Over The Tree, Close To The Front Of The Green

Saturday, April 17, 2010
I was lucky. My poorly hit tee shot smacked the right tree at the perfect angle and my ball landed in the middle of the fairway. It wasn’t real far from where I had started, and number four at Astorhurst is a dogleg to the left, but I was on short grass and only had one big tree in my path to the green. I wasn’t going to just try to defy the odds with my sand wedge, I called my shot. "Over the tree, close to the front of the green." Good or bad, right or wrong, I always believe that we should call our shots.

What will the new health care legislation accomplish? I have been asked daily for close to a month what I think will happen next. I’ve been working on an answer. The talking heads on TV all seem to know, and oddly enough, the results tie in perfectly with their political persuasion. The Republicans are predicting significant changes in both the House and Senate this fall. They sense real anger. I saw a liberal commentator predict that the Democrats will reap the benefit of the hoards of now grateful constituents, as if Obama and health care is the equivalent of Moses and manna.

So, I think it is time to call my shot. Everyone can be a genius in hindsight. Five years or so from now you will have the opportunity to tell me how wrong I was. I also realize that by taking a particular position and clearly extrapolating results from the recent activities of our President and Congress I will offend, or at the very least, anger, a fair number of my readers. Oh Well. I apologize, in advance, if I anger or offend. Feel free to give voice to your feelings in the comment section. I just ask that you remain civil and to remember that I have readers of all ages.

Rules to live by:
• There are no accidents
• Insurance executives are very smart people
• Insurance companies must balance their books
• Horse-trading is necessary to pass legislation
• If the above is true, then the end justifies the means

It is my belief that the ultimate goal of the Congressional leadership and the President is to have most Americans insured by a government run program and that this legislation is a major first step in that direction. It is also my belief that the major insurance companies are totally onboard.

Is that good or bad? My opinion doesn’t matter. I think the fix is in and our job will be to learn how to game the system.

I know. I know. You’ve seen the political shows where Democratic strategists talked about the insurance company windfall – 32 million new clients. What a bunch of malarkey. The young and healthy can already get cheap health insurance. They don’t need an act of Congress. The young, healthy and lazy can also get cheap insurance. Their moms call my office all of the time. Who we are about to get are the unhealthy. The initial batch have to be both unhealthy and uninsured for over six months. Since the federal government is unprepared, these unhealthy people will be funneled, initially, to the same state high-risk pools they have already avoided. The federal government has set aside 5 billion to help cover them. The insurers, recently forced by states like Ohio, to reduce the premium for their high risk clients, will simply have more losses to be shifted to the healthy population’s policies.

You may have noticed that Massachusetts refused to allow any insurance company price increases. Massachusetts is important. They are about five years ahead of the rest of us. The combination of new taxes on insurance companies, new policy requirements, and the removal of underwriting GUARANTEE HIGHER PRICES. This is very important. There are very few provisions in the legislation to limit or control the cost of health care. Since insurance is nothing more than a middleman, a negotiator, and a paper shuffler, the price of insurance is directly attributable to the cost of care. If the price of care increases unabatedly, the cost of insurance must also increase. Add in maternity and other desirable coverages and you have a hefty jump in price. This is not an accident.

As the price increases, Washington will fan the flames of discontent, blaming greedy insurers for the pain the consumer is feeling. There could be only one solution – The Public Option. If will be at that point that President Obama et al will be forced to create this alternative. Underpriced and underfunded, the public option will gain ground as the insurers reluctantly leave the market.

Why would the insurers, the Anthems and United Health Cares, be in favor of this? What do insurers do well?
• Manage risk
• Shuffle paper

Individual and small group health insurance are crappy businesses. There is lots of exposure, tons of paperwork, and a distribution system that demands way too much service. They are incredibly inefficient. If the eventual public option looks anything like the Swiss cheese we call Medicare, there will be a fortune to be made in SUPPLEMENTS. Low risk, controlled exposure, and sellable from phone units, online, and in the mail, supplemental policies are very profitable.

The federal government would be forced to contract with the major insurers to process a new mountain of paperwork. Pure profit. The contracts would be on a cost plus basis.

The final profit center for the major insurers will be for those people who wish, with the aid of private insurance, to opt out of the government system. This grouping of new products will not be price sensitive and should be particularly profitable.

The final legislation to make all of this happen will mirror the Medicare Part D debacle. Did the Republicans who pushed through Med D really care about doughnut holes or that my clients would be paying more for their medications? Of course not. Did they know that the legislation was a goldmine for the pharmaceutical industry and the major insurers? Probably not. Nor do I think that they cared. The Republicans had a goal, six years ago, to run on a new entitlement for senior citizens. They certainly weren’t going to let a little horse-trading get in the way. Expecting anything different from our Democratic leadership is unreasonable.

The end will justify the means. I am positive that most involved will feign total surprise at the outcome. They may even claim, facetiously, that they were forced by the market to act.

Again, is this good or bad? I don’t know. I am offended by the lack of honesty that I perceive. If this really is such a good idea, sell it. Go before the American people and tell us why we need to go in this direction and how we will pay for it. Since that didn’t happen, I doubt that the outcome will be all that great. Of course, any major political change in the next two years could negate all of this. That wouldn’t guarantee better outcomes, just a different cast of characters and results.

I gripped my sand wedge, swung as hard as I could, and lifted the ball up through the branches. I didn’t quite get over the tree as much as I got through it. The ball landed in the fairway just before the green.

Got to call your shots. Got to tell people what you really believe.

DAVE

www.bogartcunix.com