Does My Health Care Cover Being Eaten by Piranhas?

The health care debate is as curious an American phenomenon as there ever was. And the most curious thing of all is that with all the heated rhetoric flying around today, the debate was over before it even began. The Health Insurers Have Already Won. That was the cover story of Business Week last week, hardly a left-leaning socialist rag. “The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable.”

I have always said that Obama is, before he is anything else, a buttoned-down corporate guy, and will end up alienating more on the left than the right. It’s hard to imagine what the “town hall protest faction” think they want or don’t want from him. The anger rises to such a fever pitch I wonder if this even really about health care. Or, is the quality of discourse summed up by this sign seen at a rally last week: “KEEP YOUR GOVERNMENT HANDS OFF MY MEDICARE!” Never mind the so-called “death panels,” a notion so idiotic one is rendered speechless thinking of a response.

The funny thing is that the Town Hall crazies are turning blue trying to protect “the best health care system in the world,” when, by all the numbers and facts, dollar for dollar, in terms of actual outcomes, it’s actually just about the worst. Score 10 for the spin-meisters. But that’s the game: appeal to poorly-defined fears that will always linger among the “sound bite” news culture.

What we will get is a cobbled-together patchwork engineered by the insurance industry. It’s difficult right now to say whether it will be better or worse, but it will not be a whole lot different. The hundreds of millions in campaign donations and lobbying efforts directed toward all the key players in Congress have sealed the deal. All that’s left is arguing over semantics.

Having grown up in a country with a single payer system, Canada, but having spent the last 25 years here as a naturalized US citizen, I feel like I might have some worthwhile perspective to thrown into the mix, although I must admit it feels like dipping my toe into a river filled with piranhas.

When thinking about complicated things I usually try to pull back to the broadest possible perspective before narrowing the focus and arguing minutia. If there is one word that defines the fear that Americans have over government controlled medical care it is this: Rationing. To that I say this: All health care systems are rationed. No country on earth can provide ALL that medical science has to offer to EVERY individual. In many single-payer systems, care is rationed by waiting times. As it turns out, many times, if people must wait for a procedure, lo and behold, it turns out they didn’t really need it! Of course, yes, single-payer systems can and do apportion acute care in a timely manner. Most single-payer systems have higher life expectancies, lower infant mortality, etc. than the US private system, at half the cost. We are 37thin outcomes. Is this the best we can do?

Still, some Canadians feel they can’t get the level of care that US private insurers provide for their best customers. That’s true, they can’t. So they head south if they have to and can afford to. For sure, that truism forms the crux of what is the health care debate in Canada. It’s called a “two-tier system,” and the debate is: should we provide a moderate level of care as a baseline and then offer more expensive care to those who can afford it? That was the debate way back when I still lived there, and still rages today. Some provinces have edged toward providing that second tier while others fear it will wreck the system. In this way, that part of the debate is very similar to the “public school/ private school” debate.

But here’s the thing: When they do look for care outside of the system, Canadians typically head for the Mayo Clinic, a medical establishment so well-orchestrated they provide an astounding level of care for far less than what health care costs average in the US private system. Apparently they do it by managing the system coherently. No superfluous tests performed just to protect doctors against lawsuits, because doctors are paid by and protected by Mayo. They get to focus on just medicine and the patient.

Of course there are stories of Canadians heading south for care because waiting times were unacceptably long. These stories are exploited to maximum benefit by those arguing to stay with a private system. But what about the stories of the 14,000 people per day US health care companies drop because of pre-existing conditions or other technical violations, most of them in the midst of a health crisis. They would love to be on someone’s waiting list. Some of them are among the thousands who declare medical bankruptcy. (50% of all bankruptcies) Some just go without care. Others end up getting expensive procedures in more affordable places like Thailand or India.

Ask that same Canadian if they would like to sign up for a top-notch US plan. It will cost more than your mortgage, no pre-existing conditions please, and you can and will be dropped at any time if we feel there is a violation of our complex rules. If you didn’t read the fine print, you will either be denied certain procedures, or have to pony up a huge co-pay, especially if you didn’t “pre-authorize” the procedure correctly. You will probably have a large yearly deductible and by the way, they will kill you with red tape and don’t even think you can win. Oh, and did I forget to say that your premiums will double every 10 years? (Mine have.) I dare say most Canadians would take their chances with plain vanilla single payer, come what may.

Health care is rationed in the US, too: 47 million of us just don’t have it. Plus, all that aforementioned pre-authorizing and co-pay and denying coverage stuff is rationing too. If you’re really into tough love you can pretend that most of the uninsured and underinsured are too lazy to work hard enough to pay for a good plan. But, in a mostly Christian nation, does that seem like a charitable way to think? I cannot think that way. Go ahead and call me a bleeding-heart liberal. My heart does bleed. It bleeds for all the pain and suffering in the world, whether or not the sufferers deserve it. Health Care is a basic human right. If we can’t afford it then cut something else. If government can only accomplish two things, let it be health care and roads. Everything else is gravy.

Don’t get all bent out of shape when some socialized benefits go to “the least of you” (Jesus’ words), unless you also rally against all the socialized benefits that regularly go to agri-business, oil and gas industries, defense contractors, media conglomerates, corrupt foreign dictators and militaristic regimes. It’s not suddenly a Marxist plot when the little guy gets a break!

Speaking of gravy, the actuarial unit of United Health Care, one of the largest health care companies in America, is busy as a bee hive crunching numbers. Although they are trying to down play the results, most of them point to the incredible windfall the company will enjoy under almost any plan now being considered in the debate. Still, they are trying to squeeze the numbers further, having spent $3.4 million lobbying congress. Most scenarios would have the public still owing 25% of the cost of their care, even after the huge premiums. United Health Care would prefer something more like a 65-35 split. So, they’ll do more lobbying.

United, like all the other companies shaping this reform, will do fine. After hitting up mostly smaller employers with double-digit increases, their profits, especially in the units providing Medicare to the poorest of the poor, were up 34% last year. Single-payer is the worst thing that could possibly happen to these companies. Even a government-sponsored insurer operating as a competitor is unacceptable. That might be a “Trojan horse” to a single-payer system. Private plans have spent in excess of $19 million lobbying mostly Democratic members of congress to defeat a government-sponsored competitor.

Single-payer is not even on the table, and can’t even be discussed in polite company. By some estimates, a single-payer system might save Americans about 1 trillion dollars a year. Admittedly all estimates in something this volatile are suspect, and this one doesn’t explain what would happen to taxes. But this one comes from Business Week. Why would such a conservative publication propagate such a socialist notion? Because businesses small and large are getting killed by health care costs, especially when they compete with countries with single-payer systems. When “business” doesn’t trust the business of providing health care, why would you? Would it be impossible to run a nation-wide, non-profit health care corporation along the lines of the Mayo Clinic?

Medicare and Medicaid are held up as abysmal failures, yet what other plan of any kind in any country insures only the elderly, the infirm and the destitute? Of course it’s expensive! Private insurers want a chance to pick up that business? They do it only under contract with a guaranteed margin. Ask your grandparents if they’d like to take their chances with a private plan.

Let the debate continue, but extreme partisanship will not get us there. The current system cripples families, crushes small businesses, and drags the economy down. Let’s remove the rhetoric and have a serious debate. Single-payer already works worldwide, and yes it has its problems, some of them big. But there is no private model to go by. After big banking sent the economy on a suicide mission, how can we believe that big Pharma and big Health Care have anything in mind but this quarter’s balance sheet at your health’s expense?

So, my friends, it comes down to this: Who do you want to manipulate your health care? The government, who seemingly can’t do anything right, or the corporations whose bottom lines don’t care a pig in a poke for what happens to your particular health? Worse than that – their bottom lines are completely dependent on how many claims they don’t pay. I don’t normally advocate bigger government anything. And it ticks me off that there’s nothing between cut-throat capitalism and government incompetence. This time though, I would prefer to take my chances with a government bureaucracy, it’s a lot less like getting eaten by piranhas.

Doug Friesen
8/13/09

There is a crack in everything

There is a crack in everything
Sunday April 26, 2009

The occurrence last week of a financial event so profound as to be the equivalent of a crack in the fabric of space/time went largely unnoticed and underreported. I speak of the under oath testimony of Bank of America Chief Ken Lewis to NY Attorney General Andrew Cuomo, wherein Lewis claims that in December 08 Paulson and Bernanke more or less blackmailed him into completing B of A merger with Merrill Lynch even after he learned huge additional losses by Merrill Lynch just before the deal was ready to close.

Here’s the back story: Earlier last year, when the banking crisis first started to unfold, then treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke stepped in to “save” Bear Stearns, by forcing a shotgun marriage to JP Morgan Chase. By the end of summer, Fannie Mae and Freddie Mac, the two giant quasi government mortgage houses also required bailout, to the tune of $200 billion, the largest US bailout ever. When venerable trading house Lehman Brothers appeared to be on the brink of collapse, Paulson and Bernanke demurred. They had bailout fatigue, and played “tough love” with Lehman. A worldwide financial panic ensued, and Paulson and Bernanke were widely vilified for failure to take the reigns.

In September, as almost every major bank and investment house on Wall Street started to come apart at the seams, the two were desperate to somehow save the rest of the financial system and prevent a worldwide collapse. Merrill Lynch, which had lost billions in toxic mortgage securities was paired up with Bank of America. At the time, Ken Lewis was enthusiastic about the deal, as they were picking up a Wall Street giant for pennies on the dollar, and one which nicely filled holes in their financial profile.

These deals are not easily done, and Merrill Lynch was operating independently in the fall of 2008 pending shareholder approval and transfer of assets. Meanwhile, Merrill Lynch CEO John Thain was a busy man. Not only did he take time for a $1.5 million re-do of his office, he kept aggressively trading mortgage securities. Not chastened by billions in losses over the past year, he apparently believed the market for them had bottomed, and there was money to be made. He was buying. The same dense brained hubris that lost Merrill Lynch and average of 59 million a day for the last year caused Thain to think he could still master the situation. By the time he was done, in December 08, Merrill had lost an additional 15.8 billion, a staggering amount of money.

Even then, on his way out the door, Thain wrote himself a $40 million bonus and handed out almost $4 billion in bonuses to his crew. This was the start of the Wall Street Bonus scandal, and was what caused New York Attorney General Andrew Cuomo to investigate. Thain offered to reduce his bonus to $10 million. Cuomo felt zero was more what he had in mind, and also aimed to shine a spotlight in some of the dark corners of this messy deal.

December 5, Bank of America shareholders approved the merger. That’s what Merrill was waiting for, and the following week, they quietly and quickly recorded their additional losses. According to sworn testimony, On December 14 Bank of America CEO Ken Lewis was informed by his CFO of the additional losses, described as “a staggering amount of deterioration.” Lewis had expected additional losses and some of these losses were known to B of A officials but nothing of this magnitude. December 17, Lewis informed Paulson that he was thinking of invoking a “MAC” clause. MAC, stands for “material adverse change,” and allows a partially completed merger to be legally rescinded without penalty if adverse conditions arise during the merger.

Paulson and Bernanke were also busy men during this time, charged with saving the free world from financial Armageddon. They were in no mood for gamesmanship, and bluntly told Lewis that if he did invoke MAC, he and his entire board would be removed. Most importantly, they told Lewis to keep quiet about the losses until after the deal closed January 1. Lewis replied “that makes it simple, let’s deescalate.” Paulson also told Lewis that the government would at some point make TARP funds available to restore the lost equity. When Lewis asked for that in writing, Paulson said no. The deal closed Jan 1 right on schedule, and the shareholders were not informed of the losses until the second week in January. As expected B of A’s stock cratered, investors lost billions, and taxpayers were stuck with another bailout.

As Dianne Francis writes in the Financial Post “the gang that couldn’t shoot straight shot investors in the head.” Sure, Paulson and Bernanke felt they were justified in their actions because they felt the failure of the Merrill/B of A merger posed a systemic risk. But does that mean they can throw shareholders under the bus in such a selective manner?

Here’s the thing: Paulson and Bernanke’s actions violate Securities laws, which require material facts to be disclosed in a timely manner. Thing two is that the onus for this disclosure rests entirely on the shoulders of the CEO, and in an eventual suit between shareholders and Lewis, which now seems more likely than not, the defense “the government made me do it” will not stand up in court. Lewis was free to say: “No deal, I’m disclosing”.

Does the government have the right to play high stakes poker with the pension funds of Retirees? Especially when the resulting damage is almost entirely to shareholders, while the CEOs and traders still get their bonuses? Once again the Titans of finance come out intact and the public is collateral damage.

Thing three is that it is inconceivable that Timothy Geithner, (now Treasury Secretary) as the chairman of the New York Fed at the time, was not kept in the loop on this.

Thing four is the burning question: What other lies and deceit by those in power have been perpetrated during this collapse to keep themselves in power. The only constituency not being bailed out or protected in any way is the public.

Thing five is that such a violation of the rule of law will inevitably shake the confidence of the very markets we are trying to fix. As I say in my recently published book The Age of Entitlement (www.amazon.com, www.AgeOfEntitlement.com): From the most powerful hedge fund trader to the simplest homeowner, … the lack of market discipline removes the foundation of every investors decision to part with his cash.

This story could have huge implications. Not only does it blatantly expose the lengths that those in charge of the economy will go to in order to keep existing power structures intact, it highlights a casual disregard for protecting the rights of shareholders and taxpayers, the very people these regulators are entrusted to protect.