Given what I have been writing over the past twelve months or so, I just could not resist posting something on the article with this headline, "The President Wants You to Get Rich on Obamacare," that is to appear in the Sunday Magazine section of the New York Times.
The subject…making money off of the initiatives of the federal government. For example, I have just been writing about how hedge funds, construction companies, private equity, and others are taking advantage of the extraordinarily low interest rates, buying up thousands of homes and then renting them out to people who need a place to live. Furthermore, they are packaging these loans and creating a new loan class in the market for securitized debt issues.
Now we get this article in the New York Times about Tom Scully, a person that works in the finance space, who has not only started up his own company to take advantage of the new Obamacare laws, but "advises large investors on government policy" and suggests how they might also take advantage of government programs, especially at this time, the Patient Protection and Affordable Care Act.
His point: "the law is going to make some people VERY rich." He continues "With the right understanding of the industry, private-sector markets and bureaucratic rules, savvy investors could help underwrite innovative companies specifically designed to profit from the law. Billions could flow from Washington to Wall Street, indeed."
Mr. Scully is not an insider in the Obama administration…but then he is not an outsider to Washington D. C. circles. For one he is a Republican. But, he "has spent the last 30-some years oscillating between government and the private sector…" He was "a principal health policy adviser under President George H. W. Bush, he helped formulate many of those past Republican initiatives that Obamacare has put into law. Under George W. Bush, he ran the Centers for Medicare and Medicaid Services and oversaw a host of proto-Obamacare reforms, like Medicare Part D…." He left this latter effort in 2004 and "began working simultaneously at Welsh, Carson, Anderson & Stowe, a leading health care private equity firm, and Alston & Bird, a law firm and health care lobbying organization."
Now, Mr. Scully finds himself "a lobbyist, private equity executive and former government health care official WITH ACCESS TO A SERIOUS AMOUNT OF CAPITAL."
Mr. Scully, during the past three years, has searched for "a way to make a killing" from Obamacare.
If anyone can lead us into the opportunities of government programs, Mr. Scully certainly seems to be someone that might fit the role!
The specific space that Mr. Scully has chosen to work within is what is called "post-acute care"…the treatment of patients (mostly seniors) after hospitalization for surgery or serious illness."
I will not get into the details of this. You can read the article for yourself to find out more of what this space is all about.
Mr. Scully and his friends not only talk about how investors might take advantage of the provisions of Obamacare, he, and his friends, also is very involved in the process of taking advantage of the space. They have created an organization called "NaviHealth" to "streamline" the enormous corner of the health care market that "many studies conclude, is the most financially wasteful"…post-acute care. A total of $35 million has already been invested in NaviHealth and another $15 million seems to be on the way. They are very serious investors.
Adam Davidson, the author of the New York Times article writes "Obamacare is less about health care than it is about economics." The argument is that medical costs have gotten out-of-hand and are expected to be a problem for the foreseeable future. Obamacare is about the two things…finding access to the health system and finding ways to reduce the growth in health spending. The assumption behind the program is to cut costs or reduce the growing cost of medical services by shifting the incentives of health care providers.
That is, the program is specifically designed to bring more ideas and greater amounts of innovation into health care services. The model seeks to create competition on "price and quality" and not on volume.
We can argue all day about the pros and cons of the program.
The crucial thing to note in the creation of the program is that it is supposedly designed to, as Mr. Scully states, "make some people VERY rich!"
That is, making some people VERY rich seems to be explicit in the development of the program…it is not an unintended consequence of the program as are the opportunities in most government programs.
Unfortunately, the people it is most likely to make VERY rich are people that are already doing pretty well. The people that attend the meetings that Mr. Scully puts on are "mangers from hedge funds, mutual funds and private equity firms". Don't see many of the middle class in here.
But, this is not inconsistent with what government programs often do. I have noted before that Mr. Bernanke has done a pretty good job in underwriting the wealthy.
My fundamental point is that investors must be aware of how they might be able to take advantage of governmental programs in their own investment decisions. All of the opportunities that arise out of these programs may not accessible to every investor…but, some of them are and people should be looking for what might be out there and available to them.
Having wealth is, of course, a major asset in terms of becoming aware of these opportunities. But, as Mr. Scully states, "savvy investors" can be aware of them as well…it just means that these investors know where to look for opportunities and do the work necessary to develop "the right understanding."