Posted by Karl Denninger
I have written much about “Health Reform”; those of you who missed it can go back and read the entire set of posts in reverse-chronological order quite easily if you’d like.
Today, however, I want to focus on a point I made in a previous Ticker entitled “Why Health Reform Is Doomed To Fail“:
We in America are forced to pay for all of the medical innovation in the world, as a direct and proximate consequence of the acts of the douchebags in Congress who have (1) banned reimportation of drugs and devices, and (2) exempted drug and device makers, along with insurance companies, from anti-trust laws that would otherwise make their conduct felonious in The United States.
We often lament how other nations “spend less but get equal or better care.” There is no magic and no secret as to how they do this. It doesn’t happen because these nations are more efficient, or have fewer middlemen.
It happens because our lawmakers have put in place a legal structure that allows health-care related companies to sell at below-market (and perhaps even below-all-in cost!) prices to other nations while barring the purchasers of those drugs and devices from selling them to whoever they want – specifically, those who live HERE!
If that was not the case then drug and device makers would face competition from these re-imported items and our prices would go down (a lot) while theirs would go up (a fair bit.) The drug and device makers, along with foreign governments who run socialized health systems, don’t like this – therefore they get our government to pass laws that make it illegal for the free market to address this distortion – and force Americans to eat the costs that should be borne by foreigners.
Nor does it stop there. Medicare and Medicaid allegedly (if you believe doctors, hospitals, and others) pay reimbursements that are below the cost of providing services. These firms and individuals thus cost-shift the part of that cost not covered to you, the privately-insured individual or corporation along with the uninsured. This would normally be illegal under anti-trust law too, but that has also been made legal by exemptions passed by this very same government.
Finally, if you have no insurance and no money, you will get emergency care anyway. An “emergency”, by the way, includes perfectly-foreseen emergencies – like giving birth. Even if you’re an illegal Mexican invader. Instead of the hospital sending that bill to The Federal Government which then pays it and forwards it to Mexico (since it was their citizen that incurred the expense), offsetting whatever we need to in order to secure payment, our government again makes lawful that which would otherwise not be – that is, you are forced through higher costs to you to pay for that illegal invader’s medical care.
One of the “cute tricks” passed with Medicare Part “D” (by George W. Bush) was a “tax credit” for corporations who provided health care to retirees from their firms. This too was a distortion – an intentional one put into that bill to “buy off” some key Reps and Senators to insure passage of Medicare Part “D” (the biggest boondoggle and scam in the history of the Republic – until President Obama signed this piece of crap legislation.)
But this legislation repeals that little ditty in the Medicare Part “D” law.
Remember, the Democrat talking points were that this bill would “lower your costs” and “make health care more affordable.” It was also called a “jobs bill” – that is, that this bill would create jobs.
Within hours corporations announced intent to recognize the repeal of this exemption – via 8Ks filed with the SEC. This was not a surprise – Caterpillar had warned the Administration, as had other firms, that the bill as written would increase their costs and that they would have to recognize those forward costs.
Securities laws require firms to disclose material changes when they are realized – which in this case means when the bill was signed into law, since they had already analyzed the bill and it’s impact. Legally, these companies are obligated to file the 8Ks disclosing these charges.
The Administration and Democrats generally ignored these folks when they warned of this impact before the bill was passed, of course, claiming they were part of some “Vast Right-Wing Conspiracy.” Oh wait – that was Clinton. Ok, ok, so Pelosi said she had to pass this bill so we could know what was in it. (And no, that’s not an exaggeration – she really did say that!)
Well, the corporations weren’t lying, and now the 8Ks are flying. Caterpillar has announced an intent to take a $100 million non-cash charge, John Deer $150 million, and AT&T a whopping $1 billion.
Perhaps Mr. Waxman and Mr. Stupak should have considered that so-called “independent analyses” citing changes in 2016 have next to nothing to do with the costs incurred now. You might have also noted the trajectory of stock prices in the health care sector and try to square that with the concept that costs to consumers and businesses would come down:
Price appears to be moving from the lower left to the upper right of this chart, implying improving profits for firms in the health care sector as a whole. Or you could look at insurers such as Wellpoint:
Mr. Waxman may not want to square what the market is saying about these charts, but it doesn’t matter what Mr. Waxman wants. What matters is what the market believes, which is that these firms will make more money, not less. That is, on balance they will siphon off more of Americans’ hard-earned money that will be retained in their pockets.
Nor does the damage stop with AT&T, Deere and Caterpillar. One of New Hampshire’s papers reported that the ski resorts in the state may have to pay as much as one billion in fines, because they hire a large number of seasonal workers without offering health benefits. Either these firms will have to increase prices or reduce costs, which means hiring fewer workers (and poorer service for customers.) Either way, this isn’t “helping the economy.”
Mr. Waxman cites “independent analysis” that claim no material change. They obviously didn’t talk to Towers Watson, a benefits consulting firm, that says the impact could be as much as a $14 billion loss in corporate profits. (I think they’re missing a zero over the next 20 years, but even so $14 billion isn’t zero – and it certainly isn’t a profit INCREASE.)
I said from the beginning that this bill would not decrease costs, it would dramatically raise them. That it was a bill that would ultimately result in an increase in taxes now, and that you’d get improved health care effectively never.
Unlike many on the other side of the debate, however, I also put forward an alternative that would have actually worked to decrease costs – by removing the ability to cost-shift and hide the true costs of procedures, drugs and devices. A simple four-point plan that would have exposed all costs, removed anti-trust exceptions, brought true competition, forced illegal invaders who avail themselves of our health care to either pay up or have their bill paid by the nation they are citizens of, and put a stop to ambulance chasers and the defensive medicine they cause doctors to practice.
That plan would have fit inside of 50 pages of legislation, not over 2,000. It would have instantly brought true competition to the provision of health care, stopped cost-shifting instantly, prevented gouging of cash customers, resolved the pre-existing condition issues plaguing insurance currently and not cost taxpayers a nickel.
But it wouldn’t have been popular with the lobbying interests, so it didn’t get a hearing or debate.
Instead we got not only a flawed bill but one that will raise costs to corporations and individuals and destroy jobs.
It will also ultimately destroy the private health care system in The United States.
Pelosi, Reid and Obama passed and signed it, and now we’re seeing it all right – we’re being violated by it within hours of passage.