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David White
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David White is a software/firmware/marketing professional and a long time investor. He has worked in the networking field, the semiconductor equipment field, the mainframe computer field, and the pharmaceutical/scientific instrumentation field. He has bachelor's degrees in bioresource sciences... More
  • Obama Is Too Concerned With “One Big Fix” For Health Care 7 comments
    Mar 2, 2010 6:58 PM | about stocks: UNH, AET, HUM, WLP

    Obama is trying too hard to get one big fix for health care. He’s finding it is extremely hard to get everyone to agree. One reason they don’t want to is that most “big changes” turn out to be horrifically expensive. Most fail, or they are watered down demonstrably after they have incurred the afore mentioned huge costs. There is no reason Obama cannot approach this problem piece meal. This approach is much more likely to be successful. The fact is there will be less opposition to any one significant change.

    The change with the most bang for the buck is likely a change to the approach to malpractice. If the US Congress made arbitration mandatory as the first step in malpractice suit, this would cut down the costs considerably. An experienced, “malpractice expert” arbitrator could dismiss frivolous lawsuits quickly. Such an arbitrator could make quick, fair decisions. Such an arbitrator would avoid the occasional exorbitant awards that emotional juries can make. This might cut the payouts to a few harmed individuals, but it should still allow them a chance at a fair award. Further it should cut costs simply by cutting the actual time spent in court. Further the approximate expected awards could be specifically called out. The allowable growth of a possible award per year could be called out. Some allowance could be made for the level of the award due of specific types of wrongs. I point out that arbitration has worked well for baseball, etc.

    In order to be consistent with legal precedent, it would have to allow for appeal of the arbitration decision to a higher court. This might be costly. However, the standard for allowing appeals could be set high. The burden of proof of demonstrable wrong doing would also be higher at the appeal court level. These high standards would discourage most from taking this route.

    The obvious problem with this is that it would force some lawyers to change their line of work. The volume of medical malpractice law would obviously go down. The American Bar Association would strongly oppose such an initiative. It would still be hard to pass. However, it would be good for the bulk of society. It would encourage more medical personnel to stay in medicine. Many good ones now leave because they start to feel persecuted by lawyers who are willing to do anything to bring lawsuits (in order to get a settlement or to win). These actions harm the bulk of society. This is a big change that can and should be made. Why does Obama not try to make it as a first step. This would cut the cost of medicine by at least 20%-30%. It would cut the total wards and costs of malpractice (lawyers time is expensive) by at least 50%. The law enacted might have to specify (as well as it could) that savings in malpractice costs would filter directly into lower costs. Otherwise they might be absorbed as profits by health care co.’s, or by medical personnel, etc.

    This change alone would be a big step. It would be hard to get by the ABA. Yet it obviously should be made. For those of you who are fervent believers in Obama’s huge “one big fix” plan, you have to ask yourselves why this change is not being made immediately? It would cut medical costs for businesses and individuals. It would make US businesses more competitive. Why is it not being done? Is the reality that no one wants a change? Is the reality that Obama does not want to specifically alienate the ABA? Are some lobbies/groups so strong that the right thing cannot be done?



    Disclosure: No positions in the stocks mentioned
    Stocks: UNH, AET, HUM, WLP
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Comments (7)
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  • David White
    , contributor
    Comments (4083) | Send Message
     
    Author’s reply » Obama keeps saying he wants to control the cost of health care. How can he do that if he does not first control the costs of medical malpractice? The above proposal is a sensible approach to doing just that.

     

    Admittedly it will be more complex than described above. The awards would likely need to be different by state. For instance, an effective lifetime support award would be different in NY, NY or SF, CA than in Ames, Iowa or Detroit Michigan. Still the desired result should be achievable.
    3 Mar 2010, 03:10 AM Reply Like
  • Justin M. Hall
    , contributor
    Comments (753) | Send Message
     
    As always, excellent work David.

     

    Demands from the left base coupled with the urgency to get HC resolved prior to November 2010 could lead to its demise.

     

    This is a test of leadership. Obama has failed to strike the necessary balance with those on the other side and others on the same side but reluctant due to potential political fallout.

     

    HC requires leaders to find and embrace a common ground, which is clearly not present here. Strong leaders know and anticipate that they will have to give in order to take. To date, I'm not convinced that Obama is willing to give enough.

     

    If he does not give enough, HC reform is likely to fail. At least, I am hopeful.

     

    Justin
    3 Mar 2010, 06:11 AM Reply Like
  • winnersdon'tquit
    , contributor
    Comments (211) | Send Message
     
    "Why is it not being done? Is the reality that no one wants a change? Is the reality that Obama does not want to specifically alienate the ABA? Are some lobbies/groups so strong that the right thing cannot be done?"

     

    The trial lawyers were the second largest $$ contributors next to the teachers union, to the Obama election campaign.
    The president, in his dealings with unions and lawyers, has demonstrated repeatedly... "you don't bite the hand that feeds you".
    3 Mar 2010, 07:07 AM Reply Like
  • bigazul
    , contributor
    Comments (999) | Send Message
     
    All this energy is desperation. I think President Obama is beginning to understand that a second term is a pipe-dream without a big win to display. I don't think he cares or wants to even think about the nuts and bolts of this monster...or the long-term costs. He's already lost the independent vote and his core constituents are loosing faith at a rapid rate. I think we are in store for some insanity over the next 6 months.
    6 Mar 2010, 04:18 PM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6774) | Send Message
     
    Obama keeps "dancing" around the problem because he doesn't want to make the fix that really matters--malpractice.
    9 Mar 2010, 10:42 AM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    Obama came into office knowing exactly what he wanted to do with health care and it has nothing to do with job creation, providing better health care, cost containment or the economy but it had everything to do with being the first black president elected at a time of very high voter dissatisfaction who saw the opportunity to get what FDR wanted more then 70 years ago, socialized medicine for all and going down in the history books as the only President able to get it passed though at any and all costs, this is about Obama writing his own post presidency legacy, this all about Obama and nothing more.
    9 Mar 2010, 11:08 AM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6774) | Send Message
     
    As good an explanation as any.
    9 Mar 2010, 11:32 AM Reply Like
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