President Obama published his “new” healthcare plan today, an attempt at a) reconciling the Senate and House versions of the plan and b) an attempt to get a couple of Republican votes to get the plan passed and up and running. The ETF of healthcare XLV sold off with its publication. I am not sure why. The plan is dead on arrival barring the Democrats slipping the Republicans, en masse, mood altering drugs in the Senate cafeteria.
If you want details, good for you, they can be found at www.whitehouse.gov/health-care-meeting. But I am more concerned with the aftermath of the failed summit to be and where the industry ends up.
The healthcare ETF sold off a little less than one percent due to proposed regulations on health insurers and proposed taxes on device makers among the many disparate parts of the plan. I am not sure why; it is hard to imagine any Republicans breaking ranks in the current, polarized climate in Washington. Leadership might take their parking place away for breaking ranks. Seriously, given that Republican leadership has retreated into ideology and has never really attempted to negotiate any part of the bill in good faith, I can only assume this plan is dead on arrival and the meeting this week will really be a contest about who can get more time on the network news. I think watching curling would be more fun, or the compulsory short program in ice dancing, or maybe the luge.
Details – the details are many but there are two salient features of the plan. First, insurers get hammered and are being turned into utilities, and, given the monopolistic nature of insurance companies in most states right now, if you are an economic purist, it's not only a good thing but a necessary thing. Republicans will not like this – too much campaign money at stake even though more than 80% of the American people think health insurance companies are the number one problem in healthcare in the US. Second, there is a new tax on high-income earners that has a disproportionate impact on self-employed and people living or earning a lot of unearned income. These are seriously Republican people as well.
A Bipartisan Compulsory Tango – Given the details and the terrible leadership on the Hill in both parties, bi-partisanship isn’t going to happen. Republicans have no interest in governing, just making noise in advance of the election, and are using ideology as if being elected means all you do is to continue to campaign, putting them out of touch with the mainstream of the American people. Democrats are still trying to take revenge on George Bush for legally stealing the election in 2000 and handing them a busted budget and two wars he forgot to pay for, and that means they are way left and out of touch with the mainstream of the American people.
The Crash – The American people are going to be mad at someone when this plan crashes yet again, not just because they worry about their healthcare but because they wonder why time is being spent on the issue when 20% or more of their fellow citizens are unemployed, underemployed, discouraged or have flat out dropped out of the work force. And my guess is they will take it out on two groups – health insurers and incumbents.
The Aftermath – Assuming the plan is dead on arrival – or close to it – the next logical step will be a separate piece of legislation about reforming health insurance regulation. If the Dems were listening to people, that is what this draft of the plan would be about. It is not that health insurance companies are the bad guys, it is more that they are collectively one of the worst managed, if not the worst managed industry in America after domestic auto companies. They are risk managers and investment managers, not business people, and have a tin ear that has been petrified and turned to stone. And when the Obama plan fails, new legislation will be proposed and in 2010 or in 2011, despite lobbying, the insurers are going to get hit hard by new legislation.
I would avoid the XLV or individual health insurance companies. When the plan fails, they will probably pop up for a while, but long term, the insurers and even many providers are going to take a hit as new regulations and cost controls ooze into the industry via federal and state regulations. More on that later.