buy up all the bad loans they wrote in the process of doing so, nearly killed themselves inventing new and creative ways to entice anybody who could sign a name (and in recent years, not necessarily even their real name, what with the introduction of Alt-A loans - the so-called “liars’ loans”) to take on exotic new mortgages.

So there’s plenty of blame to go around, from the well-meaning but naïve government policymakers who apparently will never “get” the law of unintended consequences; to the Congresspersons of both parties who fought against tighter oversight of Fannie and Freddie (in exchange for major contributions and other perks given to them by F & F) and insisted against all evidence to the contrary that these agencies were fiscally solid; to the arrogant Wall Street magnates who dived head-first into the great feeding trough (whether they were lipsticked-up or not) and allowed their firms to become highly leveraged with disturbingly questionable instruments; to avaricious local mortgage companies who ended up giving houses away and sending the bill to Freddie and Fanny; to the delusional individuals themselves who inexplicably took on hundreds of thousands of mortgages they had absolutely no chance of paying off. All these players should have understood that you can repeal laws of man but you cannot repeal laws of economics, that sooner or later the tipping point would be reached, that the bubble would burst, and that all the players who thought they were winners would suddenly be revealed as major losers.

That tipping point, it appears, came last week.  And so, the American taxpayers, many of whom take great pains to live within their means and don’t borrow money they cannot pay back, are the only ones left to rescue the greedy and the stupid and the craven.

Assuming our economy does not actually collapse over the next few months, and thus does not wipe out our entire social contract (to the extent that we will have to start all over, and thus render moot any concerns over any future fiscal crises our current social contract promises to bring us), DrRich would like to point out that, compared to what is coming, the economic crisis we are now experiencing is merely a trifle.

The current crisis, DrRich repeats, was brought about by well-meaning government policies that attempted to repeal laws of economics in order to achieve a social good, backed up by government programs that strongly encouraged private companies to behave as if economic laws did not apply.  And now, with the inevitable dénouement, the private companies are being variably liquidated or absorbed or socialized, top executives are being variably rewarded or (one can only hope) jailed, and the taxpayer is being invariably screwed.

Regular readers will recognize in the previous paragraph a description of our current healthcare system - and a description of where it is headed.  Our government has striven to devise policies that will provide unlimited healthcare to all Americans whenever they need it, a policy that requires the repeal of basic economic laws, and one that has resulted in a convoluted system of partly governmental and partly private healthcare that rations healthcare covertly (since the unavoidable limits on healthcare cannot be acknowledged), that eschews transparency, that systematically multiplies waste and inefficiency - and that is inevitably building to a dénouement.

There is one big difference, however. Whereas the newly-burst mortgage bubble has left us with an unfunded liability of merely (we think) something less than $2 trillion, our unfunded liability for Medicare alone, over the next several decades, is estimated to be between $25 trillion and $55 trillion.  Considering the fatal damage our current, relatively trivial financial crisis apparently came within a few hours of triggering, this sounds like a lot of money.

When this massive bubble bursts, not even the stolid American taxpayer will be able to backstop the crash. Unfortunately, heading off this coming healthcare tsunami will require us to acknowledge that healthcare rationing is unavoidable, and to come up with an equitable and efficient way to do it. Since our leaders were unable to make themselves publicly recognize, and take steps to deflate, the equally obvious and much more tractable housing bubble when they had the chance to do so, it is difficult to be optimistic.

So try to enjoy our current fiscal crisis, because some day we’ll look back at it with as much nostalgia as we now do the so-called “crash” of 1987.

Posted in General Rationing Issues, Healthcare economics | 8 Comments »

The Duty To Abort

September 15th, 2008 by DrRich

There are, it would appear by reading newspapers and watching TV, many reasons not to like Sarah Palin, and even more reasons not to approve of her.  Indeed, on the very day Governor Palin was announced as Senator McCain’s running mate, DrRich said to his own lovely bride of these past 35 years, “I hope Ms. Palin has Clarence Thomas’ phone number. She’s going to need some advice.”

Clarence Thomas, of course, is the Supreme Court Justice who is masquerading as an African American (his credentials as an actual black person having been thoroughly and systematically discredited by the diversity establishment, by virtue of his conservatism, during his confirmation “hearings”).

“Why, whatever do you mean?” asked DrRich’s sweet-hearted spouse.

“Just look at her,” DrRich replied. “There she stands: Sarah ‘Jesus, Babies and Guns’ Palin. Why, she’s the embodiment of the rubes Senator Obama talks about, the ones that cling in their misery to their Bibles and their varmint guns, and that keep making babies because they’re just too dim to figure out how to prevent it, and probably even too dim to figure out what causes them in the first place.  In other words, she’s conservative.  So by definition she’s no more a woman than Clarence Thomas is black. If she’s allowed to pass herself off as a legitimate (much less celebrated) embodiment of American womanhood, it will set the Movement back to the days of Ozzie and Harriet. So she’d better put on some thick skin because it’s going to get very nasty and very ugly very quickly.”

All of this, of course, has since come to pass. Why, Wendy Doniger, who is a Professor of the History of Religions at the University of Chicago’s Divinity School, and so who has the formal authority to rule on such things, has even established in her Newsweek blog that Ms. Palin is not actually a woman. (”Her greatest hypocrisy is in her pretense that she is a woman.”)  You can’t actually be a card-carrying woman, you see, and say and do the stuff that Ms. Palin says and does.  Any educated person can see that, and it’s good that the very well educated are taking the time to inform the rest of us.

So, like DrRich says, there are many reasons not to approve of Sarah Palin, some based on facts and some confabulated from a general knowledge of the kind of things primitives like her might believe, and all of them are being well and thoroughly (and desperately) documented for the public record by a panicky media establishment, with every hope and confidence that, once fully informed, no thoughtful person could ever actually vote for one such as she.

But as cynical as he is, and as savage as he expected the attacks to be, there is one criticism being made of Ms. Palin that took even DrRich by surprise.  DrRich refers to the criticism she is receiving for failing to abort the latest addition to her family, her little son Trig, even though she learned while pregnant that he would likely have Down syndrome.

When DrRich was in medical school oh so many decades ago, children with Down syndrome were still largely institutionalized from birth. So when DrRich was being taught about Down syndrome he was shown pictures and movies of drooling children who were unable to speak or communicate meaningfully, and who were unable to feed themselves, use toilets, or interact as humans.

But of course, if you were to place any of today’s Baby Einsteins in such an institution from birth, they would end up much the same way. And once the era of institutionalization ended, and many Down children were raised instead with their families, amazingly we learned just how normal these kids could become.

When Down children are raised in the home by loving and caring families, it turns out that most of them become highly functional. DrRich knows people with Down syndrome, and finds them to be good-natured (most of the time), articulate, thoughtful and even witty, and they are not only quite capable of providing for themselves their basic human needs, but also of earning a living.  Above all, they are happy to be alive, and their families are as happy to have them as they are any of their other children and they love them just as much.  Of course, they do have problems, including a high incidence of cardiac abnormalities that need to be surgically corrected, and a relatively high risk of developing leukemia and infectious diseases. But these are fully-realized humans who enjoy their lives and have much to offer.

So if a pregnant woman finds out she is carrying a Down child, she has a lot to think about.  There are a lot of potential problems with these special-needs children, and not every family is prepared to deal with these problems.  But on the other hand, the experience of raising a Down child can be extremely rewarding - for everyone. So as DrRich sees it, the decision to deliver a Down child and welcome him/her into the family is at least a reasonable one, if not a blessed one.

So at first DrRich was a bit puzzled by the criticism being heaped upon Ms. Palin for keeping Trig.  At first, he thought this unreasonable complaint was simply one of the many things being caught up in the pile of indiscriminate criticisms being leveled against her during that first mad rush to discredit her, to shame McCain into dropping her from the ticket immediately. Surely, nobody could really hate her for intentionally delivering a Down child.

But even when the mainstream media realized that it had overplayed its hand a bit, and began to settle down to some of the more reasonable criticisms of Ms. Palin (her inexperience in foreign affairs, for instance, which is every bit as troublesome as Mr. Obama’s), the issue of her having chosen not to abort her Down child did not go away.

The complaints, of course, are couched in terms of concern. A mother with a special-needs child should devote her efforts to the child, so it is clearly inadvisable for such a mother to seek the Vice Presidency. But while they express concern for the wellbeing of the child, their underlying tone is clearly one of approbation, and the criticism rings of false indignation. Since when does the women’s movement become so vociferously exercised because a working mother is not spending enough time with her children, whatever the needs of the children?

Besides, DrRich respectfully reminds critics of Ms. Palin that the Vice Presidency is famously a job with no responsibilities whatsoever (unless the President dies, of course, in which case a new VP is tapped to sit around and do nothing).  In practical terms, being VP is the perfect job for any mother with a special-needs child, and it will certainly allow Ms. Palin to spend more time with her family than she ever could as Governor of Alaska, or even as Mayor of Wasila.  Only being a Senator would approach the suitability of this job for a mother with family responsibilities, judging from  (as demonstrated by Senators Obama, McCain and Biden) the massive amounts of time for which it is apparently perfectly OK not to show up for work. In fact, mothers with special needs-children ought to be harshly and publicly condemned if they do NOT seek the Vice Presidency of the United States.

No, there is clearly something more going on here than mere indignation that Ms. Palin is seeking a job that will take her away from her family.  And gradually, DrRich has figured out what that is.

Ms. Palin had a duty to abort Trig, and she failed to discharge that duty.  By so failing, she has abandoned, by her own choice, any claim she may have had to the title “woman,” and certainly any claim she may have had on the sympathy, much less support, of other women.

It is one thing to deliver a special-needs child who cannot be identified prenatally as having special needs. Women with such children are simply victims of the draw, and are to be pitied and supported in every way possible, with whatever public funds that may require.  Women should not be punished with such an unforeseen and unpreventable burden, foisted on them by chance, or, if there is a God, then by the divine MCP (which is one reason why the notion of a divinity is so abhorrent to so many of the leftward persuasion - if God exists, he’s certainly stacked the cards against everyone except white males).  Such a child is one of the worst things that can happen to an independent, self-actualized, competitive modern woman. Any real woman who cares about the child, who cares about herself, and who cares about doing what’s best for all women would abort that child whenever possible.

The idea that a woman who actually had a choice would cheerfully choose to have a child with Down syndrome seriously undermines the argument.  Such a woman is clearly ignorant or stupid, and must have (through their ignorance or stupidity) bought into the old-fashioned, male-dominant paradigm that we enlightened folks have fought so hard to overcome.  When women like this do their thing in Wasila, Alaska, one merely shakes one’s head at the backwardness of it all, and consoles oneself that, some day, the truth will filter out even to these bush people.

But the idea that a woman, once making such a poor decision, would then not just quietly slink along through her life, privately bearing the burden of her poor choice; the idea that such a woman indeed would allow herself (and even seek) to become well-known, and to run for public office, much less seek the second highest office in the land; the idea that such a woman could become not only popular but publicly acclaimed and even adored - why, such an idea is utterly anathema. This woman calls into question the fundamental tenets of the Movement.

This explains one aspect of the approbation being heaped upon Sarah Palin for choosing to give birth to a Down child. She has made mortal enemies of the extreme women’s movement, and they need to destroy her at whatever the cost.

But another aspect of it (and one that finally resonates with the theme of this blog), is that Ms. Palin is setting an example that, if followed by admiring women, will cost the healthcare system a lot of money. Down children, for a variety of reasons, often need a lot of expensive medical care.  And by actively campaigning to encourage women to abort their babies if pre-natal testing suggests a high risk of Down syndrome (by describing to the stunned mother-to-be the institutionalized Down child of the 1960s, by outlining the horrors of heart surgery and other medical issues that may occur, and by neglecting to mention that Down children most often become completely fulfilled and completely lovable people who bear their trials with grace and humor, and who actually have a lot to teach us), obstetricians in the US, Canada and many European countries have succeeded in sending over 90% of Down pregnancies to abortion in recent years.  Sarah Palin, especially if she remains popular, and most especially if Trig grows up in public view and becomes a beloved example of the potential of Down children, threatens to cause many women to consider their options more carefully. And that will cost society big time, as a prominent Canadian obstetrician has pointed out.

Women who have chosen to deliver their Down babies are today being subtly scorned by society. Women have a duty to their gender and to society to abort those babies, and when they choose otherwise they are displaying serious psychopathology and sociopathy.  It is becoming very difficult for women to do otherwise.

Sarah Palin threatens to change the paradigm. Perhaps she already has. The duty to abort has been hard fought and hard won. Palin has got to be stopped.

And that explains at least some of the passionate attacks from people who, one would think, would normally celebrate the ascendancy of a strong woman who has succeeded at a man’s game while remaining an admirable wife and mother.

DrRich will end by pointing out that the duty to abort disabled children (a duty that, thanks to Sarah Palin, is obvious today for all to see), is really no different than the coming duty to accept assisted suicide or euthanasia.  Observing the attacks on Ms. Palin has made DrRich realize that we are farther along that road than he had thought.

Posted in General Rationing Issues, Medical ethics | 4 Comments »

Why Big Health Insurance Supports the Democrats

May 30th, 2008 by DrRich

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.

Posted in Healthcare economics, Investment "advice" | 2 Comments »

Attention Warren Buffet - Health Insurers Capitulate!

May 22nd, 2008 by DrRich

An article in the May 19 issue of American Medical News reports that America’s largest for-profit health plans will continue to rapidly increase their insurance premiums, even though doing so will continue to lose them subscribers.

In a conference call, WellPoint President and CEO Angela Braly told analysts, “We will not sacrifice profitability for membership.” Similarly, UnitedHealth Group CEO Stephen Hemsley said, “We continue to protect our margins. … We are committed to sustaining a quality business without taking shortsighted pricing positions.”

These statements, which are merely the actions of any responsible CEO trying to protect his/her company’s stock price, have garnered the expected expressions of outrage and indignation. After all, as Dr. Poses nicely documents for us, the mission statements of WellPoint and UnitedHealth Group assure us that these companies are both dedicated to making health insurance affordable and accessible. So how can these companies in good conscience abandon the effort to keep their products within a reasonable price range? Their failure to do so (as documented in the AMNews article) is already causing businesses to drop health coverage for employees, and contributing greatly to the rising number of uninsured Americans.

The answer, of course, is the obvious one. These publicly traded companies have a primary responsibility to their shareholders, and failing to take every opportunity to maintain a reasonable profit margin would make them guilty of violating their fiduciary duties. Besides (contrary to what most seem to think), the people who actually are insured with their products are in no way their customers. In fact, the insured (and their accomplices, the doctors) are the source of “medical loss,” and the insurance companies owe it to their shareholders to restrain these parties, by using every means at their disposal. So for insurance companies to take an action that is so manifestly against the interests of their subscribers ought not to surprise anybody.

The truly notable feature of this latest development is that it amounts to a complete and final capitulation, a straightforward admission that these companies have, at last, formally abandoned the purpose for which Congress turned them loose a couple of decades ago. Congress sanctioned for-profit HMOs, and gave them extraordinary protections under the law, for one purpose, and one purpose only - to harness the power of the free markets to control the cost of healthcare. And while it has been obvious for at least a decade now that for-profit insurers actually have no clue as to how to accomplish this feat (despite their numerous draconian efforts at covert rationing), until this moment they have publicly maintained the pretense that, given enough time and latitude, they’d find ways to bring costs down.

But that’s all over now. Ms. Braly and Mr. Hemsley have said it. We, the for-profit HMOs, the entities on which the Gekkonians have been pinning all their hopes for nigh unto 15 years, and the entities on which even today Mr. McCain is basing his entire healthcare reform plan, are completely bereft of cost-containing ideas. We haven’t a prayer of figuring out how to cut healthcare costs, or even how to slow cost inflation enough to prevent truly remarkable increases in our premiums - even though those increases are dropping our subscriber numbers and scaring the hell out of our shareholders and causing our market value to plummet. We, the for-profit HMOs, have officially entered the end-game.

So, Mr. Buffet: Your investment strategy is still on-track. You will soon be able to pick up several hundred thousand more shares of WellPoint and UnitedHealth Group at truly bargain prices, as current shareholders (seeing these companies circling the drain as surely as a subscriber with an expensive-to-treat cancer), scramble to bail out. And seeing a high probability of a Democratic victory in the fall, conventional wisdom will drive the prices even lower. So keep your powder dry.

Thanks to DrRich, only you (and the other people who read this blog, most of whom think DrRich is engaging in irony) know that it’s a Democratic victory, and not a Republican victory, that will send these stock prices soaring once again. What an opportunity!

You’re quite welcome.

Posted in Healthcare economics | No Comments »

Proof That Warren Buffet Reads This Blog

May 17th, 2008 by DrRich

Yesterday, Jacob Goldstein of the Wall Street Journal Health Blog reported that Warren Buffet greatly increased his stake in big health insurers during the first quarter of 2008. Specifically, he added 300,000 shares of WellPoint and 400,000 shares of UnitedHealth to the holdings of Berkshire Hathaway. Notably, the stock prices of both of these insurers have been tanking for months. So why would Mr. Buffet be buying them?

Mr. Buffet has a simple answer: “If we’re going to be buying things, we want to buy them on sale.”

To which the WSJ replies: “Of course, if it was simply a matter of increasing holdings that are falling, we’d all be billionaires. There must be more to it than that.”

Indeed, there is more to it than that, and careful readers of this blog (as Mr. Buffet must surely be) realize what that is.

The case against buying health insurance stock, it goes without saying, is plain for anyone to see. As DrRich has pointed out more than once, the mega-insurance companies have traditionally had three major pathways for increasing shareholder value:

1) Acquiring and privatizing community assets - generally non-profit hospitals and non-profit insurers - for a tiny fraction of their true value (through the collusion and/or ignorance of boards of trustees, state attorneys general, and state insurance commissioners), then letting the market assign the actual value of those formerly public assets to the company’s stock price.

2) Mergers and acquisitions of smaller insurers, i.e., through the consolidation of the industry.

3) Taking advantage of certain opportunities for “efficiency” that big insurance companies’ quasi-monopolies have bought them, such as cherrypicking patients, handcuffing doctors, retrospectively denying coverage to insured individuals, and the manifold other activities we can safely bundle under the rubric, “covert rationing.”

Obviously, all three of these pathways are closing off. There are few community-owned assets left to acquire, and consolidation has already left the U.S. with just a handful of important health insurance carriers. As for the “efficiencies,” opportunities here are drying up as well. For instance, this past December, shareholders of UnitedHealth Group (concerned because subscribers to the company’s insurance products had decreased by 315,000 in 2007) demanded a promise from company executives that the insurer would become “nicer” to its subscribers. Their own shareholders are wrecking their business model!

Insurance companies are left with the impossible task of trying to make a profit (and worse, to demonstrate continued growth) by actually managing the healthcare of sick people. This has never been accomplished in the modern era, and in all likelihood is not within the realm of possibility.

This explains why the stock prices of the big health insurers have been heading south for some time now. But what explains Warren Buffet’s enthusiasm for these failing businesses?

Two things. First, he recognizes the growing prospect of a Democratic victory this fall, in both houses of Congress and the Presidency. Second, he has clearly read and digested DrRich’s posting of six months ago that describes what will happen to the insurance industry with a Democratic victory.

Republican-style healthcare reform, even with a Republican such as John McCain, would bring the rapid and painful death of the health insurance industry. This, simply, is because the Republican strategy for healthcare reform relies on “competition and efficiency” in the private insurance market to save the healthcare system. Republicans, apparently, have not noticed that the insurance companies have been desperately trying their brand of “efficiency” for more than a decade now, and it’s been a disaster. The insurers have shot their efficiency wad; they’re entirely bereft of ideas; they haven’t a clue. Indeed, one can only imagine how the notion of a Republican victory, and the unbearable expectations such a victory will place upon them, must shake insurance executives to their core.

On the surface, Democrats will also put the insurance industry in an untenable position, as it is clearly their aim to drive insurers out of business (though they won’t actually tell us so). But Democrats actually have no performance expectations whatsoever for the insurance industry. Their only expectation is that the insurance companies should fail in due time. This prospect - as long as it’s preceded by one last, massive windfall - is quite acceptable to an insurance industry itself, which, realistically, can only be looking for a graceful exit strategy at this point.

As it happens, that one last windfall for the insurance industry is an integral part of the Democrat’s promise. For, before they drive private insurers into oblivion, the Democrats will present them with the gift of government-paid insurance premiums for many (Obama) or all (Clinton) of the 47 million uninsured Americans. These new premiums will amount to as much as $150 billion per annum. So, for at least a while, the Democrats will guarantee that health insurance profits will rise, executives bonuses will increase, and - more to the point - their stock prices will soar.

Which brings us back to what Warren Buffet is up to. DrRich is a great admirer of Mr. Buffet, and is sincerely happy to have been of assistance in furthering his understanding of the complex interplay between politics and the fiscal status of the big health insurers. So far, Mr. Buffet is playing the game perfectly.

DrRich does respectfully remind him, however, to carefully monitor this blog for the “sell” signal.

__________

Addendum. DrRich has just noticed that his deeply admired fellow blogger, DB, has challenged him this morning to a discussion of honor over the topic of malpractice reform, where DrRich has taken a very contrarian and highly unpopular position. Indeed, even DrRich hates himself for making such an argument. Nonetheless, DrRich is compelled, reluctantly, to answer in the affirmative (this being a matter of honor), and will post a reply within a day or two.

Posted in General Rationing Issues | 6 Comments »

Can a Voucher System Fix American Healthcare?

March 21st, 2008 by DrRich

A previous post considered the main problem with current healthcare financing as described by Drs. Fuchs and Emanuel, namely, that individuals are actually paying for their own healthcare today, but are led to believe that the cost is actually “shared” by businesses and government. Since they believe they are getting something for nothing, there is no incentive for Americans to limit their demands for healthcare.

It should be no surprise, therefore, that the solution proposed by Fuchs and Emanuel offers to make individual Americans aware of how much of their own money is being spent.

Under their plan, every American will be given vouchers by the government to purchase health insurance from private companies. The vouchers will be paid for from a Value Added Tax (VAT) on purchased goods. Insurance companies would be required to sell a basic insurance plan (fully covered by the vouchers) to any individual American, regardless of any underlying medical conditions.

Furthermore, individuals would not be limited to the insurance they receive under the voucher plan. Instead they would be free to purchase whatever additional healthcare coverage they choose.

The Fuchs/Emanuel plan is therefore universal, but also intends to preserve Americans’ freedom of choice. In DrRich’s estimation, it is the explicit nod to freedom of choice that makes this proposal interesting.

The “basic health services” that would be required under this plan (i.e., the services that insurance companies would have to provide to anybody with a voucher) would be determined by a federal health board, specifically modeled after the Federal Reserve Board.

Notably, Senator Tom Daschle has recently published a book that also recommends a federal health board modeled after the Federal Reserve Board. How much of this idea he may have received from Fuchs/Emanuel (who have been writing about this for a number of years) is not known to DrRich. But Daschle’s call for a federal health board has been endorsed - at least to the extent of supplying “blurbs” to spur book sales - by several disparate political figures including Senator Bob Dole and Senator Barack Obama. So, apparently, the “federal health board” may be an idea that is gaining in popularity. (It is perhaps unfortunate that both the Fuchs/Emanuel proposal and the Daschle proposal were advanced well before the current credit crisis made the Federal Reserve Board seem far less omniscient and sure-footed than in happier days, and perhaps less welcome as a role model than it might have been a few short months ago.)

In any case, the fact that a federal health board has been championed by a noted American progressive makes DrRich suspicious that the idea of such a board is not inextricably tied to the notion of individual autonomy, as it is under the Fuchs/Emanuel plan. In the Daschle plan, the federal health board is the centerpiece; it is the whole idea, and is the means by which a centralized authority will control American healthcare. In the Fuchs/Emanuel plan, the voucher-supported basic coverage supplemented by individually purchased insurance is the centerpiece; the federal health board is “merely” the mechanism that will define what we mean by “basic coverage.” At least, that’s how DrRich understands it. And understanding it this way, DrRich will formally reject the Dasche plan as simply another way of turning the American healthcare system over to the feds, (so there, Tom!) and will consider the Fuchs/Emanuel plan more closely.

Will a scheme based on the Fuchs/Emanuel universal voucher plan work?

Now, DrRich has advanced his own plan for fixing American healthcare, thus joining the not-so-exclusive ranks of Fuchs, Emanuel, Daschle, Clinton, Obama, (maybe McCain - DrRich is not really sure), and thousands of others. And it would be all too easy and all too unproductive to dive into a long tract comparing the particulars of these many plans (possibly designed to show why none of them would work as well as DrRich’s).

But in truth, DrRich does not pretend to really know what the “best” plan for solving our healthcare problems might look like, and does not wish to try to drag his readers through the mud in a vain attempt to find out.

There are, however, some basic principles that will need to be decided upon - whether implicitly or explicitly - in any plan that offers to fix American healthcare. These principles will determine not only what kind of healthcare system we are to have, but also what sort of society we will become.

So in evaluating the Fuchs/Emanuel voucher plan (which was DrRich’s original assignment), he will do so within the framework of three basic ideas that must be addressed in any system that proposes to fix American healthcare. These ideas are:

1) Should the healthcare system be universal?

2) Should the healthcare system be designed to enforce equality, or should it instead permit Americans to exercise their autonomy as individuals?

3) Where’s the rationing?

We will explore each of these three questions in subsequent posts.

Note: This is the second in a series of posts that discuss healthcare economics, and the three basic questions we will have to answer before we can devise a way to fix American healthcare. The third post in this series, “Should the Healthcare System Be Universal?” can be found here. The first post in this series can be found here.

Posted in Fixing American Healthcare, Healthcare economics, New business models for healthcare | 3 Comments »

Wonkonians Should Read Their Own Work Product

March 6th, 2008 by DrRich

According to Fortune Magazine senior editor Geoff Colvin, if you ask Alan Greenspan what the biggest threat is to the U.S. economy, he answers with one word: Medicare.

Greenspan is relatively sanguine about the sub-prime troubles, the housing crash, the falling dollar, and the trade deficit, all of which are relatively routine economic challenges which will “sort themselves out.” The real problem, he maintains, the one that dwarfs all the others and that all but guarantees some sort of societal upheaval over the next few decades, is the money we’ve all signed up to spend on Medicare, Medicaid and Social Security - but in particular, on Medicare.

Greenspan’s opinion merely reflects the bland prose of the 2007 Financial Report of the U.S. Government (FRUSG), recently published by the GAO. Not too far into the future, according to the FRUSG, the “required Medicare, Medicaid and Social Security spending and the related deficit financing costs will far exceed the Government’s ability to pay.” (Which is another way of saying it will far exceed its ability to tax, at least under the representative form of government which, so far, most of us seem to prefer.) According to the FRUSG, within many or our lifetimes these three entitlement obligations alone will consume more than the total revenue of the US government.

But not to worry; we’ll have either a revolution or societal collapse well before that happens.

Of these three massive entitlement programs, the FRUSG makes it clear that the Mother of All Fiscal Problems is Medicare. Even before we adopt “Medicare for everybody,” or one of the similar programs now being discussed by presidential candidates, Medicare already has unfunded obligations that reach the unimaginable sum of 34 TRILLION DOLLARS. (For those who have trouble with big numbers like this, $34 trillion is considerably more than the unfunded pension liability of, say, General Motors. Or of all the companies that exist in the universe put together. It’s more than half of the total GDP of the world. Really, it’s a whole lot of money.)

While the financial projections made by the FRUSG are truly dire, they are still too optimistic. They assume that certain absurd cost-cutting measures currently required by law (such as cutting Medicare payments to doctors by 41% over the next nine years), will actually occur. (The only way this will occur is if we have 41% fewer doctors than we have today - which, if the doctors I’m talking to are to be believed, is actually a possibility.)

With a healthcare-induced financial catastrophe like this staring us in the face, with healthcare reform being (intermittently, at least) the number one domestic issue; with the dire fiscal projections in the FRUSG being advanced not by agenda-driven right-or-left-wing nut-jobs, but by plodding government accountants who are just adding up the numbers; and especially with with Medicare officially projected to go in the red during the very next presidential administration; one might think that at least one of the candidates from one of the parties might want to start talking to us about it.

The fact that they’re all looking the other way, talking as if providing health insurance to those who are uninsured is the chief (and only) issue, ought to disqualify the lot of them. (To be fair, Senator McCain does talk more about controlling costs than his counterparts, but only to the extent that Columbus is closer to Antarctica than Cleveland.)

In any case, it is obvious that if we’re to address this problem effectively, then rationing healthcare (i.e. withholding by design at least some useful healthcare from at least some people who would benefit from it) is going to have to be part of the solution.

It is also obvious, since the government employees who produced the FRUSG took our present activity into account in making their projections, and since our present activity includes extravagant, wholehearted, flagrant covert rationing, that covert rationing does not work. This, of course, goes without saying since covert rationing requires complexity, opacity, tangled incentives, waste and inefficiency, as per Corollary 4 of the Grand Unification Theory. (We should note the irony inherent in the notion that the lack of “universal coverage” is the chief problem, when in fact, having tens of millions of uninsured Americans is an integral part of the covert rationing solution.)

Since rationing is unavoidable we need to try rationing the other way, the open way, to figure out how to ration healthcare so as to optimize the balance of fairness, outcomes, and efficiency. But, of course, we can’t, since we’re Americans and Americans don’t ration. Until we give them leave to tell us the truth, a truth nicely documented by the eyeshaded branch of the Wonkonians’ own family, our Wonkonian presidential hopefuls have no choice but to ignore the fact that the government healthcare obligations we’ve already adopted are hurtling us toward the abyss.

Posted in Wonkonian Rationing, Healthcare economics | 1 Comment »