Why the 'Group of Six Senators' Is Opposed to a Public Health Plan

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Includes: AET, CI, IYH, UNH
by: Brad DeLong

Arindrajit Dube does the math in The Value of (Not Having) the Public Plan at The Baseline Scenario:

Investors in Cigna (NYSE:CI), United Healthcare Group (NYSE:UNH), and Aetna (NYSE:AET) alone appear to believe that if they can block the public plan, then their investments in those three companies alone will be worth an extra $30 billion dollars.

Arindrajit's calculation is simple. The Senate's Group of Six (Michael B. Enzi, Charles E. Grassley, Olympia Snowe, Kent Conrad, Max Baucus, and Jeff Bingamen) discussions and announcement reduced the InTrade probability of a public plan by 15 percentage points:

Safari

And the values of Aenta, UNH, and Cigna jumped by 9%--$4.5 billion:

Safari

The stakes for the insurers are huge. The investors in them appear to believe that the public plan is nearly a life-or-death issue for the companies: each 1% increase in the chance of a public plan chops 0.6% off of the long-term value of the totalprofits--not the health profits, the total profits--from their business as they have to compete for real against the government in the health insurance market.

As Bill Niskanen likes to say, given the amount of wealth at stake in congressional legislative decisions, it is an absolute miracle that every senator is not worth $100 million and that every House member is not worth $10 million.

And what does the New York Times tell us about the Group of Six, and how it is reaching its decisions? Things like this, the lead.

David Herzhenhorn and Robert Pear: Health Policy Is Carved Out at Table for 6:

WASHINGTON — On the agenda is the revamping of the American health care system, possibly the most complex legislation in modern history. But on the table, in a conference room where the bill is being hashed out by six senators, the snacks are anything but healthy. Last week, there were chippers — chocolate-covered potato chips — described on a sign as “North Dakota Diet Food.” More often, there are Doritos, pretzels, Oreo cookies and beef jerky: fuel to get through hours of talks on topics like the actuarial values of private insurance plans or the cost-sharing provisions of Medicare...

In 30 paragraphs, Herzhenhorn and Pear provide their readers with only three nuggets of anything that could be called information:

"The group of six has tossed aside the idea of a government-run insurance plan that would compete with private insurers, which the president supports but Republicans said was a deal-breaker. Instead, they are proposing a network of private, nonprofit cooperatives..."

[...]

"They have also dismissed the House Democratic plan to pay for the bill’s... cost partly with an income surtax on high earners. The three Republicans have insisted that any new taxes come from within the health care arena..."

[...]

"The Senate group... seems prepared to drop a requirement... that employers offer coverage to their workers..."

But they do not drop a single clue as to how a reader would go about trying to figure out whether these are good or bad decisions, or why these are the decisions being made. Instead we get paragraphs like this:

Mr. Baucus says his group will produce the bill that best meets Mr. Obama’s top priorities, broadly expanding coverage to the uninsured and curtailing the steep rise in health care spending over the long term, what policy makers call “bending the cost curve”...

And this:

“There are not many occasions when we have the opportunity to sit down and immerse ourselves in an issue like this, an issue that has profound implications for the country, with historic overtones, to say the least,” Ms. Snowe said. “I feel privileged to participate”...

And, of course, this:

Then, there are the refreshments. The coffee, brewed in the office, is roasted in Montana, usually the Grizzly or Buffalo blends. For all the discussions about preventive medicine, and the need to encourage Americans to lead healthier lives, carrots and celery sticks are not typical...