Donald Johnson's  Instablog

They would have to hire tax experts and accounting firms to help them prepare applications for tax credits and subsidies that Baucus proposes to give to them.

And, of course, the IRS and the Department of Health and Human Services would have to examine their tax returns and books to make sure that they weren’t cheating. This is because the subsidies and tax credits envisioned by Baucus invite fraud and abuse, and the government would have to try to minimize that. The problem is that the Medicare and Medicaid programs have shown that the Feds aren’t very good at minimizing fraud and abuse, which amounts to some $65 billion a year in the Medicare program.

Tax preparation services cost as much as the IRS collects in income taxes. It appears that the Baucus plan would cost small employers more in administrative expenses than they would collect in tax credits and health insurance subsidies.

Wonder whether the Congressional Budget Office has an opinion on this?

It would be much better to take small employers out of the health insurance business and let their employees buy health insurance in a reformed individual health insurance market.

Bottom line: Millions of small employers would give up because they couldn’t deal with the health regulations and the costs the Democrats’ health insurance reforms would impose on them. Millions of jobs would be lost, and the government’s income tax revenues from small employers would shrink.

Sen. Baucus’ Finance Committee will begin debating and marking up a bill next week.

Link:

America’s Healthy Future Act of 2009: The Baucus proposal, pp.22-24.

Opponents of Obama’s single-payer scheme, government-funded abortion, Medicare rationing by age, increased government spending on government health programs that give free health care to illegal immigrants, 60% marginal income tax rates and giving politicians the power to reward their health care friends and punish their enemies should continue to use fear to fight the fear strategy that Obama has been using with such futility. 

Ask some of these simple questions:

1. Do you think one person or one company can manage 20% of the American economy fairly and honestly?

2. When you get a big NO, ask, do you trust any politician or the 535 members of Congress to skillfully, honestly and fairly to run health care in a way that is good for anybody but their campaign contributors and favorite lobbyists?

3. Then ask, do you think Congress and the President could radically change 20% of the economy, the health care markets, and get it right? Ever?

4. Are you prepared to see Washington’s careerist politicians turn your health insurance and health care into another mismanaged, corrupt Katrina, California, New York , Illinois or New Jersey?

5. Do you realize that on a per person basis, Medicare is more expensive to administer than private health insurance and that nothing Washington will do will cut administrative costs?

6.Do you want government-run health care that favors the rich and powerful as well as the political class who will take care of their friends and themselves regardless of how it hurts you?

7. Will you support changes in health care insurance laws and regulations that won’t put the employes of large and small businesses out of work? 

8. And, finally, are you ready for some minor changes in state and federal insurance laws that will let private health insurers sell and administer policies that don’t discriminate based on your medical history, can’t be cancelled when you get sick, can’t be made more expensive after you submit major claims and make it possible to take your insurance with you when you change jobs?

These questions should be asked in townhall meetings, letters to members of Congress, speeches, TV appearances and in conversations with your friends and acquaintances.

Don’t defend insurers as Jim DeMint and most Republicans do.

Don’t let Democrats push a bill that favors their friends in the pharmaceutical industry, the American Hospital Assn. and the unrepresentative American Medical Assn.

When people bring up AARP’s strong support for ObamaCare, point out that AARP makes money selling supplemental Medicare insurance and Medicare Part D drug coverage. It is dependent on the president and Democrats, because they make it possible for AARP and its executives to make big money. Yes, AARP is tax-exempt, but it is in business to make its executives rich and its board members powerful.

Not everyone will agree with your questions or answers, but that’s okay, because you’ll continue to expose the unworkability and corruptibility of ObamaCare.

The rally got an added boost in the last week from positive earnings reports and guidance by Community Health Systems (CYH) and Universal Health Services (UHS).

Tenet Health Care (THC) Tuesday reported a small loss on increased revenues. Lifepoint Hospitals (LPNT) reports Friday.

In its conference call with securities analysts, Tenet said the health care reform bills before Congress would relieve it of the cost of uncompensated care of the uninsured and of the cost of charity care. Tenet didn’t say any more about the health insurance reform debate and how the legislation would affect the company.

Some Democrats are pushing for better Medicare reimbursements for most of the hospitals in rural areas, many of which are owned by publicly-owned hospital companies. This could help their bottom lines.

But one has to wonder whether cuts in overall Medicare and Medicaid payments to hospitals would cost them more than the uncompensated care currently costs them. And if Medicare and a public government health plan sharply curtail access to care, what will happen to hospitals’ revenues and profits?

Also, we’re still in a recession, and Tenet told analysts that it saw significant declines in business with commercial HMOs. If unemployment continues to rise, as many expect, or if it just stays at 9.5%, more unemployed people will drop their COBRA insurance and become uninsured. This means commercial insurance business will continue to be weak for hospitals.

Thus, while some hospital companies have been cutting costs and improving margins, it’s hard to see how that can continue.

Disclosure: I don’t have positions in these stocks.

After rallying in anticipation of a watered down health insurance reform bill, if any, health insurers and other health stocks face two or three months of uncertainty as President Obama, members of Congress, lobbyists and the public fight over what ObamaCare will be.

Markets weaken in the face of uncertainty, and the uncertainty in the health stocks markets rose late last week as the last House committee approved a bill that includes a somewhat watered down but still strong public option health plan. The Senate Finance Committee’s gang of three Democrats and three Republicans are trying to come up with a bill that would win at least 60 votes in the Senate. If they can’t, the Democrats will try to push through their health care reform in a budget reconciliation bill. But that reportedly would force them to drop a lot of health insurance reforms.

Thus, while House Democrats appear poised to battle over bills approved by three different committees, the fact that four Blue Dog Democrats last week caved in and voted for a bill that provides for the public option health plan creates uncertainty about what all 52 Blue Dogs will do when a bill finally reaches the House floor. Will they put their Congressional careers in jeopardy by voting for a bill that includes a public option, end-of-life counseling, Medicare cuts, tax increases and coverage for illegal immigrants and abortions? It seems unlikely, but it still could happen, especially if public opinion polls show increased support for such a bill.

At the moment, polls show only 41% of voters approve of the way Obama is handling the health care debate. And his overall approval ratings are below where President George W. Bush’s were at the same point in his career. Recall that W. was hardly popular after the Supreme Court ruled for him and against Al Gore. So Obama’s approval rating is surprisingly low, and that is negatively influencing Congressional thinking about health insurance reform legislation.

Yet, Obama and Congressional Democrats are showing they are willing to make compromises that will help them pass some kind of health insurance reform legislation.

How much they’ll have to give up remains to be seen. And that is the big uncertainty facing speculators trading health insurers and other health stocks.

Health insurers seem the most vulnerable at the moment. This is because the industry is being demonized by Speaker Nancy Pelosi and other supporters of ObamaCare.

To date, the insurers have put up a weak defense. Indeed, they’re digging fox holes that may go to China. They’re defending indefensible state and federal laws and regulations that they helped write and even wrote in many cases. Those laws and regulations allow them to medically risk rate individuals and small groups instead of community rating them. Congress is strongly in favor of community rating, which would force health insurers to act like insurers instead of letting them insure only low-risk people.

If the insurers accepted community rating, the public option might be compromised away. But they’re gambling on gridlock.

At this point, speculators on Intrade.com are betting that there’s a 41% chance that health care reform will be enacted by Jan. 1, 2010. That’s up from just below 30% early last week.

The Intrade health care reform market has been volatile, and that volatility probably will continue well into the fall.

Look for the same kind of volatility in health insurance stocks and other health stocks.

Charts for health insurers are here.

Charts for hospital chains are here.

Charts for drug makers are here.

Charts for medical device and supply makers are here.

Charts for long-term care stocks are here.

Chart for health stock exchange traded funds are here.

Click on a chart to see a gallery of charts for a stock or ETF.

Disclosure: I own BDX and options on STJ.

However, Ted Kennedy’s and Henry Waxman’s bills that would Canadianize American health markets look (note the hedge) dead on arrival.

Three polls by Rasmussen, Gallup and NBC/WSJ all show President Obama’s personal approval ratings are down and that Americans aren’t ready to Canadianize health care. Weak poll numbers for Obama and for health deform (sic) undermine ObamaCare’s chances.

The futures traders at Intrade.com who are playing the health care reform market, are giving ObamaCare a 35% chance of passing by Jan. 1., down from 46% last week. The adults are taking over from the gullibles.

Karl Rove nails it in today’s WSJ: You can’t reduce access to care and the quality of care for more than 280 million Americans who have some kind of insurance to help the 2%, or 6 to 8 million CITZENS and legal residents who never can afford to buy catastrophic coverage and aren’t eligible for existing programs. I’ve been saying this for months. Be sure to read the comments that follow Rove’s column. Folks are starting to understand what ObamaCare would do to them.

Health stocks have been rallying for several days anticipating a watered down health deform bill.

Why is ObamaCare in trouble now?

You can’t sell garbage with a lousy pitchman like Obama. He has no credibility on economics, energy, global warming or health because he’s Clintonized his speeches to the point where everyone sees the clever parsing coming before his teleprompter does.

Bob Dole didn’t sell Viagra. Viagra sold itself despite Dole. Obama’s no Michael Jordan, and ObamaCare’s no Viagra.

Americans know that when one political party gains to much power, power corrupts. They’ve seen it in their state legislatures and major cities all their lives, and they saw it when Bush and the GOP controlled Congress. Now they see the Dems gleefully creating false crises and trying to exploit them at the expense of the privately insured and Medicare beneficiaries.

Obama got his hard left Barney Franks and Teddy Kennedys convinced he could Rahm their near single-payer plan through Congress. Now they see the Blue Dogs standing in their way, and they’re saying the 80-member Congressional Progresssive Caucus will block anything the Blue Dogs will support. And the Blue Dogs are split, too.

Kennedy and Waxman have spent the last 35 to 45 years blocking real reform, waiting for the day when an Obama would come along and Canadianize health care. And they’re willing to block real reform if they can’t get their perfect plan through now.

White House, you’ve got a problem.

Speculators seem to be betting that a watered down health insurance reform bill won’t hurt health insurers, hospitals, drug makers or medical device and supply manufacturers.

Stocks for almost all of these health sectors and for exchange trade funds that track health stock indexes turned higher last week.

Why?

1. Congress is not going to get health bills through the Senate or the House in face of strong opposition by a minority of Democrats in both houses. This means opponents of the health insurance reform bills will have at least 45 days to convince members of Congress and the public that the bills favored by the president and his hard left supporters in Congress are a bad idea.

2. It is very unlikely that Congress will create a public option health plan, or Government HMO (Fannie Med). The votes aren’t there. This is a bit bullish for health insurers over the short term. White House talk about taxing insurers that offer gold plated health benefit plans makes no sense because few do. If such taxes were enacted, insurers would stop offering or administering such plans, and self-insured employers probably would drop them as long as union contracts didn’t lock them into such plans.

3. If the very liberal Coastal Democrats who lead Congress and most of the five commitees drafting health insurance legislation want to get the support of Democrats from Western, Midwestern and Southern states, they’ll have to up Medicare payments to providers in those states. This is bullish for hospital chains, which operate mostly in the fly-over states.

4. The Congressional Budget Office Saturday threw cold water on the idea of putting MedPac, a panel of self-interested health care and medical experts who would be subject to tremendous political pressure from Congress, in charge of deciding what insurers would cover and how much they would pay for procedures. The panel would save only $2 billion out of trillions over 10 years, the CBO guessed. And it was being generous to the idea that MedPac would save anything. This is good for drug and medical device makers, because it lessens the threat of new price and utilization controls on their products.

5. While http://www.intrade.com bettors think there’s at least a 46% chance that some kind of health insurance reform will be enacted before year end, the polls are showing Americans are increasingly opposing the bills before Congress. The politicians who created the laws and regulations that make Medicare, Medicaid, SCHIP and state and federal regulations of health insurance markets unworkable failures are promising to fix the health markets. They have less and less credibility every day.

6. Proposals to tax millionaires to pay for covering the uninsured and increasing benefits for others are in trouble, if not dead on arrival.  The economy’s in no shape to be stalled by tax hikes, and there appear to be enough Democrats opposed to the tax to stop it.

7. While the so-called Blue Dog Democrats are stalling health insurance reform for economic and ideological reasons, the Congressional Black Caucus has made it clear that it won’t support a bill that the Blue Dogs will support. Throw in the opposition by anti-abortionists who don’t want the legislation to use taxpayers money to pay for abortions, and you have a pretty complex political problem for President Obama, Sen. Majority Leader Harry Reid (D-NV) and Speaker Nancy Pelosi (D-CA). While the Speaker claimed Sunday that she has the votes to pass health insurance reform, few believe her.

Some Democrats are saying that drafting health insurance reform bills is 70% to 80% done and it won’t take long to get a bill. Other Democrats are saying they want to take the time to write good legislation. The question is, can the Democrats and a few Republicans resolve the last 20% to 30% of the issues that need to be agreed upon to get a bill? It doesn’t look very good for health insurance reform at the moment, but some kind of a bill may pass in the next year or so, if not this year. Presidents Reagan, Clinton and Bush II all enacted major health legislation in their third and later years in office. All three bills have been financial and health care disasters.

Charts for health insurers are here.

Charts for hospital chains are here.

Charts for drug makers are here.

Charts for medical device and supply makers are here.

Charts for long-term care stocks are here.

Chart for health stock exchange traded funds are here.

Click on a chart to see a gallery of charts for a stock or ETF.